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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________ .
Commission file number: 000-51402
FEDERAL HOME LOAN BANK OF BOSTON
(Exact name of registrant as specified in its charter)
Federally chartered corporation of the United States
04-6002575
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)
800 Boylston Street,BostonMA02199
(Address of principal executive offices)(Zip code)
(617) 292-9600
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
Class B Stock, par value $100 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
 
Accelerated filer o
 Non-accelerated filerx 
Smaller reporting company 
☐
Emerging growth company☐

1

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.     ☑    
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐    No x
Registrant's stock is not publicly traded and is only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. As of February 28, 2025, including mandatorily redeemable capital stock, we had 22,106 thousand outstanding shares of Class B stock.


DOCUMENTS INCORPORATED BY REFERENCE
None
2

FEDERAL HOME LOAN BANK OF BOSTON
2024 Annual Report on Form 10-K
Table of Contents
    
PART I
    
  
  
  
  
  
PART II
   
  
  
  
  
  
  
  
  
PART III
   
  
  
  
  
  
PART IV
   
  

3
Table of Contents
PART I
ITEM 1. BUSINESS

General

The Federal Home Loan Bank of Boston is a federally chartered corporation organized by the United States (the U.S.) Congress in 1932 pursuant to the Federal Home Loan Bank Act of 1932 (as amended, the FHLBank Act) and is a government-sponsored enterprise (GSE). Unless otherwise indicated or unless the context requires otherwise, all references in this discussion to “the Bank,” "we," "us," "our," or similar references mean the Federal Home Loan Bank of Boston. Our primary regulator is the Federal Housing Finance Agency (the FHFA).

We are a privately capitalized cooperative, and our mission is to provide our members with highly reliable wholesale funding and liquidity, and to support affordable housing and community economic development. We deliver competitively priced financial products and services, expertise that supports housing finance, community development, and economic growth, including programs targeted to lower-income households, and a competitive return on investment to our member shareholders. We serve the residential-mortgage and community-development lending activities of our members and certain nonmember institutions (referred to as housing associates) located in our district. Our district is comprised of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. There are 11 distinct Federal Home Loan Banks (the FHLBanks or the FHLBank System) located across the U.S., each supporting the lending activities of its members within their districts. Each FHLBank is a separate entity with its own board of directors, management, and employees.

We are exempt from ordinary federal, state, and local taxation except for local real estate tax. However, we are required by statute to set aside 10 percent of our net earnings to support our Affordable Housing Program (AHP). For additional information, see — AHP Assessment. We also have voluntarily made an additional contribution to our AHP, and put in place certain subsidized advance, grant, and special purpose credit programs, including our Jobs for New England (JNE) program, Housing Our Workforce (HOW) program, Lift Up Homeownership special purpose credit program (LUH), Mortgage Partnership Finance® (MPF®) Permanent Rate Buydown product, and community development financial institution (CDFI) Advance. For additional information, see — Targeted Housing and Community Investment Programs.

In pursuit of our dual mission of providing liquidity to our member financial institutions and supporting housing and economic development in the communities our members serve, we have adopted long-term strategic priorities in our strategic business plan, which are to:

•advance our affordable housing and community development mission through voluntary programs;
•position the Bank to compete effectively in support of home financing and member funding needs;
•maintain an appropriate and efficient capital structure considering the Bank’s risk profile through proactive capital stock management and dividend strategies;
•advocate stakeholder interests in policy matters and effectively monitor and respond to legislative and regulatory initiatives;
•attract, develop and retain the talent required to meet the Bank's present and future needs;
•leverage the advantages of diverse perspectives and inclusion, consistent with the principles of equal opportunity and in accordance with our statutory mandates under the FHLBank Act; and
•uphold our commitment to effective and efficient operations, while adapting as an agile organization to emerging opportunities and risks.

We combine private capital and public sponsorship in a way that is intended to enable our members and housing associates to assure the flow of credit and other services for housing finance, community development, and economic growth. We serve the public through our members and housing associates by providing these institutions with readily available, low-cost loan products, called advances, as well as other products and services that are intended to support the availability of residential-mortgage and community-investment credit. In addition, we provide liquidity by enabling members to sell mortgage loans to us or to designate third-party investors through a mortgage loan purchase program. Our primary sources of income come from the margin earned on interest-earning assets funded by interest-bearing liabilities and equity capital. We are generally able to borrow funds at favorable rates due to our GSE status. Our debt is not backed by the U.S. government, but it does represent the joint and several obligation of the 11 FHLBanks.

"Mortgage Partnership Finance," "MPF," "eMPF" and "MPF Xtra" are registered trademarks of the Federal Home Loan Bank of Chicago.
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Table of Contents
Our members and housing associates are comprised of financial institutions located throughout our district. Institutions eligible for membership include savings institutions (savings banks, savings and loan associations, and cooperative banks), commercial banks, credit unions, qualified CDFIs, and insurance companies that meet regulatory requirements, including having a home financing policy that is consistent with the Bank's housing finance mission. We are also authorized to lend to housing associates such as state housing finance agencies located in our district. Members (but not housing associates) are required to purchase and hold our capital stock as a condition of membership and for advances and certain other business activities transacted with us. Our capital stock is not publicly traded on any stock exchange and can only be transferred at par value of $100 per share. We are capitalized by retained earnings and the capital stock purchased by our members. Members may receive dividends, which are determined by our board of directors, and may request redemption or, at our sole discretion, repurchase of their capital stock at par value subject to certain conditions, as discussed further in Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital. The U.S. government does not guarantee either the members' investment in or any dividend on our stock.

Oversight, Compliance with Government Regulations, Examinations, and Audit

Our business is subject to extensive regulation and supervision. The laws and regulations to which we are subject cover all key aspects of our business, and directly and indirectly affect our product and service offerings, pricing, competitive position and strategic plan, relationship with members and third parties, capital structure, cash sources and uses, and information security practices. As discussed throughout this report, such laws and regulations have a significant effect on key drivers of our results of operations, including, for example, our capital and liquidity, product and service offerings, risk management, and costs of compliance. For more information, see Part I — Item 1A — Risk Factors — We are subject to a complex body of laws and regulations, as well as U.S. government monetary and fiscal policies, which could change in a manner detrimental to our business operations and/or financial condition.

The FHFA, an independent agency in the executive branch of the U.S. government, supervises and regulates the FHLBanks. The FHFA is financed through assessments on the entities it regulates, which include the FHLBanks, as discussed under Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — FHFA Expenses.

The FHFA issues regulations, advisory bulletins, and supervisory letters that govern, among other things, the permissible activities, powers, and investments, the risk-management practices and capital standards required of the FHLBanks, and the authorities and duties of FHLBank boards of directors. The FHFA has broad supervisory authority over the FHLBanks, including, but not limited to, the power to suspend or remove any entity-affiliated party (including any director, officer, or employee) of an FHLBank who violates certain laws or commits certain other acts; to issue and serve a notice of charges upon an FHLBank or any entity-affiliated party; to issue a cease and desist order, or a temporary cease and desist order; to stop or prevent any unsafe or unsound practice or violation of law, order, rule, regulation, or condition imposed in writing; to impose civil money penalties against an FHLBank or an entity-affiliated party; to require an FHLBank to maintain capital levels in excess of usual regulatory requirements; to require an FHLBank to take certain actions, or refrain from certain actions, under the prompt corrective action provisions that authorize or require the FHFA to take certain supervisory actions, including the appointment of a conservator or receiver for an FHLBank under certain conditions; and to require any one or more of the FHLBanks to repay the primary obligations of another FHLBank on outstanding consolidated obligations (COs).

The FHFA conducts an annual examination and other periodic reviews of our operations to assess our safety and soundness as well as our compliance with statutory and regulatory requirements and requires ongoing reporting of specific information through the issuance of special data requests. In addition, we are required to submit information on our financial condition and results of operations each month to the FHFA and to report other supplemental information to the FHFA on a periodic basis. We are prohibited by FHFA regulations from disclosing the results of the FHFA's examinations and reviews. However, information from those examinations and reviews could become publicly available either through the FHFA or through the FHFA's Office of Inspector General, which can sometimes occur via their reports to Congress.

Our capital stock is registered with the U.S. Securities and Exchange Commission (SEC) under Section 12(g) of the Securities Exchange Act of 1934 and, as a result, we are required to comply with the disclosure and reporting requirements of the Exchange Act. We are not subject to the provisions of the Securities Act of 1933. We are also subject to regulation by the Financial Crimes Enforcement Network (FinCEN) and the Commodity Futures Trading Commission (CFTC).

The Government Corporations Control Act, to which we are subject, provides that before a government corporation issues and offers obligations to the public, the Secretary of the U.S. Department of the Treasury (U.S. Treasury) shall prescribe the form, denomination, maturity, interest rate, and conditions of the obligations, the method and time issued, and the selling price. The
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FHLB Act also authorizes the Secretary of the U.S. Treasury discretion to purchase consolidated obligations up to an aggregate principal amount of $4.0 billion.

Our board of directors has an audit committee, and we have an internal audit department. An independent registered public accounting firm audits our annual financial statements. The independent registered public accounting firm conducts these audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

We must submit annual management reports to Congress, the President, the Office of Management and Budget (OMB), and the Comptroller General of the United States. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent registered public accounting firm on our financial statements.

The Comptroller General of the United States has authority under the FHLBank Act to audit or examine the FHFA and the Bank and to decide the extent to which each fairly and effectively fulfills the purposes of the FHLBank Act. Furthermore, the Government Corporations Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, then the results and any recommendations must be reported to Congress, the OMB, and the FHLBank in question. The Comptroller General may also conduct his or her own audit of any financial statements of an FHLBank.

For additional information about the regulatory environment in which we operate, see Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments.

Office of Finance

The FHLBanks' Office of Finance (the Office of Finance) facilitates the issuing and servicing of FHLBank debt in the form of COs. The FHLBanks, through the Office of Finance as their agent, are the issuers of COs for which they are jointly and severally liable. The Office of Finance also provides the FHLBanks with market data. The Office of Finance publishes annual and quarterly combined financial reports on the financial condition and performance of the FHLBanks and also publishes certain data concerning debt issues and issuance. The FHLBanks are charged for the costs of operating the Office of Finance, as discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Office of Finance Expenses. The Office of Finance is governed by a board of directors that is constituted of all 11 FHLBank presidents and five independent directors.

Available Information

Our website, www.fhlbboston.com, provides a link to the section of the Electronic Data Gathering and Reporting (EDGAR) website, as maintained by the SEC, containing all reports electronically filed, or furnished, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K as well as any amendments to such reports. Specific links to our annual reports on Form 10-K and quarterly reports on Form 10-Q are made available free of charge through our website as soon as reasonably practicable after electronically filing or being furnished to the SEC. In addition, the SEC’s EDGAR website, which contains our periodic and current reports and other information regarding our electronic filings may be accessed directly at http://www.sec.gov. The Bank's and the SEC's website addresses have been included as inactive textual references only. Information on those websites is not part of this report.

Human Capital Resources

Our human capital is a significant contributor to the success of our strategic business objectives. In managing our human capital, we focus on our workforce profile and the various programs and philosophies described below.

Workforce Profile

Our workforce is primarily comprised of corporate employees, with our principal operations in one location. As of December 31, 2024, we had 206 full-time employees and no part-time employees. We employ temporary personnel to supplement our workforce as business needs arise. As of December 31, 2024, approximately 38 percent of our workforce was female, 62 percent male, 68 percent non-minority and 32 percent minority, and the average tenure of our employees was 11.6 years. Beginning in 2023 and into 2025, we have been adding to our workforce in key positions throughout the Bank designed to mitigate against risks attendant to a leanly staffed workforce by maintaining capacity of individuals, increasing redundancy, and facilitating knowledge transfer for anticipated departures. We strive to both develop talent from within the organization and
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supplement with external hires. We believe that developing talent internally results in institutional strength and continuity and promotes loyalty and commitment in our employee base, which furthers our success, while adding new employees contributes to new ideas and continuous improvement. There are no collective bargaining agreements with our employees.

Total Rewards

We have designed a total rewards structure to attract, retain and motivate our employee population while supporting business and mission objectives throughout all economic cycles. We maintain a market-based, competitive and comprehensive total rewards program consisting of base salary, annual incentives, retirement programs, and health and welfare benefits including:

•Cash compensation – Our salary and annual incentive plans are designed to align payout opportunities with achievement of our financial, operational, mission and regulatory goals and limit excessive risk-taking while recognizing team results and individual contributions.
•Benefits – We offer a variety of competitive retirement, health and welfare and other benefits as critical components in the total rewards program. These benefits are intended to provide employees with vehicles to save for retirement and provide affordable access to healthcare while encouraging healthy choices and behaviors. For more information on our retirement plans, see Part III — Item 11— Executive Compensation — Compensation Discussion and Analysis — Retirement and Deferred Compensation Plans.
•Time away from work – This includes paid time off for vacations, personal reasons, holidays, and volunteer opportunities. This also includes sick time at full pay and salary continuation at 65 percent of base pay for periods of extended illness.
•Culture – We strive to maintain a culture of inclusion and respect to attract, develop, and retain talent, which is supported by our strategic business plan regarding inclusion in all aspects of our business, as required by regulation.
•Development programs and training – We provide educational/tuition assistance programs, internal educational and development opportunities, and fee reimbursement for external educational and development programs.
•Succession planning – Our board and leadership actively engage in succession planning, with a defined plan for management positions as well as other strategically important roles.

For more information on our Total Rewards program, including FHFA oversight of executive compensation, see Part III — Item 11 — Executive Compensation — Compensation Discussion and Analysis. Our approach to performance management includes a collaborative development of annual goals aligned with our strategic business plan, as well as the utilization of a competency model framework with specific behaviors aligned with business priorities, and an annual performance review with formal check-ins during the year. Overall annual ratings are calibrated, and merit and incentive payments are differentiated for our highest performers.

Membership

Table 1 - Number of Members by Institution Type
 December 31,
 202420232022
Commercial banks47 49 50 
Credit unions160 159 159 
Insurance companies80 79 74 
Savings institutions137 137 138 
CDFI, non-depository institutions3 3 4 
Total members427 427 425 

As of December 31, 2024, 2023, and 2022, 66.5 percent, 65.8 percent, and 65.9 percent, respectively, of our members had outstanding advances with us. These usage rates are calculated excluding housing associates and other nonmember borrowers. While eligible to borrow, housing associates are not members and, as such, cannot hold our capital stock. Other nonmember borrowers consist of institutions that are former members or that have acquired former members and assumed the advances and capital stock held by those former members. These other nonmember borrowers are required to hold capital stock to support outstanding advances with us until those advances either mature or are paid off. In addition, nonmember borrowers are required to deliver all required collateral to us or our safekeeping agent until all outstanding advances either mature or are paid off. Other than housing associates, nonmember borrowers may not request new advances and are not permitted to extend or renew any advances they have assumed.
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Our membership includes the vast majority of Federal Deposit Insurance Corporation (FDIC)-insured institutions and National Credit Union Association-insured credit unions with more than $100 million in assets in our district that are eligible to become members. There are other institutions in our district that are eligible for membership, such as insurance companies, smaller credit unions, and CDFIs, that could become members in the future. We do not anticipate that a substantial number of additional insured institutions will become members. We note that, for a variety of reasons, including mergers and acquisitions of members, we could experience a contraction in our membership that could lower overall demand for our products and services.

Economic Conditions

While our membership is limited to institutions with a principal place of business located in our district, both U.S. national and New England economic conditions, particularly in the housing market, impact our results of operations, financial condition, and future prospects. For example, demand for advances is influenced in part by factors such as the level of our members' deposits, which serve as liquidity alternatives to advances, and demand for residential mortgage loans, which members can generally use as collateral for advances. For information on some of the economic factors that have impacted us in 2024 and are expected to impact us in 2025, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Economic Conditions.

Business Lines

Our business lines include offering credit products, such as advances, access to the MPF Program, deposit and safekeeping services, and access to the AHP. We also maintain a portfolio of investments for liquidity purposes and to supplement earnings.

Advances. We serve as a source of liquidity and, subject to our assessment of the borrower's ability to repay, make advances secured by mortgage loans and other eligible collateral to our members and housing associates. We offer an array of fixed- and variable-rate advances products, with repayment terms intended to provide funding alternatives to our members in many interest-rate environments and situations. Principal repayment terms may be structured as 1) interest-only to maturity (sometimes referred to as bullet advances) or to an optional early termination date or series of dates or 2) amortizing advances, which are fixed-rate and term structures with monthly payments of interest and principal.

With respect to advances outside our targeted housing and community investment programs, we price advances to generate a targeted profit margin above the estimated marginal cost of raising funding with a similar maturity profile as well as associated operating and administrative costs. In accordance with the FHLBank Act and FHFA regulations, we price our advance products in a consistent and nondiscriminatory manner to all members. However, we are permitted to differentially price our products based on the creditworthiness of the member, volume, or other reasonable criteria applied consistently to all members.

Our members have other sources of liquidity available to them, including the Federal Reserve Banks, retail deposits, investment banks, commercial banks, wholesale/brokered deposits, and, in limited instances, other FHLBanks.

We had 284 members, five housing associates, and four nonmember institutions with advances outstanding as of December 31, 2024. For information on trends in demand for advances, see Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Advances.

Members that have an approved line of credit with us may, from time to time, overdraw their demand-deposit account. These overdrawn demand-deposit accounts are reported as advances in the statements of condition. These line of credit advances are fully secured by eligible collateral pledged by the member to us. In cases where the member overdraws its demand-deposit account by an amount that exceeds its approved line of credit, we may assess a penalty fee to the member.

In addition to making advances to members, we are permitted under the FHLBank Act to make advances to housing associates that are approved mortgagees under Title II of the National Housing Act. Housing associates must be chartered under law and such charter shall remain in effect unless dissolved by an act of legislature, be subject to inspection and supervision by a governmental agency, and lend their own funds as their principal activity in the mortgage field. Housing associates are not subject to capital stock investment requirements. However, they are subject to the same underwriting standards as members, but are more limited in the forms of collateral that they may pledge to secure advances.

Our advance products can also help members in their asset-liability management. For example, we offer advances that members can use to match the cash-flow patterns and maturities of their mortgage loans or other assets. Such advances can reduce a
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member's interest-rate risk associated with holding long-term, fixed-rate mortgages. We may also offer advances that shift from fixed to floating rates or vice versa after a certain period or upon the occurrence of a certain condition.

Generally, advances may be prepaid at any time. We charge prepayment fees to make us financially indifferent to advance prepayments, except in cases where the prepayment of an advance does not have an adverse financial impact on us or where the pricing of the product compensates us for the value of the option to prepay the advance.

We also offer an advance restructuring program under which the prepayment fee on prepaid advances may be satisfied by the member's agreement to pay an interest rate on a new advance sufficient to amortize the prepayment fee by the maturity date of the new advance, rather than paying the fee in funds immediately available to us.

We have never experienced a credit loss on an advance.

Targeted Housing and Community Investment Programs. We currently offer several solutions that are targeted to meet the affordable housing and economic development needs of communities that our members serve. These programs include the AHP, the Equity Builder Program (EBP), Community Development Advances (CDAs), the New England Fund (NEF), JNE, HOW, LUH, MPF Permanent Rate Buydown, and CDFI Advance. The table below provides a description of each program.


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Table 2 - Targeted Housing and Community Investment Programs
ProgramDescription
Statutorily Mandated Subsidy Programs(1):
AHPSubsidies in the form of direct grants or subsidized advances issued at interest rates below our funding cost (AHP advances) to help fund affordable housing projects that are directly sponsored by members. AHP funds are required to be used for homeownership for households with incomes at or below 80 percent of the median income for the area, or rental housing in which 20 percent of the units are for households with incomes that do not exceed 50 percent of the median income for the area. Program funds must be used for the direct costs to acquire, construct, or rehabilitate affordable housing.
EBPOffers members grants to provide households with incomes at or below 80 percent of the area median income with down-payment, closing-cost, homebuyer counseling, and rehabilitation assistance. EBP is funded with a portion of the AHP assessment.
Statutorily-Mandated Non-Subsidized Advances for Community Investment Programs:
CDAsDiscounted advances offered at interest rates that are lower than our regular advance products for the purpose of helping our members fund community development efforts, such as supporting the growth of small businesses, and the development or renovation of roads and schools and expanding affordable housing for individuals with incomes at or below defined percentages of area median income.
NEFAdvances that are targeted to housing initiatives that benefit households with incomes at or below 80 percent of the area median income in support of inclusionary zoning efforts in ownership and rental projects.
Discretionary Housing and Community Investment Programs(2):
JNEProvides subsidized advances to members to support low-cost lending to small businesses in New England that create and/or retain jobs, or otherwise contribute to overall economic development activities.
HOWEnables members to provide down payment assistance to households with incomes above 80 percent up to 120 percent of the area median income.
LUHSpecial purpose credit program established in accordance with the Equal Credit Opportunity Act and the Consumer Financial Protection Bureau’s Regulation B designed to increase the opportunity for people of color with incomes up to 120 percent of the area median income to purchase a home.
MPF Permanent Rate BuydownEnables our participating financial institutions that utilize the MPF Program to reduce interest rates paid by income-eligible borrowers. Eligible borrowers with incomes up to 80 percent of area median income can qualify for the product.
CDFI AdvanceProvides subsidized advances enabling members to provide low-cost capital to certified, non-depository CDFIs to support the development of affordable housing, job creation/small business growth, and the expansion of community facilities in distressed communities throughout New England.
_______________________
(1)For further information about how AHP subsidies are funded, see AHP Assessment below.
(2)Discretionary housing and community investment programs in this section consist of voluntary grants and subsidized advances.

Investments. We maintain a portfolio of investments for liquidity purposes and to supplement earnings. To better meet members' potential borrowing needs at times when access to the capital markets is unavailable (either due to requests that follow the end of daily debt issuance activities or due to a market disruption event impacting CO issuance) and in support of certain statutory and regulatory liquidity requirements, as discussed in Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources, we maintain a portfolio of short-term investments issued by highly-rated institutions, primarily consisting of federal funds sold, securities purchased under agreements to resell secured by U.S. Treasury securities, or Government National Mortgage Association (Ginnie Mae), Federal
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National Mortgage Association (Fannie Mae), or Federal Home Loan Mortgage Corporation (Freddie Mac) securities, and interest-bearing deposit accounts at banks. We also purchase U.S. Treasury securities with maturities of up to 10 years to support our liquidity.

We also leverage our capital to enhance our income and further support our contingent liquidity needs and mission by maintaining a longer-term investment portfolio. This portfolio includes debentures issued or guaranteed by the U.S. Treasury, U.S. government agencies and instrumentalities, as well as supranational institutions, and mortgage-backed securities (MBS) that are issued by GSEs and U.S. government agencies. In accordance with our policy all securities must be internally rated no lower than FHFA3 on an internal 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. We also may purchase securities issued by state or local housing-finance agencies (HFAs) that meet an internal rating requirement of at least FHFA2. The long-term investment portfolio is intended to provide us with higher returns than those available in the short-term money markets. For a discussion of developments and factors that have impacted and could continue to impact the profitability of our investments, particularly our long-term investment portfolio, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary.

Under our regulatory authority to purchase MBS, additional investments in MBS and asset-backed securities (ABS) are prohibited if our investments in such securities would cause the outstanding balance to exceed 300 percent of capital at the time of purchase, or would cause the total amount of purchases within a calendar quarter to exceed 50 percent of capital. Capital for this calculation is defined as capital stock, mandatorily redeemable capital stock, and retained earnings. On December 31, 2024, and 2023, our MBS and ABS holdings represented 264 percent and 256 percent of capital, respectively, and purchases remained below 50 percent of capital in all quarters of 2024 and 2023.

Our investment activities are designed to comply with the FHFA’s core mission achievement advisory bulletin, which establishes a ratio by which the FHFA will assess each FHLBank’s core mission achievement. Core mission achievement is determined using a ratio of primary mission assets, which includes advances and acquired member assets (mortgage loans acquired from members), to COs excluding the amount funding U.S. Treasury securities with maturities no greater than 10 years classified as available-for-sale or trading securities. The primary mission achievement ratio is calculated using annual average par values.
 
The core mission advisory bulletin provides the FHFA’s expectations about the content of each FHLBank’s strategic plan based on its ratio, as follows:

•when the ratio is at least 70 percent, the strategic plan should include an assessment of the FHLBank’s prospects for maintaining this level;
•when the ratio is at least 55 percent but less than 70 percent, the strategic plan should explain the FHLBank’s plan to increase the ratio; and
•when the ratio is below 55 percent, the strategic plan should include an explanation of the circumstances that caused the ratio to be at that level and detailed plans to increase the ratio. The advisory bulletin provides that if an FHLBank maintains a ratio below 55 percent over the course of several consecutive reviews, the FHLBank’s board of directors should consider possible strategic alternatives.

Our primary mission achievement ratio for the years ended December 31, 2024 and 2023, was 76.7 percent and 78.4 percent, respectively.

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Table 3 - Primary Mission Achievement Ratio
(dollars in thousands)
 For the Year Ended December 31,
Average par value for the year ended
20242023
Advances
$41,193,981 $42,385,470 
Mortgage loans held for portfolio
3,317,835 2,807,813 
Primary mission assets
44,511,816 45,193,283 
Consolidated obligations
64,278,724 64,180,388 
U.S. Treasury obligations
6,250,000 6,499,315 
Consolidated obligations less U.S. Treasury obligations
$58,028,724 $57,681,073 
Primary mission achievement ratio
76.7 %78.4 %

Mortgage Loan Finance. We participate in the MPF Program, which is a secondary mortgage market structure under which we either invest in or, for fees, facilitate third party investors' investment in eligible mortgage loans (referred to as MPF loans) from FHLBank members, referred to as "participating financial institutions." MPF loans are fixed rate, residential mortgage loans that are either conventional (conventional mortgage loans) or insured or guaranteed by the Federal Housing Administration (the FHA), the U.S. Department of Veterans Affairs (the VA), the Rural Housing Service of the U.S. Department of Agriculture (RHS), or the U.S. Department of Housing and Urban Development (HUD) (government mortgage loans) and are secured by one- to four-family residential properties with original maturities ranging from five years to 30 years or participations in such mortgage loans. For information on trends in the size of the program in 2024, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Mortgage Loans.

A variety of MPF loan products have been developed to meet the differing needs of participating financial institutions. We have offered our members MPF Original, MPF 125, MPF Plus, MPF 35, MPF Government, MPF Government MBS and MPF Xtra, each being closed-loan products in which we (or a third party investor in the case of MPF Xtra, or MPF Government MBS) invest in MPF loans that have been acquired or have already been closed by a participating financial institution with its own funds. The products have different credit-risk-sharing characteristics based upon the different levels for the first loss account and credit-enhancement and the types of credit-enhancement fees (performance-based, fixed amount, or none). In the case of MPF Xtra and MPF Government MBS, each product facilitates the investment in MPF loans by third party investors for which we are paid fees and under which the related credit and market risks are transferred to the investors. There are no first loss account, credit-enhancement, or credit-enhancement fees for MPF Xtra and MPF Government MBS because the loans are sold to third parties that assume the embedded credit risk. For government mortgage loans, participating financial institutions provide the required credit-enhancement by delivering loans that are guaranteed or insured by a department or agency of the U.S. government.

The participating financial institution is responsible for all of the traditional retail loan origination functions under all of these MPF loan products. A master commitment provides the terms under which the participating financial institution delivers mortgage loans to us. We continue to offer MPF Original, MPF 35, MPF Government, MPF Government MBS, and MPF Xtra. We do not currently offer our members new master commitments under MPF 125 or MPF Plus.

The FHLBank of Chicago (in this capacity, the MPF Provider) establishes general eligibility standards under which an FHLBank member may become a participating financial institution, the structure of MPF loan products, and the eligibility rules for MPF loans. In addition, the MPF Provider manages the delivery mechanism for MPF loans and the back-office processing of MPF loans as master servicer and master custodian. The FHLBanks that participate in the MPF Program, including the Bank, (the MPF Banks) pay fees to the MPF Provider for these services.

The MPF Provider has engaged a vendor for master servicing and as the primary custodian for the MPF Program (referred to herein as the master servicer). The MPF Provider also has contracted with other custodians meeting MPF Program eligibility standards at the request of certain participating financial institutions. These other custodians are typically affiliates of participating financial institutions, and in some cases a participating financial institution may act as self-custodian.

The MPF Provider publishes and maintains:

•the MPF Program Guide; and
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•a Selling Guide and a Servicing Guide for each of the remaining MPF products we have offered (collectively, the MPF guides), which together detail the requirements participating financial institutions must follow in originating, underwriting, selling and servicing MPF loans.

The MPF Provider also maintains the infrastructure through which MPF Banks may purchase MPF loans through their participating financial institutions.

For conventional mortgage loan products (MPF loan products other than government mortgage loans and products in which we do not invest such as MPF Xtra), participating financial institutions assume or retain a portion of the credit risk on the MPF loans they sell to an MPF Bank by providing credit-enhancement either through a direct liability to pay credit losses up to a specified amount or through a contractual obligation to provide supplemental mortgage guaranty insurance. The FHFA Acquired Member Assets (AMA) rule allows each FHLBank to utilize its own model to determine the credit-enhancement for an AMA asset or pool of loans in lieu of a nationally recognized statistical ratings organization (NRSRO) ratings model. We determined, based on documented analysis, that assets delivered to us were credit enhanced to at least a level at which we have a high degree of confidence that we will not bear material losses beyond the losses absorbed by our first loss account, even under reasonably likely adverse changes to expected economic conditions. Loans are assessed by third party credit models, and a credit-enhancement is calculated based on credit attributes of the loans in each master commitment. Credit losses on a loan may only be absorbed by a credit-enhancement amount stated in the applicable master commitment. The participating financial institution's credit-enhancement covers losses for MPF loans in excess of the MPF Bank's allocated portion of credit losses up to an agreed upon amount, called the first loss account. Participating financial institutions are paid a credit-enhancement fee for providing credit-enhancement and in some instances all or a portion of the credit-enhancement fee may be adjusted based upon the performance of loans purchased by the Bank. Losses that exceed the amount of the participating financial institutions' credit-enhancement obligation are borne by the Bank.

Members and eligible housing associates may apply to become a participating financial institution. All of the participating financial institution's obligations under the applicable agreement are secured in the same manner as the other obligations of the participating financial institution under its advances agreement with us. We have the right to request additional collateral to secure the participating financial institution's obligations.

Repurchases of MPF Loans

When a participating financial institution fails to comply with its representations and warranties concerning its duties and obligations described within applicable agreements, the MPF guides, applicable laws, or terms of mortgage documents, the participating financial institution may be required to repurchase the MPF loans that are impacted by such failure. Reasons that would require a participating financial institution to repurchase an MPF loan may include, but are not limited to, MPF loan ineligibility, failure to deliver documentation to an approved custodian, a servicing breach, fraud, or other misrepresentation. In such instances, we can require that the participating financial institution compensate us for any losses or costs that we incur.

MPF Servicing

Participating financial institutions can retain the rights and responsibilities for servicing MPF loans sold to us under the MPF Program or choose a servicing released option. Servicing functions include loan collections and remittances, default management, loss mitigation, foreclosure, and disposition of the real estate acquired through foreclosure or deed-in-lieu of foreclosure.

If there is a loss on a conventional mortgage loan, the loss is allocated to the master commitment and shared in accordance with the risk-sharing structure for that particular master commitment. The servicer pays any gain on sale of real-estate-owned property (REO) to the related MPF Bank, or in the case of a participation, to us and other MPF Bank(s) based upon their respective interests in the MPF loan. However, the amount of the gain is available to reduce subsequent losses incurred under the master commitment before such losses are allocated between us and the participating financial institution.

Loss Allocation

Credit losses from conventional mortgage loans that are not covered by the borrower's equity in the mortgaged property, property insurance, or primary mortgage insurance are allocated between us and the participating financial institution as follows:

•Credit losses are allocated first to us, up to an agreed-upon amount, called the first loss account determined for the MPF product as follows:
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MPF Original. The first loss account starts at zero on the day the first MPF loan under a master commitment is purchased and increases monthly over the life of the master commitment at a rate that ranges from 0.03 percent to 0.06 percent (three to six basis points) per annum based on the month-end outstanding aggregate par value of the master commitment. The first loss account is structured so that over time, it should cover expected losses on a master commitment, though losses early in the life of the master commitment could exceed the first loss account and be charged in part to the participating financial institution's credit-enhancement.

MPF 125. The first loss account is equal to 1.00 percent (100 basis points) of the aggregate par value of the MPF loans funded under the master commitment. Once the master commitment is fully funded or expires, the first loss account is expected to cover expected losses on that master commitment. We may recover a portion of losses allocated to the first loss account by withholding performance credit-enhancement fees payable to the participating financial institution. We do not currently offer our members new master commitments under MPF 125.

MPF Plus. The first loss account is equal to an agreed-upon number of basis points of the aggregate par value of the MPF loans funded under the master commitment that is not less than the amount of expected losses on the master commitment. Once the master commitment is fully funded, the first loss account is expected to cover expected losses on that master commitment. We may recover a portion of losses allocated to the first loss account by withholding performance credit-enhancement fees payable to the participating financial institution. We do not currently offer our members new master commitments under MPF Plus.

MPF 35. The first loss account is equal to 35 basis points of the aggregate par value of the MPF loans funded under the master commitment. We may recover a portion of losses allocated to the first loss account by withholding performance credit-enhancement fees payable to the participating financial institution.

•Credit losses are allocated second to the participating financial institution under its credit-enhancement obligation for losses in excess of the first loss account, if any, up to the amount of such credit-enhancement. The credit-enhancement may consist of a direct liability of the participating financial institution to pay credit losses up to a specified amount, a contractual obligation of the participating financial institution to provide supplemental mortgage guaranty insurance, or a combination of both.

•Third, any remaining unallocated losses are absorbed by us.

We may invest in participation interests in MPF loans together with other MPF Banks. For participation interests, MPF loan losses (other than those allocable to the participating financial institution) are allocated among us and the participating MPF Bank(s) pro rata based upon the respective participation interests in the related master commitment.

Other Banking Activities. We engage in other banking activities including, among others:

•offering standby letters of credit, which are financial instruments we issue for a fee under which we agree to honor payment demands made by a beneficiary in the event the primary obligor cannot fulfill its obligations; and
•acting as a correspondent for deposit, funds transfer, and safekeeping services for which we earn a fee.

Consolidated Obligations

We fund our activities principally through the sale of debt securities known as consolidated obligations, referred to herein as COs. Our ability to access the money and capital markets through the sale of COs using a variety of debt structures and maturities has historically allowed us to manage our balance sheet effectively and efficiently. The FHLBanks are among the world's most active issuers of debt, issuing on a daily basis, including sometimes multiple issuances in a single day. The FHLBanks compete with Fannie Mae, Freddie Mac, and other GSEs for funds raised through the issuance of unsecured debt in the agency debt market.

COs, consisting of bonds and discount notes, represent our primary source of debt to fund advances, purchases of mortgage loans, and investments. All COs are issued on behalf of one or more FHLBanks (as the primary obligors for the specified issuance) through the Office of Finance, but all COs are the joint and several obligations of all of the FHLBanks. COs are not obligations of the U.S. government and are not guaranteed by the U.S. government or any government agency. As of February 28, 2025, Moody's Investors Service Inc. (Moody's) rated COs Aaa/P-1, and Standard & Poor’s Financial Services LLC (S&P) rated them AA+/A-1+. The GSE status of the FHLBanks and the ratings of the COs have historically provided the
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FHLBanks with ready capital market access. For information on the market for COs during the period covered by this report, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt Financing — Consolidated Obligations.

CO Bonds. CO bonds may have original maturities of up to 30 years (although there is no statutory or regulatory limit on maturities) and are generally issued to raise intermediate and long-term funds. CO bonds may also contain embedded options that affect the term or yield structure of the bond. Such options include call options under which we can redeem bonds prior to maturity.

CO bonds may be issued with either fixed-rate coupon-payment terms, zero-coupon terms, or variable-rate coupon-payment terms that use a variety of indices for interest-rate resets including the secured overnight financing rate (SOFR), and others. Some CO bonds may contain different coupon characteristics at different points in time.

CO bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members. We frequently participate in these issuances. Each FHLBank requests funding through the Office of Finance, and the Office of Finance endeavors to issue the requested bonds and allocate proceeds in accordance with each FHLBank's requested funding. In some cases, proceeds from partially fulfilled offerings must be allocated among the requesting FHLBanks in accordance with predefined rules that apply to particular issuance programs. Conversely, under certain programs, proceeds from bond offerings that exceed aggregate FHLBank demand will be allocated to the FHLBanks in accordance with predefined rules that apply to particular issuance programs. The Office of Finance also prorates the amounts of fees paid to dealers in connection with the sale of COs to each FHLBank based upon the percentage of debt issued that is assumed by each FHLBank.

The Office of Finance has established an allocation methodology for the proceeds from the issuance of COs if COs cannot be issued in sufficient amounts to satisfy all FHLBank demand for funding during periods of financial distress and when its existing allocation processes are deemed insufficient. In general, this methodology provides that the proceeds in such circumstances will be allocated among the FHLBanks based on relative FHLBank total regulatory capital, with FHLBanks with greater total regulatory capital in absolute terms receiving greater allocations of issuance proceeds. The Office of Finance will use this method in such periods unless it determines that there is an overwhelming reason to adopt a different allocation method. As is the case during any instance of a disruption in our ability to access the capital markets, market conditions or this allocation could adversely impact our ability to finance our operations, financial condition, and results of operations.

CO Discount Notes. CO discount notes are short-term obligations issued at a discount to par with no coupon. Terms range from overnight up to one year. We generally participate in CO discount note issuance on a daily basis as a means of funding short-term assets and managing our short-term funding gaps. Each FHLBank submits commitments to issue CO discount notes in specific amounts with specific terms to the Office of Finance, which in turn, aggregates these commitments into offerings to securities dealers. Such commitments may specify yield limits that we have specified in our commitment, above which we will not accept funding. CO discount notes are sold either at auction on a scheduled basis or through a direct bidding process on an as-needed basis through a group of dealers known as the selling group, who may turn to other dealers to assist in the ultimate distribution of the securities to investors.

Negative Pledge Requirement. FHFA regulations require that each FHLBank maintain the following types of assets, free from any lien or pledge, in an amount at least equal to the amount of that FHLBank's participation in the total COs outstanding:

•cash;
•obligations of, or fully guaranteed by, the U.S. government;
•secured advances;
•mortgages, which have any guaranty, insurance, or commitment from the U.S. government or any agency of the U.S.; and
•investments described in Section 16(a) of the FHLBank Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

We were in compliance with this FHFA regulation as of December 31, 2024 and 2023.

Joint and Several Liability. Although each FHLBank is primarily liable for the portion of COs corresponding to the proceeds received by that FHLBank, each FHLBank is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all COs. Under FHFA regulations, if the principal or interest on any CO issued on behalf of one of the FHLBanks is not paid in full when due, then the FHLBank primarily responsible for the payment may not pay dividends to, or redeem or repurchase shares of stock from, any member of such FHLBank. The FHFA, in its discretion, may require any
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FHLBank to make principal or interest payments due on any COs, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation.

To the extent that an FHLBank makes any payment on a CO on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the FHLBank otherwise responsible for the payment. However, if the FHFA determines that an FHLBank is unable to satisfy its obligations, then the FHFA may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all COs outstanding, or on any other basis the FHFA may determine.

Neither the FHFA, nor any of its predecessors, has ever required us to repay obligations in excess of our participation nor have they allocated to us any outstanding liability of any other FHLBank's COs.
Capital Resources

As a cooperative, we are owned by our member institutions, which are required to purchase shares of our capital stock as a condition of membership and to support the capital requirements for certain credit products that we provide. All issuances and repurchases/redemptions of our capital stock are effected at a par value of $100 per share. We issue one class of stock, Class B, which shareholders may redeem five years after providing a written redemption request. Our equity capital also includes retained earnings.

Total Stock-Investment Requirement (TSIR). Each member is required to satisfy its TSIR at all times, which is an amount of stock equal to its activity-based stock-investment requirement plus its membership stock-investment requirement rounded up to the nearest whole share. Any stock held by a member in excess of its TSIR is referred to as excess stock. On December 31, 2024, members and nonmembers with capital stock outstanding held excess capital stock totaling $42.9 million, representing approximately 2.0 percent of total capital stock outstanding.

Membership Stock-Investment Requirement (MSIR). The MSIR is equal to 0.05 percent of the value of the member’s total assets measured as of December 31 of the preceding year subject to a current minimum balance of $10,000 and a current maximum balance of $5.0 million. For insurance company members, the MSIR’s total assets amount excludes any assets in a separate account, segregated account, or protected account. Each member’s MSIR is adjusted annually on or about March 31 to reflect total assets as of December 31 of the preceding year.

Activity-Based Stock-Investment Requirement (ABSIR). Certain activity with us has an associated ABSIR. For example, advances have an ABSIR that varies by term with longer terms typically requiring a higher ABSIR.

Redemption of Excess Stock. Members may submit a written request for redemption of excess stock. The stock subject to the request will be redeemed at par value by us upon expiration of the stock-redemption period, which is five years for Class B stock, provided that the stock is not required to support the member's TSIR. The stock-redemption period also applies (with certain exceptions) to stock held by a member that (1) gives notice of intent to withdraw from membership or (2) becomes a nonmember due to merger or acquisition, charter termination, or involuntary termination of membership. At the end of the stock-redemption period, we must comply with the redemption request unless doing so would cause us to fail to comply with our minimum regulatory capital requirements, cause the member to fail to comply with its TSIR, or violate any other applicable limitation or prohibition.

Repurchase of Excess Stock. Our Capital Plan provides us with the authority and sole discretion to repurchase excess stock from any shareholder at par value upon 15 days prior written notice to the member, unless a shorter notice period is agreed to in writing with the member, so long as the repurchase will not cause us to fail to meet any of our regulatory capital requirements or violate any other applicable limitation or prohibition. It is our practice to repurchase daily the excess stock held by any shareholder whose excess stock exceeds the lesser of $3.0 million or 3.00 percent of the shareholder’s TSIR, subject to a minimum repurchase of $100,000. We retain authority to suspend repurchases of excess stock from any member or all members without prior notice. In addition to daily repurchases, shareholders may request that we voluntarily repurchase excess stock shares at any time. In either case, we retain sole discretion over any voluntary repurchases of excess stock in accordance with our Capital Plan. The discretion to suspend repurchases or to decline a member’s repurchase request would most likely be exercised in one of two scenarios. In the first scenario, discretion would be exercised because the member’s financial condition or collateral position is such that we deem it necessary to retain excess stock to fully secure our credit exposure to the member. In the second scenario, discretion would be exercised to meet the liquidity or capital management needs of the Bank. During the year ended December 31, 2024, we repurchased $2.6 billion of excess capital stock, of which $997 thousand was mandatorily redeemable capital stock.

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Statutory and Regulatory Restrictions on Capital-Stock Redemption and Repurchases. By law our stock is putable by the member. However, there are significant statutory and regulatory restrictions on our obligation to redeem a member's outstanding stock, including the following:

•We can only redeem stock investments that exceed the members' TSIR.
•Our board of directors, or a committee of the board, may decide to suspend redemptions if it reasonably believes that continued redemptions would cause us to fail to meet any of our minimum capital requirements, prevent us from maintaining adequate capital against potential risks that are not adequately reflected in our minimum capital requirements, or otherwise prevent us from operating in a safe and sound manner.
•If our board of directors or the FHFA determines that we have incurred or are likely to incur losses that result in or are likely to result in charges against our capital stock while such charges are continuing or expected to continue then we may not redeem or repurchase any capital stock without the prior written approval of the FHFA.
•If, during the period between receipt of a stock-redemption request from a member and the actual redemption, we become insolvent and are either liquidated or forced to merge with another FHLBank, the redemption value of the stock will be established either through the market-liquidation process or through negotiation with a merger partner. In either case, all senior claims must first be settled, and there are no claims which are subordinated to the rights of FHLBank stockholders.
•If we were liquidated, after payment in full to our creditors, our stockholders would be entitled to receive the par value of their capital stock as well as any retained earnings in an amount proportional to the stockholder's share of the total shares of capital stock. In the event of a merger or consolidation, our board of directors would determine the rights and preferences of our stockholders, subject to any terms and conditions imposed by the FHFA.

Additionally, we cannot redeem or repurchase shares of capital stock from any of our members if:

•the principal or interest due on any CO issued through the Office of Finance on which we are the primary obligor has not been paid in full when due;
•we fail to provide to the FHFA, before the end of each calendar quarter and prior to declaring or paying dividends for a quarter, a written certification required by the FHFA's regulations stating that we will remain in compliance with our liquidity requirements and will remain capable of making full and timely payment of all of our current obligations coming due during the next quarter;
•we notify the FHFA that we cannot provide the required certification, project we will fail to comply with statutory or regulatory liquidity requirements, or will be unable to timely and fully meet all of our current obligations; or
•we actually fail to comply with statutory or regulatory liquidity requirements or to timely and fully meet all of our current obligations, or negotiate to enter or enter into an agreement with one or more other FHLBanks to obtain financial assistance to meet our current obligations.

Our board of directors also has a statutory obligation to review and adjust member capital stock purchase requirements to comply with our minimum capital requirements, and each member must comply promptly with any such requirement. However, a member may be able to reduce its outstanding business with us as an alternative to purchasing additional capital stock.

Mandatory Purchases of Capital Stock. Our board of directors has a right and an obligation to call for additional capital-stock purchases by our members in accordance with our Capital Plan, if needed to satisfy statutory and regulatory capital requirements. Our board of directors has never called for any additional capital-stock purchases by members under our Capital Plan.

Retained Earnings. Our current minimum retained earnings management action trigger and limit are $1.7 billion and $1.3 billion, respectively, and is discussed under Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Internal Capital Practices and Policies — Minimum Retained Earnings Target.

As of December 31, 2024, our retained earnings totaled $1.9 billion. Of that amount, $509.2 million is in a restricted retained earnings account and is not available to pay dividends. Our Capital Plan and a joint capital enhancement agreement (as amended, the Joint Capital Agreement) among the FHLBanks require that we allocate a certain percent of net income, at least 20 percent, to the restricted retained earnings account until the total amount in the restricted retained earnings account is at least equal to 1.0 percent of the daily average carrying value of our outstanding total COs (excluding fair-value adjustments) for the calendar quarter. At December 31, 2024, our contribution requirement totaled $663.5 million. Any amount of restricted retained earnings that exceeds 150 percent of the contribution requirement may be reclassified to unrestricted retained earnings. For
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additional information on restricted retained earnings and the Joint Capital Agreement, see Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Internal Capital Practices and Policies — Restricted Retained Earnings and the Joint Capital Agreement.

Dividends. We may pay dividends from current net earnings or unrestricted retained earnings, subject to certain limitations and conditions. For additional information see Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Interest-Rate-Exchange Agreements

In general, we use interest-rate-exchange agreements (derivatives) in three ways: 1) as a fair-value hedge of a hedged financial instrument or a firm commitment, 2) as a cash-flow hedge of a hedged financial instrument or a forecasted transaction, or 3) as economic hedges in asset-liability management that are not designated as hedges. In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, we also use derivatives to manage embedded options in assets and liabilities and to hedge the market value of existing assets, liabilities, and anticipated transactions. We may also enter into derivatives concurrently with the issuance of COs to reduce funding costs. We enter into derivatives directly with principal counterparties and also enter into centrally-cleared derivatives where our counterparty is a derivatives clearing organization (DCO). FHFA regulations require the documentation of nonspeculative use of these instruments and the establishment of limits to credit risk arising from these instruments.

AHP Assessment

Annually, the FHLBanks collectively must set aside for the AHP the greater of $100 million or 10 percent of the current year's net income before interest expense associated with mandatorily redeemable capital stock and the assessment for AHP (net earnings). For the year ended December 31, 2024, our AHP assessment was $32.3 million. In addition to the required assessment, our Board may elect to make voluntary contributions to the AHP. Our board of directors approved a voluntary contribution of $2.8 million for 2024, resulting in a total combined contribution amount of $35.1 million for the year.

If the result of the aggregate 10 percent of current year net earnings calculation is less than $100 million for all FHLBanks, then each FHLBank would be required to contribute such prorated sums as may be required to assure that the aggregate contributions of the FHLBanks equals $100 million. The shortfall would be allocated among the FHLBanks based upon the ratio of each FHLBank's income before AHP to the sum of the income before AHP of the FHLBanks combined, except that the required annual AHP contribution for an FHLBank cannot exceed its net earnings for the year. Accordingly, the actual amount of each future AHP assessment is dependent upon both our net income before interest expense associated with mandatorily redeemable capital stock and the income of the other FHLBanks.

Risk Management

We have a comprehensive risk-governance structure. We have identified the following major risk categories relevant to business activities:

•Credit risk is the risk to earnings or capital due to an obligor's failure to meet the terms of any contract with us or otherwise perform as agreed;
•Market risk is the risk to earnings or shareholder value due to adverse movements in interest rates, market prices, or interest-rate spreads;
•Liquidity risk is the risk that we may be unable to meet our funding requirements, or meet the credit needs of members, at a reasonable cost and in a timely manner;
•Leverage risk is the risk that our capital is not sufficient to support the level of assets that can result from a deterioration of our capital base, a deterioration of the assets, or from overbooking assets;
•Business risk is the risk to earnings or capital arising from adverse business decisions or improper implementation of those decisions, or from external factors as may occur in both the short- and long-run, including from legislative and regulatory developments;
•Diversity and inclusion risk is the risk that the Bank lacks sufficient diversity of perspectives and experiences among its staff, board of directors, and business partners or lacks a sufficiently inclusive environment that encourages sharing of such perspectives and experiences to incorporate a broader range of risks and opportunities in its decision-making;
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•Operational risk is the risk of unexpected loss resulting from ineffective people, processes or systems, whether emanating internally or externally. Operational risk also includes model risk (the risk of loss resulting from model errors or the incorrect use or application of model output), compliance risk (the risk of non-compliance with the Bank’s obligations and commitments), cybersecurity risk, and the risk of internal or external fraud; and
•Reputation risk is the risk to earnings or capital arising from negative public opinion, which can affect our ability to establish new business relationships or maintain existing business relationships.

Credit, market, liquidity, and leverage risks are discussed in greater detail throughout Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations and Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk. Business, operational, diversity and inclusion, and reputation risks are discussed in greater detail below.

The board of directors provides risk oversight through the review and approval of our risk-management policy and also evaluates and approves risk tolerances and risk limits. The board of directors' Risk Committee provides additional oversight of the Bank's risk governance structure. The board of directors also reviews the results of an annual risk assessment that we perform for our major business processes.

Management establishes a quantifiable connection between our desired risk profile and our risk tolerances and risk limits as expressed in our risk-management policy. Management is responsible for maintaining internal policies consistent with the risk-management policy and maintains various standing committees intended to assess and manage each of the major risk categories relevant to our business activities. Our chief risk officer is responsible for communicating material changes to these internal policies to the board of directors' Risk Committee. Management is also responsible for monitoring, measuring, and reporting risk exposures to the board of directors. Additionally, our internal audit department may report to the board of directors' Audit Committee the results of internal audit work on the effectiveness of management's risk management processes and controls.

Business Risk

Management's strategies for mitigating business risk include annual and long-term strategic planning exercises; continually monitoring key economic indicators, business activity and financial projections, merger activity among our members, emerging business opportunities, competitive threats, member engagement and satisfaction, and our external environment; and developing contingency plans when appropriate.

Operational Risk

We are subject to operational risk which can result from human error, fraud, vendor or third-party failure, unenforceability of legal contracts, or deficiencies in internal controls or information systems.

We have policies and procedures intended to mitigate operational risks. We train our employees for their roles and maintain written policies and procedures for our key functions. We maintain a system of internal controls designed to adequately segregate responsibilities and appropriately monitor and report on our activities to management and the board of directors. Our internal audit department, which reports directly to the Audit Committee of the board of directors, regularly monitors our adherence to established policies and procedures. Operational risk includes risk arising from breaches of our cybersecurity or other cybersecurity incidents that could result in a failure or interruption of our information technology systems as discussed in Part I — Item 1C — Cybersecurity. Some operational risks are beyond our control, and the failure of other parties to adequately address their operational risks could adversely impact us.

Disaster-Recovery/Business Continuity Provisions. We maintain a business continuity site in Massachusetts to provide continuity of operations in the event that our Boston headquarters becomes unavailable. We also have reciprocal back-up agreements in place with the FHLBank of Topeka to provide short-term coverage for a limited set of services in the event that our facilities are inoperable.

Insurance Coverage. We have insurance coverage for employee fraud, forgery, alteration, and embezzlement, computer systems fraud, as well as director and officer liability protection for, among other things, breach of duty, negligence, and acts of omission. Additionally, insurance coverage is currently in place for commercial property and general liability, bankers professional liability, employment practices liability, cyber liability, and fiduciary liability. We maintain additional insurance protection as deemed appropriate, including coverage for liability arising from automobiles, and business-travel accidents. In addition to using an insurance broker to place our insurance coverage, we use the services of an independent insurance
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consultant who periodically conducts a review of our insurance coverage levels and provides other advice about our insurance program.

Diversity and Inclusion Risk

The Bank’s commitment to its diversity and inclusion program continues to evolve. As required by regulation, the Bank has a rolling three-year diversity and inclusion strategic plan so we can evaluate the program’s effectiveness over the three-year time horizon. Having an effective diversity and inclusion program provides for differing perspectives and experiences that assist the Bank in meeting its strategic objectives, which occur at the board of directors, management, and staff levels.

Reputation Risk

We take several steps to manage reputation risk. We have established a code of ethics and business conduct and operational risk-management procedures intended to ensure ethical behavior among our staff and directors and require all employees annually to certify compliance with our code of ethics. We work to ensure that all communications are presented accurately, consistently, and in a timely manner to multiple audiences and stakeholders. In particular, we regularly conduct outreach efforts with our membership and with housing and economic-development advocacy organizations throughout our district. We also maintain relationships with government officials at the federal, state, and municipal levels; nonprofit housing and community-development organizations; and regional and national trade and business associations to foster awareness of our mission, activities, and value to members. We work with the Council of FHLBanks and the Office of Finance to coordinate communications on a broader scale.

ITEM 1A. RISK FACTORS

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

BUSINESS AND REPUTATION RISKS

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

Our primary business is providing liquidity to our members by making advances to, and purchasing residential mortgage loans from, our members. Our members can secure funding from alternative sources that are not subject to the same body of regulation applicable to us. This is one factor among several that may enable alternative suppliers of funds to offer wholesale funding or purchase residential mortgage loans on terms that we are unable to offer and that members deem more desirable than the terms we offer on our advances or purchases of residential mortgage loans.

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

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

As of December 31, 2024, our five largest stock-holding members held 37.2 percent of our advances and 31.8 percent of our capital stock. The loss of large members or a significant reduction in the level of business they conduct with us would likely lower overall demand for our products and services in the future and adversely impact our performance.

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

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

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

For example, we note that, from time to time, the executive branch, Congress, and various independent federal agencies have advanced plans through legislation, regulation, guidance, or other government action, such as executive orders, to reform the federal regulatory landscape regarding U.S. housing finance, such as the ultimate resolution to Fannie Mae and Freddie Mac’s respective conservatorships. If implemented, these plans could directly or indirectly impact the business and results of operations of the GSEs that support the U.S. housing market, including the FHLBanks. Any such changes that are implemented could directly or indirectly impact our ability to conduct business or the cost of doing business.

The FHFA issued the “FHLBank System at a 100: Focusing on the Future” report on November 7, 2023, presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue over a multi-year effort, in service of its vision for the FHLBank System. The report focused on four broad themes: (1) mission of the FHLBank System; (2) stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. We are unable to predict what actions, if any, will ultimately result from the FHFA’s recommendations, the timing of any actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System, particularly in light of the changes in the FHFA’s leadership and potential changes in the regulatory environment affecting the Bank. The report is discussed in greater detail in Part II — Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Legislative and Regulatory Developments.

We cannot predict what, if any, regulations will be issued, legislation will be enacted, or other government actions will be taken, and we cannot predict the effects of any such regulations, legislation, or other government actions on our business operations and/or financial condition, particularly in light of changes in the federal administration, FHFA leadership, and potential changes in the regulatory environment affecting the Bank. Any such changes to legislation, regulation, or regulatory expectations affecting our mission, liquidity role, membership and lending requirements, affordable housing contributions, voluntary programs, support for community investment, operations, structure, statutory and regulatory mandated diversity and inclusion programs, and governance, could increase our operational costs and expenses, result in heightened scrutiny of the Bank and our mission and activities, and impact the Bank’s business, which may affect the Bank’s financial condition, or results of operations, or the value of membership in the Bank.

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

Historically, our board of directors has varied dividend declarations based on our financial condition, performance, outlook and economic environment. Throughout 2024, our board maintained dividends at a consistent level relative to short-term interest rates, as represented by SOFR. If our financial performance or condition were to deteriorate significantly in the future, our board of directors could determine to reduce or eliminate dividends.

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

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

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

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

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

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

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

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

Any negative information or other factors could result in the FHLBanks having to pay a higher rate of interest on COs to make them attractive to investors. If we maintain our existing pricing on our advances products and other services notwithstanding increases in CO interest rates, the spreads we earn would fall and our results of operations would be adversely impacted. If, in response to this decrease in spreads, we change the pricing of our advances, the advances may be less attractive to members, and the amount of new advances and our outstanding advance balances may decrease. In either case, the increased cost of issuing COs could adversely impact our financial condition and results of operations. Moreover, such negative information could deter prospective members from becoming members and could adversely impact our financial condition and results of operations.

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

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

The Capital Rule, among other things, establishes criteria for four capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. An adequately capitalized FHLBank is one that has sufficient permanent and total capital to satisfy its risk-based and minimum capital requirements. We satisfied these requirements on December 31, 2024. However, pursuant to the Capital Rule, the FHFA has discretion to reclassify an FHLBank and modify or add to corrective action requirements for a particular capital classification. If we become classified into a capital classification other than adequately capitalized, we would be subject to the corrective action requirements for that capital classification in addition to being subject to prohibitions on declaring dividends and redeeming or repurchasing capital stock.

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

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

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

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

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

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

We are subject to affordable housing goals regarding our acquired member asset program that require a portion of the mortgage loans we purchase meet specified standards relating to affordability or location. If we do not meet our acquired member asset housing goals and the FHFA finds that the goals were feasible, we may be required to develop an FHFA approved housing plan with additional requirements that could have a material adverse effect on our results of operations and financial condition. For example, a housing plan may limit our ability to acquire more than a certain amount of non-affordable housing mortgage loans through our acquired member asset program or require that we pay a premium for affordable housing mortgage loans. In addition, the penalties for failure to comply with any such housing plan may include cease-and-desist orders and civil money penalties.

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

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

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

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

MARKET AND LIQUIDITY RISKS

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

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

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

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

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

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

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

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

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

CREDIT RISKS

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

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

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

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

A deterioration of the U.S. real estate market, including residential and commercial markets, and a national decline in real estate prices could adversely impact the financial condition of a number of our borrowers, particularly those whose businesses are concentrated in the mortgage industry. One or more of our borrowers may default on their obligations to us for a number of reasons, such as changes in financial condition, a reduction in liquidity, operational failures, or insolvency. In addition, the value of mortgage loans or MBS pledged to us as collateral may decrease. If a borrower defaults, and we are unable to obtain additional collateral to make up for the reduced value of such collateral, we could incur losses. A default by a borrower lacking sufficient collateral to cover its obligations to us could result in significant financial losses, which would adversely impact our results of operations and financial condition.

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

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

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

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

OPERATIONAL RISKS

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

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

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

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

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

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

For example, in participating in the MPF Program, we rely on the FHLBank of Chicago in its capacity as the MPF Provider. Our investments in mortgage loans through the MPF Program account for 5.1 percent of our total assets as of December 31, 2024, and 3.6 percent of interest income for the year ended December 31, 2024. If the FHLBank of Chicago changes or ceases to operate the MPF Program or experiences a failure or interruption in its information systems and other technology in its operation of the MPF Program, our mortgage-investment activities could be adversely impacted, and we could experience a related decrease in net interest margin, financial condition, and profitability. In the same way, we could be adversely impacted if the FHLBank of Chicago's third-party vendors engaged in the operation of the MPF Program were to experience operational or technological difficulties.

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

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

For example, we use models to assist in our determination of the fair values of financial instruments. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market pricing parameters. For financial instruments that are actively traded and have quoted market prices or parameters readily available, there is little to no subjectivity in determining fair value. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility or on dealer prices or prices of similar instruments. Pricing models and changes in their underlying assumptions are based on our best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions could have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities. While the models we use to value instruments and measure risk exposures are subject to periodic validation by our staff and by independent parties, rapid changes in market conditions in the interim could impact our financial position. The use of different models and assumptions, as well as changes in market conditions, could significantly impact our financial condition and results of operations.

GENERAL RISK FACTORS

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

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

Cybersecurity Risk Management and Strategy

We are subject to cybersecurity risk, which includes intentional and unintentional acts that may jeopardize the confidentiality, integrity, or availability of our information technology assets and data under our control. Cybersecurity risk can take the form of a variety of circumstances to cause harm to us, our members, our service providers, and the economy in general. These circumstances include, but are not limited to, malicious software or exploited vulnerabilities, social engineering, such as phishing, denial-of-service attacks, viruses, malware, and natural disasters. Refer to Item 1A — Risk Factors for a description of cybersecurity and other operational risks that may affect our information technology assets and data under our control.

In alignment with industry standards, such as the National Institute of Standards and Technology (NIST) Cybersecurity Framework, and FHFA regulatory guidance, we have implemented processes for assessing, identifying, and managing cybersecurity risk through a layered approach throughout our environment and in our service provider arrangements, including SaaS and IaaS engagements. We endeavor to continuously develop our policies and practices to mitigate our exposure to cybersecurity risks given, among other things, the evolving natures of these risks, the involvement of uncontrollable circumstances, such as fires or flooding, and our role in the financial services industry and the broader economy. Our cybersecurity risk-mitigating processes include, but are not limited to the following: performing regular risk assessments to identify, understand, and prioritize risks from cybersecurity threats; the implementation of firewalls, anti-virus software, and real-time network monitoring; the deployment of software updates to address security vulnerabilities; maintaining a
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vulnerability management program to timely identify and remediate cybersecurity risks, and; periodic employee training to educate employees on how to identify and avoid various forms of social engineering.

We also maintain a business continuity program designed to ensure that resources and plans are in place to protect the Bank from potential loss during a disruption, which includes the unavailability of our information technology assets due to unintentional events like fire, power loss, and other technical incidents such as hardware failures. These business continuity resources and plans include, but are not limited to, maintaining a business continuity site to ensure continued operations, regular backing up of data and systems, testing our ability to operate on disaster recovery systems, and annually reviewing department level business continuity procedures.

We regularly engage with third parties to test, maintain, and enhance our cybersecurity risk management practices and threat monitoring. These engagements include, among other things, incident response exercises, penetration testing, constant managed detection and response services, and intrusion prevention and detection applications. Our vendor risk management program includes regular reviews and oversight of these third parties, including performance and technological reviews and escalation of any unsatisfactory reviews.

Our results of operations and financial condition have not been materially affected by cybersecurity threats or incidents during the period covered by this report. However, to assess, identify, and manage risks from cybersecurity threats, including as a result of previous cybersecurity incidents, we have invested, and expect to continue to invest, significant resources to maintain and enhance our information security and business continuity programs designed to preserve the confidentiality, integrity, and availability of our information technology assets and data under our control. As a result, the risk of cybersecurity threats has materially affected our business strategy. It is inevitable that cybersecurity incidents will occur in the future and any such cybersecurity incident could result in significantly harmful consequences to us, our members, and their customers. We assess the materiality of each cybersecurity incident from several perspectives including, but not limited to, our ability to continue to service our members, any loss of or unauthorized access to data, lost revenue, increased operating costs, litigation, and reputational harm.

Cybersecurity Governance

Our director of information security provides regular reporting (at least quarterly) to the Risk Committee and Technology Committee of our board of directors on topics such as threat intelligence, major cybersecurity risk areas and threats, technologies and best practices, and any cybersecurity incidents that may have impacted us, and more frequently if there is an ongoing cybersecurity incident. Our board of directors oversees our information security program through regular review of policies and principles, including our information security policy designed to establish clear management direction and commitment to preserve the confidentiality, integrity, and availability of all information technology assets, including data.

Our Bank Technology Governance Committee, a management level committee, consisting of members of our senior leadership, including our chief risk officer and chief information officer, is responsible for approving policies to support the management and implementation of the cybersecurity program. This committee receives regular reporting from our director of information security similar to what is provided to the board of directors, and more detailed reporting regarding the availability of information technology assets and cybersecurity threats being monitored.

Our director of information security, who reports both to our chief risk officer and our chief information officer, manages the Bank’s cybersecurity governance framework designed to protect the confidentiality, integrity, and availability of the Bank’s information technology assets and data under our control. Our director of information security has more than 25 years of experience in information technology in successively more responsible roles and has led teams to design, secure, and implement numerous technology solutions. Our information security department is responsible for developing, documenting, and approving our information security control standards, guidelines, and procedures, in line with the policies and standards set forth by our board of directors and the Bank Technology Governance Committee.

The business continuity program is overseen by the Finance Committee of our board of directors and includes, among other items, business impact analysis for developing effective plans and a disaster recovery plan to respond, recover, resume, and restore technology assets critical for us to operate. Our Operational Risk Committee, a management level committee, including leadership representatives from our operational risk, information security, information technology, legal, operations, and other departments throughout the Bank, is responsible for oversight of operational risk and oversees the implementation of the business continuity program as approved by the board of directors.

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ITEM 2. PROPERTIES

We occupy 39,185 rentable square feet in the Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199 that serves as our headquarters. We also maintain 7,461 square feet of leased property for a business continuity site in Massachusetts. We believe our properties are adequate to meet our requirements for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are subject to various legal proceedings arising in the normal course of business. After consultation with legal counsel, we do not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The par value of our capital stock is $100 per share. Our stock is not publicly traded and can be purchased only by our members at par. As of February 28, 2025, 424 members and 8 nonmembers held a total of 22.1 million shares of our Class B stock.

Subject to regulatory limitations, dividends are solely within the discretion of our board of directors. The board of directors declared dividends during 2024, 2023, and 2022 as set forth in Table 4 below. Dividend rates are quoted in the form of an interest rate, which is then applied to each stockholder's average capital-stock-balance outstanding during the preceding calendar quarter to determine the dollar amount of the dividend that each stockholder will receive. The dividend rate was based upon a spread to average short-term interest rates experienced during the quarter.

Table 4 - Quarterly Dividends Declared
(dollars in thousands)
202420232022
Dividends Declared in the Quarter Ending
Average
Capital Stock (1) during preceding quarter
Dividend
Amount (2)
Annualized
Dividend Rate
Average
Capital Stock (1) during preceding quarter
Dividend
 Amount (2)
Annualized
Dividend Rate
Average
Capital Stock (1) during preceding quarter
Dividend
 Amount (2)
Annualized
Dividend Rate
March 31$1,957,708 $41,450 8.40 %$1,844,092 $31,003 6.67 %$994,076 $5,136 2.05 %
June 301,966,890 41,079 8.40 2,139,463 39,829 7.55 956,166 4,927 2.09 
September 302,057,414 43,021 8.41 2,312,966 46,363 8.04 1,226,088 11,372 3.72 
December 312,041,780 42,906 8.36 1,907,984 39,965 8.31 1,584,941 20,614 5.16 
_________________________
(1)    Average capital stock amounts do not include average balances of mandatorily redeemable stock.
(2)    The dividend amounts do not include the interest expense on mandatorily redeemable stock.

On February 14, 2025, our board of directors declared a cash dividend that was equivalent to an annual yield of 7.74 percent, the approximate daily average of SOFR rates for the fourth quarter of 2024 plus 300 basis points. The dividend amount, based on average daily balances of Class B shares outstanding for the fourth quarter of 2024, totaled $41.2 million and was paid on March 4, 2025. In declaring the dividend, the board stated that it expects to follow this formula for declaring cash dividends through 2025, though a quarterly loss or a significant adverse event or trend could cause a dividend to be reduced or suspended.

Dividends are declared and paid in accordance with a schedule adopted by the board of directors that enables our board of directors to declare each quarterly dividend after net income is known, rather than basing the dividend on estimated net income. For example, in 2024, quarterly dividends were declared in February, April, July, and October based on the immediately preceding quarter's net income and were paid on the second business day of the month that followed the month of declaration. We expect to continue this approach in 2025.
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Dividends may be paid only from current net earnings or previously retained earnings. In accordance with the FHLBank Act and FHFA regulations, we may not declare a dividend if we are not in compliance with our minimum capital requirements or if we would fall below our minimum capital requirements or would not be adequately capitalized as a result of a dividend except, in this latter case, with the Director of the FHFA's permission. Further, we may not pay dividends if the principal and interest due on any CO issued through the Office of Finance on which we are the primary obligor has not been paid in full when due, or under certain circumstances, if we become a noncomplying FHLBank as that term is defined in FHFA regulations as a result of any inability to either comply with regulatory liquidity requirements or satisfy our current obligations.

We maintain a policy providing that 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, and is determined monthly using rolling three-month averages. At December 31, 2024, we had total retained earnings of $1.9 billion, which exceeded the minimum retained earnings limit of $1.3 billion. If our balance of retained earnings is below our minimum retained earnings limit, the quarterly dividends may not exceed 40 percent of the prior quarter’s net income.

This method for determining our minimum amount of retained earnings replaced our previous target of $700.0 million in July 2024. See Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Internal Capital Practices and Policies — Minimum Retained Earnings for additional information.

We may not pay dividends in the form of capital stock or issue new excess stock to members if our excess stock exceeds 1.0 percent of our total assets or if the issuance of excess stock would cause our excess stock to exceed 1.0 percent of our total assets. At December 31, 2024, we had excess stock outstanding totaling $42.9 million or 0.1 percent of our total assets.

We maintain a policy establishing a minimum capital level in excess of regulatory requirements to provide further protection for our capital base. This adopted minimum capital level provides that we will maintain a minimum capital level equal to 4.0 percent of total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model, an amount equal to $3.5 billion at December 31, 2024. Our permanent capital level was $4.1 billion at December 31, 2024, so we were in excess of this requirement by $596.2 million on that date. If necessary to satisfy this adopted minimum capital level, however, we will take steps to control asset growth and/or maintain capital levels, the latter of which may limit future dividends.

Our Capital Plan and the Joint Capital Agreement require us to allocate 20 percent of our net income to a separate restricted retained earnings account until the total amount in the restricted retained earnings account is at least equal to 1.0 percent of the daily average carrying value of our outstanding total COs (excluding fair-value adjustments) for the calendar quarter. As of December 31, 2024, $509.2 million of our retained earnings are amounts in the restricted retained earnings account compared with our total contribution requirement of $663.5 million at that date. Amounts in the restricted retained earnings account cannot be used to pay dividends. Any amount of restricted retained earnings that exceeds 150 percent of the contribution requirement may be reclassified to unrestricted retained earnings. No reclassification from restricted retained earnings to unrestricted retained earnings occurred during 2024.

For additional information on the Joint Capital Agreement, see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Internal Capital Practices and Policies — Restricted Retained Earnings and the Joint Capital Agreement.

ITEM 6. [RESERVED]

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

Forward-Looking Statements

This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are “forward-looking statements.” These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our minimum retained earnings target, or the interest-rate environment in which we do business; statements of management’s plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, “anticipates,” “believes,” “continued,” “expects,” “plans,” “intends,”
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“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 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, actions of the Federal Open Market Committee (FOMC), or changes in credit ratings of the U.S. federal government; and 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 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 legislative 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, including disasters caused by significant climate change, which, among other things, could damage our facilities or the facilities of our members, damage or destroy collateral that members have pledged to secure advances or mortgages that we hold for our portfolio, and which could cause us to experience losses or be exposed to a greater risk that pledged collateral would be inadequate in the event of a default;
•the pace of technological change and our ability to develop and support internal controls, information systems, and other operating technologies that effectively manage the risks we face including, but not limited to, failures, interruptions, or security breaches and other cybersecurity incidents; and
•our ability to attract and retain skilled employees, including our key personnel.

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

EXECUTIVE SUMMARY

Net income for the year ended December 31, 2024, totaled $290.5 million, an increase of $33.2 million from net income of $257.3 million for 2023. The increase in net income was primarily due to an increase of $58.1 million in net interest income after provision for credit losses, partially offset by a $12.0 million increase in expenses related to our discretionary housing and community investment programs, $4.1 million increase in compensation and benefits expense, $3.7 million increase in AHP assessment, and a $2.4 million decrease in noninterest income.

Net interest income after reduction of credit losses for the year ended December 31, 2024, was $433.3 million, compared with $375.2 million for 2023. The $58.1 million increase in net interest income after provision for credit losses was primarily driven by a $19.9 million favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness, attributable to
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changes in intermediate- and long-term interest rates during the year ended December 31, 2024, and increases of $2.0 billion and $511.1 million in our average mortgage-backed securities and average mortgage loan portfolios, respectively.

Total assets increased $4.9 billion to $72.0 billion over the year ended December 31, 2024. Advances totaled $45.2 billion at December 31, 2024, an increase of $3.2 billion from December 31, 2023. At December 31, 2024, investment securities and short-term money-market investments totaled $22.5 billion, an increase of $1.3 billion from December 31, 2023, comprised primarily of a $1.0 billion increase in MBS and a $219.8 million increase in short-term investments. Mortgage loans totaled $3.7 billion, an increase of $619.8 million from December 31, 2023.

Our retained earnings grew to $1.9 billion at December 31, 2024, an increase of $122.0 million from December 31, 2023, equaling 2.7 percent of total assets at December 31, 2024. We continue to satisfy all regulatory capital requirements as of December 31, 2024.

On February 14, 2025, our board of directors declared a cash dividend that was equivalent to an annual yield of 7.74 percent on the average daily balance of capital stock outstanding during the fourth quarter of 2024. The yield is equivalent to the approximate daily average of SOFR for the fourth quarter of 2024 plus 300 basis points.

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

Generally, investor demand for high credit quality, fixed-income investments, including COs, continued to be strong relative to other investments. Yield spreads on CO debt relative to benchmark yields for comparable debt remained relatively stable during the period covered by this report. Our flexibility in utilizing various funding tools, in combination with a diverse investor base and our status as a government-sponsored enterprise, have helped provide reliable market access and demand for COs throughout fluctuating market environments and regulatory changes affecting dealers of and investors in COs. The Bank has continued to meet all funding needs during the year ended December 31, 2024.

Net Interest Margin and Spread

Net interest spread was 0.29 percent for the year ended December 31, 2024, an increase of eight basis points from the year ended December 31, 2023, and net interest margin was 0.63 percent, an increase of eight basis points from the year ended December 31, 2023. The increase in net interest spread and margin was primarily attributable to the improvements in net interest income after reduction of provision for credit losses discussed above, resulting from net increases in intermediate- and long-term interest rates during the year.

Housing and Community Investment Programs

In addition to providing a readily available, competitively-priced source of funds to members, one of our core missions is to support affordable housing and community investment. We administer a number of programs that are targeted to fulfill that mission, some of which are statutory, and some are discretionary. For additional information on these specific programs, see Part I — Item 1 — Business — Targeted Housing and Community Investment Programs.

We are required to annually set aside a portion of our earnings for our Affordable Housing Program. These funds assist members serving very low-, low-, and moderate-income households and support community economic development. The Bank's net income for the year ended December 31, 2024, resulted in an accrual of $32.3 million to the AHP pool of funds that will be available to members in 2025. 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. Beginning in 2024, the Bank's board of directors affirmed its commitment to affordable housing by making a voluntary AHP contribution of $2.8 million for the year ended December 31, 2024, to make the Bank’s AHP contribution economically neutral to the impact of our discretionary housing and community investment programs, as shown in Table 5 below.

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Table 5 - Statutory AHP Assessment and Voluntary AHP Contributions
(dollars in thousands)
For the Year Ended December 31, 2024
Net income subject to AHP statutory assessment$323,217 
Statutory AHP percentage10 %
Statutory AHP assessment$32,322 
AHP voluntary contributions2,767 
Total contribution to the AHP$35,089 
Net income subject to AHP statutory assessment$323,217 
Discretionary housing and community investment program expense24,906 
AHP voluntary contributions2,767 
Net income subject to assessment, as adjusted$350,890 
Statutory AHP percentage10 %
AHP Assessment without discretionary housing and community investment expense and voluntary AHP contributions$35,089 

The combined amounts of our required AHP assessments and voluntary contributions to AHP totaled $35.1 million for 2024, $30.6 million for 2023, and $26.0 million for 2022. Since inception of the AHP in 1990, the Bank has provided over $435.2 million in subsidies and grants towards the creation of affordable housing.

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

Table 6 - Voluntary Housing and Community Investment Program Subsidy Expenses
(dollars in thousands)
Program
For the Year Ended December 31, 2024
Affordable housing
LUH program$5,000 
HOW program5,000 
MPF permanent rate buy-down program4,906 
14,906 
Economic development
JNE program4,818 
CDFIs
CDFI advance program5,182 
Total discretionary housing and community investment program expenses24,906 
AHP voluntary contributions2,767 
Total$27,673 

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 2024 as described in Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — 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.

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ECONOMIC CONDITIONS

Economic Environment

Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the fourth quarter of 2024. This expansion was driven mainly by consumer spending and federal government spending.

Employment remained steady with job gains of 125,000 and 151,000 in January and February 2025, respectively. In February 2025, the unemployment rate was 4.1 percent. The unemployment rate for the New England region in December 2024 was 3.7 percent, ranging from 2.5 percent in Vermont to 4.5 percent in Rhode Island.

In February 2025, the Consumer Price Index (CPI) increased 0.2 percent from the preceding month, representing a year-over- year increase of 2.8 percent. The CPI increase was driven mainly by an increase in the cost of shelter, energy, and food. The FHFA reported that housing prices rose 4.5 percent across the U.S. from the fourth quarter of 2023 to the fourth quarter of 2024. Over the same period, housing prices in New England rose 7.0 percent.

Interest-Rate Environment

On January 29, 2025, the FOMC announced that it would maintain the federal funds rate in a target range of 425 to 450 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 would continue reducing its holdings of U.S. Treasury securities, agency debt, and agency mortgage-backed securities, and is strongly committed to supporting maximum employment and returning inflation to its two percent objective.

In the fourth quarter of 2024, short-term rates remained elevated, consistent with the FOMC’s target range for the federal funds rate. Long-term rates fluctuated, along with expectations regarding the timing and magnitude of potential rate cuts by the FOMC. In December 2024, the difference between 10-year and 3-month U.S. Treasury yields became positive after being negative, or inverted, for 25 consecutive months.

Table 7 - Key Interest Rates(1)
202420232022
EndingAverageEndingAverageEndingAverage
SOFR4.49%5.15%5.38%5.01%4.30%1.64%
Federal funds effective rate4.33%5.15%5.33%5.03%4.33%1.68%
3-month U.S. Treasury yield4.31%5.09%5.33%5.17%4.34%2.01%
2-year U.S. Treasury yield4.24%4.38%4.25%4.60%4.43%2.99%
5-year U.S. Treasury yield4.38%4.13%3.85%4.06%4.00%3.00%
10-year U.S. Treasury yield4.57%4.21%3.88%3.96%3.87%2.95%
________________
(1)    Source: Bloomberg

SELECTED FINANCIAL DATA

We derived the selected results of operations for the years ended December 31, 2024, 2023, and 2022, and the selected statement of condition data as of December 31, 2024 and 2023, from financial statements included elsewhere herein. We derived the selected results of operations for the years ended December 31, 2021 and 2020, and the selected statement of condition data as of December 31, 2022, 2021, and 2020, from financial statements not included herein. This selected financial data should be read in conjunction with the financial statements and the related notes appearing in this report.

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Table 8 - Selected Financial Data
(dollars in thousands)
 December 31,
 20242023202220212020
Statement of Condition     
Total assets$71,992,966 $67,142,274 $62,897,549 $32,545,292 $38,461,035 
Investments(1)
22,499,068 21,167,632 17,918,781 16,372,499 13,341,538 
Advances45,163,175 41,958,583 41,599,581 12,340,020 18,817,002 
Mortgage loans held for portfolio, net(2)
3,679,150 3,059,331 2,758,429 3,120,159 3,930,252 
Deposits and other borrowings877,081 922,879 655,487 884,032 1,088,987 
Consolidated obligations:
Bonds
48,192,171 40,248,743 31,565,543 26,613,032 21,471,590 
Discount notes
18,546,504 22,000,546 26,975,260 2,275,320 12,878,310 
Total consolidated obligations
66,738,675 62,249,289 58,540,803 28,888,352 34,349,900 
Mandatorily redeemable capital stock5,086 6,083 10,290 13,562 6,282 
Class B capital stock outstanding-putable(3)
2,195,167 2,042,453 2,031,178 953,638 1,267,172 
Unrestricted retained earnings1,403,455 1,339,546 1,290,873 1,179,986 1,130,222 
Restricted retained earnings509,245 451,154 399,695 368,420 368,420 
Total retained earnings1,912,700 1,790,700 1,690,568 1,548,406 1,498,642 
Accumulated other comprehensive (loss) income(255,022)(294,539)(306,425)28,967 16,139 
Total capital3,852,845 3,538,614 3,415,321 2,531,011 2,781,953 
Results of Operations
Net interest income after provision for credit losses$433,286 $375,232 $282,291 $212,163 $194,566 
Litigation settlements— 693 — 505 26,096 
Other income (loss), net12,447 14,111 13,644 (47,387)14,831 
Other expense122,956 104,096 91,203 88,081 101,857 
AHP assessments32,322 28,648 20,521 7,739 13,386 
Net income$290,455 $257,292 $184,211 $69,461 $120,250 
Other Information
Dividends declared$168,455 $157,160 $42,049 $19,697 $80,958 
Dividend payout ratio58.00 %61.08 %22.83 %28.36 %67.32 %
Weighted-average dividend rate(4)
8.40 7.67 3.53 1.66 4.64 
Return on average equity(5)
7.99 7.33 6.47 2.62 4.00 
Return on average assets0.42 0.37 0.37 0.19 0.24 
Net interest margin(6)
0.63 0.55 0.57 0.60 0.39 
Average equity to average assets5.20 5.03 5.68 7.43 6.03 
Total regulatory capital ratio(7)
5.71 5.72 5.93 7.73 7.21 
_______________________
(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 $2.2 million, $2.0 million, $1.9 million, $1.7 million, and $3.1 million, as of December 31, 2024, 2023, 2022, 2021, and 2020, respectively.
(3)Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions. For additional information see Liquidity and Capital Resources — Internal Capital Practices and Policies.
(4)Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends. See Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities for additional information.
(5)Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income and total retained earnings.
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(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 II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 11 — Capital.

RESULTS OF OPERATIONS

The following table presents the Bank’s significant statements of operations line items for the years ended December 31, 2024, 2023, and 2022 and provides information regarding the changes during those years. These items are discussed in more detail below.

Table 9 - Statements of Operations Summary
(dollars in thousands)
Change
For the Years Ended December 31,2024 vs. 20232023 vs. 2022
202420232022AmountPercentAmountPercent
Net Interest Income after provision for credit losses
$433,286 $375,232 $282,291 $58,054 15.47 %$92,941 32.92 %
Noninterest income
12,447 14,804 13,644 (2,357)(15.92)1,160 8.50 
Noninterest expense
122,956 104,096 91,203 18,860 18.12 12,893 14.14 
AHP assessment
32,322 28,648 20,521 3,674 12.82 8,127 39.60 
Net Income
$290,455 $257,292 $184,211 $33,163 12.89 %$73,081 39.67 %

Net income increased $33.2 million to $290.5 million for the year ended December 31, 2024, from $257.3 million for the same period in 2023. The increase in net income was primarily due to an increase of $58.1 million in net interest income after provision for credit losses partially offset by a $12.0 million increase in expenses related to our discretionary housing and community investment programs, $4.1 million increase in compensation and benefits expense, $3.7 million increase in AHP assessment, and a $2.4 million decrease in noninterest income.

Net interest income after provision for credit losses for the year ended December 31, 2024, was $433.3 million, compared with $375.2 million for 2023. The $58.1 million increase in net interest income after provision for credit losses was driven by an increase in average daily yields resulting from higher average short-term market interest rates in the year ended December 31, 2024, compared to the corresponding prior year period as well as increases of $2.0 billion and $511.1 million in our average mortgage-backed securities portfolio and average mortgage loan portfolio, respectively, moderated by a $1.1 billion decline in our average advances portfolio and a $975.2 million decline in average short-term money-market investments. In addition, there was a $19.9 million favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness, attributable to net increases in intermediate- and long-term interest rates during the year ended December 31, 2024, that were greater than the net increases in intermediate- and long-term interest rates during 2023. Net interest spread was 0.29 percent for the year ended December 31, 2024, an increase of eight basis points from the same period in 2023, and net interest margin was 0.63 percent, an increase of eight basis points from the same period in 2023.

Table 10 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.
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Table 10 - Net Interest Spread and Margin
(dollars in thousands)
 For the Year Ended December 31,
 202420232022
 Average
Balance		Interest
Income /
Expense		Average
Yield/Rate		Average
Balance		Interest
Income /
Expense		Average
Yield/Rate		Average
Balance		Interest
Income /
Expense		Average
Yield/Rate
Assets      
Advances$41,056,756 $2,142,343 5.22 %$42,159,728 $2,113,732 5.01 %$25,529,926 $635,147 2.49 %
Interest-bearing deposits2,649,478 139,108 5.25 2,847,402 145,358 5.10 1,401,024 34,869 2.49 
Securities purchased under agreements to resell1,358,943 70,504 5.19 1,980,425 99,404 5.02 1,722,816 25,065 1.45 
Federal funds sold3,800,153 198,834 5.23 3,941,871 200,021 5.07 4,027,978 88,071 2.19 
Investment securities(1)
16,610,426 940,561 5.66 14,708,175 798,290 5.43 13,656,397 358,187 2.62 
Mortgage loans(1)(2)
3,357,259 131,258 3.91 2,846,178 93,198 3.27 2,910,762 85,431 2.94 
Other earning assets14 1 4.91 14,109 716 5.07 5,205 194 3.73 
Total interest-earning assets68,833,029 3,622,609 5.26 68,497,888 3,450,719 5.04 49,254,108 1,226,964 2.49 
Other non-interest-earning assets1,361,834 1,635,888 1,086,175 
Fair-value adjustments on investment securities(320,012)(358,081)(174,954)
Total assets$69,874,851 $3,622,609 5.18 %$69,775,695 $3,450,719 4.95 %$50,165,329 $1,226,964 2.45 %
Liabilities and capital   
Consolidated obligations   
Discount notes$19,079,836 $993,701 5.21 %$24,054,759 $1,200,138 4.99 %$14,369,248 $344,370 2.40 %
Bonds44,326,807 2,159,454 4.87 38,788,537 1,837,365 4.74 30,491,534 591,546 1.94 
Other interest-bearing liabilities801,569 35,972 4.49 863,542 37,907 4.39 799,824 8,586 1.07 
Total interest-bearing liabilities64,208,212 3,189,127 4.97 63,706,838 3,075,410 4.83 45,660,606 944,502 2.07 
Other non-interest-bearing liabilities2,032,111 2,556,752 1,657,737 
Total capital3,634,528 3,512,105 2,846,986 
Total liabilities and capital$69,874,851 $3,189,127 4.56 %$69,775,695 $3,075,410 4.41 %$50,165,329 $944,502 1.88 %
Net interest income $433,482  $375,309 $282,462 
Net interest spread  0.29 %  0.21 %0.42 %
Net interest margin  0.63 %  0.55 %0.57 %
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(1)    Average balances are reflected at amortized cost.
(2)    Nonaccrual loans are included in the average balances used to determine average yield.

Rate and Volume Analysis

Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 11 summarizes changes in interest income and interest expense for the years ended December 31, 2024, 2023, and 2022. Changes in interest income and interest expense that are not identifiable as either volume or rate-related, but equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.

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Table 11 - Rate and Volume Analysis
(dollars in thousands)
 For the Year Ended
December 31, 2024 vs. 2023		For the Year Ended
December 31, 2023 vs. 2022
 Increase (Decrease) due toIncrease (Decrease) due to
 VolumeRateTotalVolumeRateTotal
Interest income   
Advances$(56,181)$84,792 $28,611 $577,890 $900,695 $1,478,585 
Interest-bearing deposits(10,308)4,058 (6,250)54,747 55,742 110,489 
Securities purchased under agreements to resell(32,142)3,242 (28,900)4,276 70,063 74,339 
Federal funds sold(7,311)6,124 (1,187)(1,922)113,872 111,950 
Investment securities106,594 35,677 142,271 29,568 410,535 440,103 
Mortgage loans18,296 19,764 38,060 (1,931)9,698 7,767 
Other earning assets(693)(22)(715)431 91 522 
Total interest income18,255 153,635 171,890 663,059 1,560,696 2,223,755 
Interest expense   
Consolidated obligations   
Discount notes(257,194)50,757 (206,437)328,518 527,250 855,768 
Bonds268,566 53,523 322,089 197,810 1,048,009 1,245,819 
Other interest-bearing liabilities(2,767)832 (1,935)737 28,584 29,321 
Total interest expense8,605 105,112 113,717 527,065 1,603,843 2,130,908 
Change in net interest income$9,650 $48,523 $58,173 $135,994 $(43,147)$92,847 

Average Balance of Advances

The average balance of total advances decreased slightly by $1.1 billion, or 2.6 percent, for the year ended December 31, 2024, compared with the same period in 2023. This decrease in the average balance of advances was primarily concentrated in short-term fixed rate advances and variable-rate advances, partially offset by an increase in long-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, decreased $975.2 million, or 11.1 percent, for the year ended December 31, 2024, compared with the same period in 2023, as liquidity needs were greater in 2023 compared to 2024 due to increased advances borrowing activity in the year ended December 31, 2023. The yield earned on short-term money-market investments is highly correlated to short-term market interest rates. As a result of increases during 2023 in the FOMC's target range for the federal funds rate, average yields on overnight federal funds sold increased from 5.07 percent during the years ended December 31, 2023, to 5.23 percent during the year ended December 31, 2024, while average yields on securities purchased under agreements to resell increased from 5.02 percent for the year ended December 31, 2023, to 5.19 percent for the year ended December 31, 2024. These investments are used for liquidity management.

Average investment-securities balances increased $1.9 billion, or 12.9 percent for the year ended December 31, 2024, compared with the same period in 2023. The increase was primarily the result of a $2.0 billion increase in average MBS.

Average Balance of COs

Average CO balances increased $563.3 million, or 0.9 percent, for the year ended December 31, 2024, compared with the same period in 2023. This increase consisted of a $5.5 billion increase in CO bonds, offset by a $5.0 billion decline in CO discount notes.

The average balance of CO discount notes represented approximately 30.1 percent of total average COs for the year ended December 31, 2024, compared with 38.3 percent of total average COs for the year ended December 31, 2023. The average
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balance of CO bonds represented 69.9 percent and 61.7 percent of total average COs outstanding during the years ended December 31, 2024 and 2023, 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 12 provides a summary of the impact of derivatives and hedging activities on our earnings.

Table 12 - Effect of Derivative and Hedging Activities
(dollars in thousands)

For the Year Ended December 31, 2024
Net Effect of Derivatives and Hedging ActivitiesAdvancesInvestmentsMortgage LoansCO BondsCO Discount NotesTotal
Net interest income
Amortization / accretion of hedging activities (1)
$(880)$2,035 $(102)$8,710 $— $9,763 
Gains (losses) on designated fair-value hedges2,241 5,209 — (1,548)— 5,902 
Net interest settlements (2)
211,453 465,397 — (580,642)— 96,208 
Price alignment interest (3)
(5,535)(48,771)— 1,482 — (52,824)
Total net interest income207,279 423,870 (102)(571,998)— 59,049 
Net gains (losses) on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting15 — — — 156 171 
Mortgage delivery commitments— — (1,493)— — (1,493)
Price alignment interest (3)
— — — — 177 177 
Net gains (losses) on derivatives and hedging activities15 — (1,493)— 333 (1,145)
Total net effect of derivatives and hedging activities$207,294 $423,870 $(1,595)$(571,998)$333 $57,904 

For the Year Ended December 31, 2023
Net Effect of Derivatives and Hedging ActivitiesAdvancesInvestmentsMortgage LoansCO BondsTotal
Net interest income
Amortization / accretion of hedging activities (1)
$(1,701)$— $(237)$(6,522)$(8,460)
(Losses) gains on designated fair-value hedges(3,459)(11,877)— 1,370 (13,966)
Net interest settlements (2)
181,022 465,478 — (639,270)7,230 
Price alignment interest (3)
(8,267)(51,573)— 1,505 (58,335)
Total net interest income167,595 402,028 (237)(642,917)(73,531)
Net gains (losses) on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting2 — — — 2 
Mortgage delivery commitments— — (710)— (710)
Net gains (losses) on derivatives and hedging activities2 — (710)— (708)
Total net effect of derivatives and hedging activities$167,597 $402,028 $(947)$(642,917)$(74,239)

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For the Year Ended December 31, 2022
Net Effect of Derivatives and Hedging ActivitiesAdvancesInvestmentsMortgage LoansCO BondsTotal
Net interest income
Amortization / accretion of hedging activities (1)
$(990)$— $(431)$(3,494)$(4,915)
Gains on designated fair-value hedges3,217 41,134 — 985 45,336 
Net interest settlements (2)
7,704 33,981 — (114,582)(72,897)
Price alignment interest (3)
(2,285)(12,540)— 391 (14,434)
Total net interest income7,646 62,575 (431)(116,700)(46,910)
Net losses on derivatives and hedging activities
Losses on derivatives not receiving hedge accounting(8)(2)— (520)(530)
CO bond firm commitments— — — 520 520 
Mortgage delivery commitments— — (668)— (668)
Net losses on derivatives and hedging activities(8)(2)(668)— (678)
Total net effect of derivatives and hedging activities$7,638 $62,573 $(1,099)$(116,700)$(47,588)
________________________
(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.

Comparison of the year ended December 31, 2023, versus the year ended December 31, 2022

For discussion and analysis of our results of operations for 2023 compared to 2022, see Results of Operations in the Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2023 Annual Report on Form 10-K.

FINANCIAL CONDITION

Advances

At December 31, 2024, the advances portfolio totaled $45.2 billion, an increase of $3.2 billion from $42.0 billion at December 31, 2023.

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Table 13 - Advances Outstanding by Product Type
(dollars in thousands)
 
 December 31, 2024December 31, 2023
 Par Value Percent of TotalPar ValuePercent of Total
Fixed-rate advances     
Long-term$11,909,336  26.3 %$11,550,277 27.5 %
Short-term10,604,134  23.4 11,725,587 27.9 
Putable7,488,170  16.5 5,896,570 14.0 
Overnight2,221,057 4.9 3,599,404 8.6 
Amortizing984,750  2.2 1,058,714 2.5 
Callable— — 2,500,000 5.9 
33,207,447 73.3 36,330,552 86.4 
Variable-rate advances     
Simple variable (1)
12,065,070  26.7 5,650,195 13.4 
Putable15,000 — 80,000 0.2 
All other variable-rate indexed advances4,709 — 5,909 — 
 12,084,779  26.7 5,736,104 13.6 
Total par value$45,292,226  100.0 %$42,066,656 100.0 %
________________________
(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 II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 5 — Advances for disclosures relating to redemption terms of advances.

Advances Credit Risk

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

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

Our depository members generally experienced modest deterioration in key financial metrics over the 12 months ending December 31, 2024, principally as a result of ongoing pressure on net interest margin and to a lesser extent on increased credit costs. Although rates moderated in 2024, the general economic outlook was tenuous over the past few years due to elevated interest rates and their potential impact on unemployment. To date, however, the increase in interest rates has not caused a material change in unemployment, particularly in the New England region, and prospects of a recession seem less likely than earlier in the year. Aggregate nonperforming assets reported publicly by depository institution members in their regulatory filings increased modestly during the twelve months ending December 31, 2024, and were 0.56 percent of assets at December 31, 2024, compared to 0.43 percent at December 31, 2023. The overall financial condition of our insurance company members was stable over the 12 months ending December 31, 2024.

We experienced no member failures during 2024. All Bank members except for one had positive tangible capital as of December 31, 2024, measured in accordance with accounting principles generally accepted in the United States of America (GAAP), though higher interest rates present increased potential for more of our members (those that can experience material unrealized losses on available-for-sale securities) to have negative tangible capital. All extensions of credit to members are fully secured by eligible collateral as noted herein. However, we could incur losses if a member were to default, the value of the
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collateral pledged by the member declined to a point such that we were unable to realize sufficient value from the pledged collateral to cover the member’s obligations, and we were unable to obtain additional collateral to make up for the reduction in value of such collateral.

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 Bank control over the collateral pledged by the borrower.

•Credit category one (Credit Category-1) a borrower is generally in a satisfactory financial condition.
•Credit category two (Credit Category-2) a borrower shows financial weakness or weakening financial trends.
•Credit category three (Credit Category-3) a borrower demonstrates financial weaknesses that present an elevated level of concern.
•Credit category four (Credit Category-4) a borrower shows significant financial weaknesses and an increased likelihood of failure over the next 12 months.

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

The following table presents a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s borrowers as of December 31, 2024.

Table 14 - Credit Outstanding and Collateral Borrowing Capacity by Credit Category
(dollars in thousands)
December 31, 2024
Borrowers with Credit Outstanding
Number
Other Credit Outstanding(1)
Total Credit Outstanding
Collateral Borrowing Capacity(2)
Borrower Credit CategoryAdvancesTotalUsed
Member borrowers(3)
Credit Category-1292 $43,302,626 $9,408,555 $52,711,181 $147,073,282 35.8 %
Credit Category-237 1,534,622 56,946 1,591,568 3,475,166 45.8 
Credit Category-37 352,418 5,715 358,133 448,099 79.9 
Credit Category-41 3,000 45,459 48,459 60,199 80.5 
Nonmember borrowers(4)
Former members7 61,986 2,623 64,609 137,609 47.0 
Housing associates5 37,574 42 37,616 45,233 83.2 
Total349 $45,292,226 $9,519,340 $54,811,566 $151,239,588 36.2 %
_______________________
(1)    Includes accrued interest on advances, letters of credit, unused line of credit, and the credit enhancement obligation 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 the financial reviews and other information pertinent to that member.

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We have not recorded any allowance for credit losses on advances as of December 31, 2024, and December 31, 2023, for the reasons discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 5 — Advances.

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

We generally require our members and housing associates to execute a security agreement that grants us a blanket lien on all unencumbered assets of such borrowers that consist of, among other things: fully disbursed whole first-mortgage loans and deeds of trust constituting first liens against real property; U.S. federal, state, and municipal obligations; GSE securities; corporate debt obligations; commercial paper; funds placed in deposit accounts with us; such other items or property that are offered to us by the borrower as collateral; and all proceeds of all of the foregoing. In the case of insurance companies, housing associates, and CDFIs, in some instances we establish a specific lien instead of a blanket lien subject to additional safeguards including, among other things, larger haircuts on collateral. We protect our security interests in pledged assets by filing a Uniform Commercial Code (UCC) financing statement in the appropriate jurisdiction, or by taking possession or control of such collateral, or by taking other appropriate steps. such as delivering the security to an approved safekeeping agent or to be held by the borrower’s securities corporation in custodial account with us. We have control agreements with approved safekeeping agents which are intended to give us appropriate control over the related collateral. We conduct reviews of loan collateral pledged by borrowers to determine that the pledged collateral conforms to our eligibility requirements, and to adjust, if warranted, the lendable value of loan collateral pledged. We may conduct collateral reviews at any time. See Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 5 — Advances for the types of assets we generally accept as collateral.

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

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

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

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Table 15 - Top Five Advance-Borrowing Institutions
(dollars in thousands)
 December 31, 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 Company2,100,000 4.6 1.78 
Hingham Institution for Savings1,497,000 3.3 4.34 
Institution for Savings in Newburyport and its Vicinity1,321,080 2.9 3.77 
Total of top five advance-borrowing institutions$16,843,188 37.2 %
 December 31, 2023
Name Par Value of Advances Percent of Total Par Value of Advances
Weighted-Average Rate (1)
Citizens Bank, N.A.$4,286,128 10.2 %5.57 %
State Street Bank and Trust Company2,500,000 6.0 5.27 
Webster Bank, N.A.2,360,018 5.6 5.52 
Massachusetts Mutual Life Insurance Company2,100,000 5.0 1.78 
Hingham Institution for Savings1,692,675 4.0 4.75 
Total of top five advance-borrowing institutions$12,938,821 30.8 %
_______________________
(1)    Weighted-average rates are based on the contract rate of each advance without taking into consideration the effects of interest-rate-exchange agreements that we may use as hedging instruments.

Investments

At December 31, 2024, investment securities and short-term money-market instruments totaled $22.5 billion, an increase of $1.3 billion from $21.2 billion at December 31, 2023.

Short-term money-market investments increased $219.8 million to $6.0 billion at December 31, 2024, compared with December 31, 2023. The increase was attributable to an increase of $314.8 million in interest bearing deposits, partially offset by a $100.0 million decrease in securities purchased under agreements to resell.

Investment securities increased $1.1 billion to $16.5 billion at December 31, 2024, compared with $15.4 billion at December 31, 2023. The increase was primarily due to the $1.0 billion increase in MBS.

Held-to-Maturity Securities

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

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Table 16 - Held-to-Maturity Securities
(dollars in thousands)
December 31,
202420232022
Due in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotal Carrying ValueTotal Carrying ValueTotal Carrying Value
MBS (1)
U.S. government guaranteed - single-family$— $— $— $2,738 $2,738 $3,123 $3,614 
GSEs - single-family485 170 9,664 50,261 60,580 75,782 95,454 
Total MBS$485 $170 $9,664 $52,999 $63,318 $78,905 $99,068 
Yield on held-to-maturity securities (2)
2.74 %5.95 %5.84 %5.21 %
________________________
(1)    Maturity ranges are based on the contractual final maturity of the security.
(2)    The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the effect of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio.

Available-for-Sale Securities

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

Table 17 - Available-for-Sale Securities
(dollars in thousands)
December 31,
202420232022
Due in one year or lessDue after one year through five yearsDue after five years through ten yearsDue after ten yearsTotal Carrying ValueTotal Carrying ValueTotal Carrying Value
Non-MBS
U.S. Treasury obligations$1,711,545 $4,096,120 $— $— $5,807,665 $5,664,452 $5,723,562 
HFA securities— 6,651 — — 6,651 21,805 32,774 
Supranational institutions92,947 244,405 — — 337,352 346,375 350,352 
U.S. government corporations— — — 221,769 221,769 235,191 227,200 
GSEs— 37,984 — 56,630 94,614 99,421 97,666 
Total non-MBS1,804,492 4,385,160 — 278,399 6,468,051 6,367,244 6,431,554 
MBS (1)
U.S. government guaranteed - single-family— — — 179,052 179,052 14,433 16,148 
U.S. government guaranteed - multifamily— — — 464,823 464,823 477,676 476,730 
GSEs - single-family— 16,974 9,856 1,926,323 1,953,153 904,456 765,526 
GSEs - multifamily— 3,715,213 3,199,084 491,532 7,405,829 7,579,936 5,936,958 
Total MBS— 3,732,187 3,208,940 3,061,730 10,002,857 8,976,501 7,195,362 
Total available-for-sale securities$1,804,492 $8,117,347 $3,208,940 $3,340,129 $16,470,908 $15,343,745 $13,626,916 
Yield on available-for-sale securities (2)
1.75 %2.14 %3.14 %5.27 %
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________________________
(1)    MBS maturity ranges are based on the contractual final maturity of the security.
(2)    The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the effect of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio.

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 December 31, 2024, all of these placements either expired within one day or were payable upon demand. See Part I — Item 1 — Business — Business Lines — Investments for additional information.

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

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

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Table 18 - Credit Ratings of Investments at Carrying Value
(dollars in thousands)
As of December 31, 2024
Long-Term Credit Rating
Investment CategoryTriple-A Double-A Single-A Unrated
Money-market instruments: (1)
      
Interest-bearing deposits$— $541,150 $1,417,203 $— 
Securities purchased under agreements to resell— — 1,500,000 — 
Federal funds sold— 755,000 1,750,000 — 
Total money-market instruments— 1,296,150 4,667,203 — 
Investment securities:(2)
Non-MBS:      
U.S. Treasury obligations— 5,807,665  —  — 
Corporate bonds— — — 1,489 
U.S. government-owned corporations— 221,769  —  — 
GSE— 94,614  —  — 
Supranational institutions337,352 —  —  — 
HFA securities6,651 —  —  — 
Total non-MBS344,003 6,124,048 — 1,489 
MBS:
U.S. government guaranteed - single-family— 181,790 — — 
U.S. government guaranteed - multifamily— 464,823 — — 
GSE – single-family— 2,013,733 — — 
GSE – multifamily— 7,405,829 — — 
Total MBS— 10,066,175 — — 
Total investment securities344,003 16,190,223 — 1,489 
Total investments$344,003  $17,486,373  $4,667,203  $1,489 
_______________________
(1)    The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of December 31, 2024. If there is a split rating, the lowest rating is used. In certain instances where a counterparty is unrated, the Bank may assign a deemed rating to the counterparty and that deemed rating is used.
(2)    The issue rating is used for investment securities. Issue ratings are obtained from Moody’s, Fitch, and S&P. If there is a split rating, the lowest rating is used.

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Table 19 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value
(dollars in thousands)
Carrying Value
December 31, 2024December 31, 2023
Federal funds sold$2,505,000 $2,500,000 
Interest bearing deposits1,958,353 1,643,587 
Supranational institutions337,352 346,375 
U.S. government-owned corporations221,769 235,191 
GSEs94,614 99,421 
Corporate bonds1,489 1,395 
FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, the product of which is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that we may offer for extensions of unsecured credit other than overnight sales of federal funds ranges from one to 15 percent based on the counterparty's credit rating. 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.

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

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

Table 20 - Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty
(dollars in thousands)
December 31, 2024(1)
Credit Rating
Domicile of Counterparty
Double-A
Single-A
Total
Domestic - interest bearing deposits
$541,150 $1,417,203 $1,958,353 
U.S branches and agency offices of foreign commercial banks - federal funds
Canada
— 850,000 850,000 
France— 600,000 600,000 
Australia
400,000 — 400,000 
Finland
355,000 — 355,000 
The Netherlands— 300,000 300,000 
Total U.S branches and agency offices of foreign commercial banks
755,000 1,750,000 2,505,000 
Total unsecured investment credit exposure
$1,296,150 $3,167,203 $4,463,353 
____________________________
(1) Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, government instrumentalities,    government-sponsored enterprises,    and supranational    entities, and does    not include related accrued     interest.
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Table 21 - Issuers / Counterparties Representing Greater Than 10 Percent of Total Unsecured Credit Related to Money-Market Instruments and to Debentures
Issuer / counterpartyAs of December 31, 2024
Toronto Dominion11.7 %
Credit Agricole S.A.11.7 
JPMorgan Chase Bank N.A.10.5 
Bank of America N.A.10.5 

Mortgage Loans

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

As of December 31, 2024, our mortgage loan investment portfolio totaled $3.7 billion, an increase of $619.8 million from December 31, 2023. This increase is the result of an increase in mortgage loan purchase volume during 2024. We expect continued competition from Fannie Mae and Freddie Mac, as well as from private mortgage loan acquirers, for loan investment opportunities.

Table 22 - Par Value of Mortgage Loans Held for Portfolio
(dollars in thousands)
December 31,
 20242023202220212020
Conventional mortgage loans 
MPF Original
$566,665 $633,857 $714,461 $860,818 $1,235,220 
MPF 125
44,247 50,157 58,048 70,544 105,916 
MPF Plus
26,689 32,493 40,232 53,486 74,739 
 MPF 352,871,653 2,160,602 1,744,489 1,895,506 2,208,682 
Total conventional mortgage loans3,509,254 2,877,109 2,557,230 2,880,354 3,624,557 
Government mortgage loans134,283 146,314 163,121 191,721 246,150 
Total$3,643,537 $3,023,423 $2,720,351 $3,072,075 $3,870,707 

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Mortgage Loans Credit Risk

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

Table 23 - Mortgage Loans by Contractual Repayment Term
(dollars in thousands)

Redemption Term December 31, 2024December 31, 2023
Due in 1 year or less$112,158 $105,181 
Due after 1 year through 5 years474,624 442,553 
Due after 5 years through 15 years1,310,880 1,167,537 
Thereafter1,745,875 1,308,152 
Total par value3,643,537 3,023,423 
Other adjustments, net (1)
37,813 37,908 
Total mortgage loans held for portfolio3,681,350 3,061,331 
Allowance for credit losses on mortgage loans(2,200)(2,000)
Mortgage loans held for portfolio, net$3,679,150 $3,059,331 
_______________________
(1)Consists of premiums, discounts, and deferred derivative gains, net.

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

Table 24 - State Concentrations by Par Value
Percentage of Total Par Value of Conventional Mortgage Loans
 December 31, 2024December 31, 2023
Massachusetts58 %62 %
Maine16 13 
Vermont7 5 
Connecticut6 7 
All others13 13 
Total100 %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.

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

Table 25 - State Concentrations of Delinquent Conventional Mortgage Loans
December 31,
Percentage of Par Value of Delinquent Conventional Mortgage Loans20242023
Massachusetts55 %65 %
Connecticut11 10 
Maine5 4 
Vermont5 3 
All others24 18 
Total100 %100 %
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Table 26 - Characteristics of Our Investments in Mortgage Loans(1)
December 31,
20242023
Loan-to-value ratio at origination
< 60.00%21 %22 %
60.01% to 70.00%15 17 
70.01% to 80.00%18 19 
80.01% to 90.00%35 31 
Greater than 90.00%11 11 
Total100 %100 %
Weighted average loan-to-value ratio72 %71 %
FICO score at origination  
< 620— %— %
620 to < 6603 4 
660 to < 70010 11 
700 to < 74016 17 
≥ 74071 68 
Total100 %100 %
Weighted average FICO score760 756 
_______________________
(1)Percentages are calculated based on par value at the end of each period.

Table 27 - Mortgage Loans - Risk Elements and Credit Losses
(dollars in thousands)
December 31, 2024December 31, 2023
Average par value of mortgage loans outstanding during the period ending$3,317,835 $2,807,813 
Mortgage loans held for portfolio, par value3,643,537 3,023,423 
Nonaccrual loans, par value6,083 7,871 
Allowance for credit losses on mortgage loans2,200 2,000 
Net recoveries4 23 
Net charge-offs to average loans outstanding during the year ending— %— %
Allowance for credit losses to mortgage loans held for portfolio0.06 0.07 
Nonaccrual loans to mortgage loans held for portfolio0.17 0.26 
Allowance for credit losses to nonaccrual loans36.17 25.41 
Government mortgage loans may not exceed the loan-to-value limits set by the applicable federal agency. Conventional mortgage loans with loan-to-value ratios greater than 80 percent require certain amounts of primary mortgage insurance from a mortgage insurance company rated at least triple-B (or equivalent rating).

Higher-Risk Loans. Our portfolio includes certain higher-risk subprime conventional mortgage loans. The higher-risk subprime loans represent a relatively small portion of our conventional mortgage loan portfolio (4.3 percent by par value), but a disproportionately higher portion of the conventional mortgage loan portfolio delinquencies (25.8 percent by par value).

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Table 28 - Summary of Higher-Risk Conventional Mortgage Loans
(dollars in thousands)
As of December 31, 2024
High-Risk Loan TypeTotal Par ValuePercent Delinquent 30 DaysPercent Delinquent 60 DaysPercent Delinquent 90 Days or More and Nonaccruing
Subprime loans (1)
$148,880 4.34 %0.96 %1.19 %
High loan-to-value loans (2)
1,000 — — — 
Total high-risk loans$149,880 4.31 %0.95 %1.18 %
_______________________
(1)    Subprime loans are loans to borrowers with FICO® credit scores of 660 or lower.
(2)    High loan-to-value loans are loans with an estimated current loan-to-value ratio greater than 100 percent.

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

Mortgage Insurance Companies. We are exposed to credit risk from primary mortgage insurance (PMI) coverage on individual loans. As of December 31, 2024, we were the beneficiary of PMI coverage of $128.2 million on $492.8 million of conventional mortgage loans. These amounts relate to loans originated with PMI and for which current loan-to-value ratios exceed 78 percent (determined by recalculating the original loan-to-value ratio using the current par value divided by the appraised home value at the time of loan origination).

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

Deposits

We offer demand and overnight deposits and custodial mortgage accounts to our members. Deposit programs are intended to provide members with a low-risk earning asset that satisfies liquidity requirements. Deposit balances depend on members' needs to place excess liquidity and can fluctuate significantly. Due to the relatively small size of our deposit base and the unpredictable nature of member demand for deposits, we do not rely on deposits as a core component of our funding. At December 31, 2024, and December 31, 2023, deposits totaled $877.1 million and $922.9 million, respectively.

Consolidated Obligations

See Liquidity and Capital Resources for information regarding our COs.

Derivative Instruments

All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled $301.9 million and $383.1 million as of December 31, 2024, and December 31, 2023, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled $4.7 million and $3.0 million as of December 31, 2024, and December 31, 2023, respectively.

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

We base the estimated fair values of these agreements on the fair value of interest-rate-exchange agreements with similar terms or available market prices. Consequently, fair values for these instruments must be estimated using techniques such as discounted cash-flow analysis and comparison with similar instruments. Estimates developed using these methods are subjective and require judgments regarding significant matters such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. We formally establish hedging relationships
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associated with balance-sheet items and forecasted transactions to obtain desired economic results. These hedge relationships may include fair-value and cash-flow hedges, as well as economic hedges.

All commitments to invest in mortgage loans are recorded at fair value on the statement of condition as derivatives. Upon satisfaction of the commitment, the recorded fair value is then reclassified as a basis adjustment of the purchased mortgage assets. We had commitments for which we were obligated to invest in mortgage loans with par values totaling $32.7 million and $30.0 million at December 31, 2024 and 2023, respectively.

The following table presents a summary of the notional amounts and estimated fair values of our outstanding derivatives, excluding accrued interest, and related hedged item by product and type of accounting treatment as of December 31, 2024, and December 31, 2023. The notional amount represents the hypothetical principal basis used to determine periodic interest payments received and paid. However, the notional amount does not represent an actual amount exchanged or our overall exposure to credit and market risk.

Table 29 - Derivatives and Hedge-Accounting Treatment
(dollars in thousands)
      December 31, 2024December 31, 2023
Hedged Item Derivative 
Designation(2)
 Notional
Amount		 Fair
 Value		Notional
Amount		Fair
Value
Advances (1)
 Swaps Fair value $12,157,089  $(83,874)$12,534,180 $(120,326)
  Swaps Economic —  — 90,000 (793)
Total associated with advances     12,157,089  (83,874)12,624,180 (121,119)
Available-for-sale securitiesSwaps Fair value11,790,008  (154,592)12,391,160 (197,733)
COs Swaps Fair value 22,285,710  (595,614)26,662,140 (876,631)
SwapsEconomic2,987,274 723 — — 
Forward starting swapsCash Flow741,000 224 1,391,000 83 
Total associated with COs26,013,984 (594,667)28,053,140 (876,548)
Total     49,961,081  (833,133)53,068,480 (1,195,400)
Mortgage delivery commitments     32,729  (100)29,995 290 
Total derivatives     $49,993,810  (833,233)$53,098,475 (1,195,110)
Accrued interest       241,767  262,631 
Cash collateral, including related accrued interest888,593 1,312,535 
Net derivatives       $297,127  $380,056 
Derivative asset       $301,873  $383,073 
Derivative liability       (4,746) (3,017)
Net derivatives       $297,127  $380,056 
 _______________________
(1)    As of December 31, 2023, embedded derivatives separated from certain advance contracts with an aggregate notional amount of $90.0 million and fair value of $790 thousand are not included in the table.
(2)    The hedge designation “fair value” represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge changes in fair value attributable to changes in the designated benchmark interest rate. The hedge designation "cash flow" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge the exposure to variability in expected future cash flows. The hedge designation “economic” represents derivatives hedging specific or nonspecific assets, liabilities, or firm commitments that do not qualify or were not documented as fair-value or cash-flow hedges but are documented as serving a non-speculative use and are hedging strategies under our risk-management policy.

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Table 30 - Hedging Strategies
(dollars in thousands)
Notional Amount
Hedged Item / Hedging InstrumentHedging ObjectiveHedge DesignationDecember 31, 2024December 31, 2023
Advances
Pay fixed, receive floating interest-rate swap (without options)Converts the advance's fixed rate to a variable rate indexFair value$4,558,918 $4,132,610 
Economic— 15,000 
Pay fixed, receive floating interest-rate swap (with options)Converts the advance's fixed rate to a variable rate index and offsets embedded options in the advanceFair value7,583,171 8,391,570 
Economic— 5,000 
Pay floating with embedded coupon features, receive floating interest-rate swap (noncallable)Reduces interest-rate sensitivity and repricing gaps by converting the advance's variable rate to a different variable rate index and/or offsets embedded coupon features in the advanceFair value15,000 — 
Pay floating with embedded features, receive floating interest-rate swap (callable)Reduces interest-rate sensitivity and repricing gaps by converting the advance’s variable-rate to a different variable-rate index and/or offsets embedded option risk in the advance.Fair value— 10,000 
Pay floating, receive floating basis swapReduces interest-rate sensitivity and repricing gaps by converting the advance's variable-rate to a different variable-rateEconomic— 70,000 
12,157,089 12,624,180 
Investments
Pay fixed, receive floating interest-rate swapConverts the investment's fixed rate to a variable rate indexFair value11,790,008 12,391,160 
CO Bonds
Receive fixed, pay floating interest-rate swap (without options)Converts the bond's fixed rate to a variable rate indexFair value2,343,710 5,730,000 
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 bondFair value19,942,000 20,932,140 
Forward-starting interest-rate swapTo lock in the cost of funding on anticipated issuance of debtCash flow741,000 1,391,000 
23,026,710 28,053,140 
CO Discount Notes
Receive-fixed, pay float interest-rate swapConverts the discount notes fixed rate to a variable rate indexEconomic2,987,274 — 
Stand-Alone Derivatives
Mortgage delivery commitmentsN/A32,729 29,995 
Total$49,993,810 $53,098,475 

Derivative Instruments Credit Risk. We are subject to credit risk on derivatives. This risk arises from 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 2023 and August 2023 exceeded $8 billion and, as a result, we remained subject to two-way initial margin obligations as required by the Wall Street
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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 December 31, 2024, 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 31 - Credit Exposure to Derivatives Counterparties
(dollars in thousands)
As of December 31, 2024
Notional AmountNet Derivatives Fair Value Before CollateralCash Collateral Pledged to Counterparty Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
Single-A$2,460,000 $1,044 $(995)$49 
Cleared derivatives21,920,910 3,380 297,500 300,880 
Liability positions with credit exposure:
Uncleared derivatives
Double-A78,500 (609)622 13 
Single-A7,691,900 (136,077)137,000 923 
Total interest-rate swap positions with nonmember counterparties to which we had credit exposure32,151,310 (132,262)434,127 301,865 
Mortgage delivery commitments (1)
32,729 8 — 8 
Total$32,184,039 $(132,254)$434,127 $301,873 
_______________________
(1)    Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.

Uncleared derivatives. The credit risk arising from unsecured credit exposure on derivatives is mitigated by the credit quality of the counterparties and by the early termination ratings triggers contained in all master derivatives agreements. We enter into new uncleared derivatives only with nonmember institutions that are at or above our third highest internal rating, although risk-reducing trades could be approved for counterparties whose ratings had fallen below these ratings. See Part I — Item 1 — Business — Business Lines — Investments for additional information on our internal ratings. We actively monitor these exposures and the credit quality of our counterparties, using stress testing of counterparty exposures and assessments of each counterparty's financial performance, capital adequacy, sovereign support, and related market signals such as credit default swap spreads. We can reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities. We do not enter into interest-rate-exchange agreements with other FHLBanks. We use master-netting agreements to reduce our credit exposure from counterparty defaults. The master agreements contain bilateral-collateral-exchange provisions that require credit exposures to be secured by U.S. federal government, U.S. government guaranteed, GSE securities, or cash. Exposures are measured daily, and adjustments to collateral positions are made daily. These agreements may require us to deliver additional collateral to certain of our counterparties if our credit rating is downgraded by an NRSRO, which could increase our exposure to loss in the event of a default by a counterparty to which we were the net creditor at the time of any such default, as further detailed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 7 — Derivatives and Hedging Activities.

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

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

LIQUIDITY AND CAPITAL RESOURCES

Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I — Item 1 — Business — Consolidated Obligations. Outstanding COs and the condition of the market for COs are discussed below under — Debt Financing — Consolidated Obligations. Our equity capital resources are governed by our Capital Plan, certain portions of which are described under — Capital below as well as by applicable legal and regulatory requirements.

Liquidity

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

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

Sources and Uses of Liquidity. Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short- and intermediate-term financial instruments that can be sold or pledged as collateral under a repurchase agreement. During the year ended December 31, 2024, we maintained continuous access to funding and adapted our debt issuance to meet the needs of our members.

Secondary sources of liquidity include payments collected on mortgage loans, proceeds from the issuance of capital stock, and member deposits. In addition, under the FHLBank Act, the U.S. Treasury may purchase up to $4 billion of FHLBank COs. The terms, conditions, and interest rates in such a purchase would be determined by the U.S. Treasury. This authority may be exercised at the discretion of the U.S. Treasury with the agreement of the FHFA only if alternative means cannot be effectively employed to permit members of the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and high interest rates. There were no such purchases by the U.S. Treasury during the year ended December 31, 2024.

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

For information and discussion of our guarantees and other commitments we may have, see Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 15 — Commitments and Contingencies. For further information and discussion of the joint and several liability for FHLBank COs, see below — Debt Financing — Consolidated Obligations.

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Internal Liquidity Sources / Liquidity Management

Liquidity Reserves for Deposits. Applicable law requires us to hold cash, obligations of the U.S., and advances with maturities of less than five years, in a total amount not less than the amount of total member deposits with us. We have complied with this requirement during the year ended December 31, 2024.

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 Action Trigger. We maintain a liquidity management action trigger pertaining to projected net cash flow: if projected net cash flow falls below zero on or before the 21st day following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not breach this threshold at any time during the year ended December 31, 2024. Table 32 below shows this calculation as of December 31, 2024.

Table 32 - Projected Net Cash Flow
(dollars in thousands)
As of December 31, 2024
21 Days
Uses of funds
Interest payable$209,107 
Maturing or expected option exercise of liabilities9,078,532 
Committed asset settlements56,670 
Capital outflow42,922 
MPF delivery commitments32,729 
Projected Calls110,000 
Gross uses of funds9,529,960 
Sources of funds
Interest receivable254,613 
Maturing or projected amortization of assets13,407,572 
Committed liability settlements1,277,699 
Cash and due from banks and interest bearing deposits1,960,702 
Other3,130 
Gross sources of funds16,903,716 
Projected net cash flow$7,373,756 

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
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of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.

We were in compliance with the Base Case Liquidity Requirement at all times during the year ended December 31, 2024.

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 and management action trigger framework around these metrics as follows:

Table 33 - Funding Gap Metric
Funding Gap Metric (1)
LimitManagement Action TriggerThree-Month Average
December 31, 2024		Three-Month Average
December 31, 2023
3-month Funding Gap15%13%4.9%3.8%
1-year Funding Gap30%25%11.1%17.5%
_______________________
(1)    The funding gap metric is a positive value when maturing liabilities exceed maturing assets, as defined, within the given period. Compliance with Limits and Management Action Triggers 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. We 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 we do not fund principal and interest payments due with respect to any CO for which issuance proceeds were allocated to us 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. We would then be required to repay the funding to the other FHLBanks. We have never drawn funding under this agreement, nor have we ever been required to provide funding to another FHLBank under this agreement.

Debt Financing — Consolidated Obligations

Our primary source of liquidity is through CO issuances. At December 31, 2024, and December 31, 2023, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled $66.7 billion and $62.2 billion, respectively. CO bonds are generally issued with either fixed-rate coupon-payment terms or variable-rate coupon-payment terms that use a variety of indices for interest-rate resets. Some of the fixed-rate bonds that we have issued are callable bonds that may be redeemed at par on one or more dates prior to their maturity date. In addition, to meet our needs and the needs of certain investors in COs, fixed- and variable-rate bonds may also contain certain provisions that may result in complex coupon-payment terms and call or amortization features. When such COs (structured bonds) are issued, we enter into interest-rate-exchange agreements containing offsetting features, which effectively change the characteristics of the bond to those of a simple variable-rate bond.

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

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See Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 9 — Consolidated Obligations for a summary of CO bonds by contractual maturity dates and call dates as of December 31, 2024, and December 31, 2023. CO bonds outstanding for which we are primarily liable at December 31, 2024, and December 31, 2023, include issued callable bonds totaling $18.0 billion and $22.2 billion, respectively.

CO discount notes are also a significant funding source for us. CO discount notes are short-term instruments with maturities ranging from overnight to one year. We use CO discount notes primarily to fund short-term advances and investments, and longer-term advances and investments with short-term variable coupon repricing intervals. CO discount notes comprised 27.8 percent and 35.3 percent of the outstanding COs for which we are primarily liable at December 31, 2024, and December 31, 2023, respectively, but accounted for 67.3 percent and 81.6 percent of the proceeds from the issuance of such COs during the years ended December 31, 2024 and 2023, respectively.

Although we are primarily liable for the portion of COs allocated to us, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on COs issued by all of the FHLBanks. The par amounts of the FHLBanks' outstanding COs were $1.2 trillion at both December 31, 2024 and 2023. COs are backed only by the combined financial resources of the FHLBanks. We have never repaid the principal or interest on any COs on behalf of another FHLBank.

We have evaluated the financial condition of the other FHLBanks based on known regulatory actions, publicly-available financial information, and individual long-term credit rating downgrades as of each period presented. Based on this evaluation, as of December 31, 2024, and through the filing of this report, we do not believe it is likely that we will be required to repay the principal or interest on any CO on behalf of another FHLBank.

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

Capital

Total capital at December 31, 2024, was $3.9 billion compared with $3.5 billion at December 31, 2023.

The FHLBank Act and FHFA regulations specify that each FHLBank is required to satisfy certain minimum regulatory capital requirements. We were in compliance with these requirements at December 31, 2024, as discussed in Part II —Item 8 — Financial Statements — Notes to the Financial Statements — Note 11 — Capital.

Table 34 - Capital Stock Outstanding by Member Institution Type
(dollars in thousands)
 December 31, 2024
Savings institutions$819,425 
Commercial banks780,608 
Insurance companies323,136 
Credit unions271,238 
Community development financial institutions760 
Total GAAP capital stock2,195,167 
Mandatorily redeemable capital stock5,086 
Total regulatory capital stock$2,200,253 

Capital stock subject to a stock redemption period is reclassified to mandatorily redeemable capital stock, a liability in the statement of condition. Mandatorily redeemable capital stock totaled $5.1 million and $6.1 million at December 31, 2024, and December 31, 2023, respectively. For additional information on the redemption of our capital stock, see Part I— Item 1 — Business — Capital Resources — Redemption of Excess Stock and Item 8 — Financial Statements —Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Mandatorily Redeemable Capital Stock.

Capital Rule

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

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

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

The Capital Rule requires the Director of the FHFA to determine on no less than a quarterly basis the capital classification of each FHLBank. By letter dated December 10, 2024, the Director of the FHFA notified us that, based on financial information as of September 30, 2024, we met the definition of adequately capitalized under the Capital Rule.

Internal Capital Practices and Policies

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

Internal Minimum Capital Requirement in Excess of Regulatory Requirements

In an effort to provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model (together, our internal minimum capital requirement). As of December 31, 2024, this internal minimum capital requirement equaled $3.5 billion, which was satisfied by our actual regulatory capital of $4.1 billion.

Minimum Retained Earnings Target

In the third quarter of 2024, we implemented a management action trigger and a limit for our minimum level of retained earnings, both of which are determined monthly using rolling three-month averages:

•Management action trigger: retained earnings must be at least 4.5 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; and
•Limit: 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 December 31, 2024, we had total retained earnings of $1.9 billion, which exceeded both the management action trigger of $1.7 billion and the limit of $1.3 billion. This method for determining our minimum amount of retained earnings replaced our previous target of $700.0 million in July 2024. In the event that the Bank’s balance of retained earnings is below the limit, dividends may not exceed 40 percent of the prior quarter’s net income.

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

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

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Repurchases of Excess Stock

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

Table 35 - Capital Stock Requirements and Excess Capital Stock
(dollars in thousands)
 Membership Stock
Investment
Requirement		 Activity-Based
Stock Investment
Requirement		 
Total Stock
Investment
Requirement (1)
 
Outstanding Class B
Capital Stock (2)
 Excess Class B
Capital Stock
December 31, 2024$348,504  $1,808,806  $2,157,331  $2,200,253  $42,922 
December 31, 2023335,004  1,666,987  2,002,011  2,048,536  46,525 
_______________________
(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

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

At December 31, 2024, our total required contribution to the restricted retained earnings account was $663.5 million compared with the current restricted retained earnings account balance of $509.2 million.

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

•amounts held in an FHLBank's unrestricted retained earnings account may not be transferred into the restricted retained earnings account;
•during the dividend restriction period, an FHLBank shall redeem or repurchase capital stock only at par value, and shall only conduct such redemption or repurchase if it would not result in the FHLBank's total regulatory capital falling below its aggregate paid in amount of capital stock;
•any quarterly net losses will be netted against the FHLBank's other quarters' net income during the same calendar year so that the minimum required annual allocation into the FHLBank's restricted retained earnings account is satisfied;
•if the FHLBank sustains a net loss for a calendar year, the net loss will be applied to reduce the FHLBank's retained earnings that are not in the FHLBank's restricted retained earnings account to zero prior to application of such net loss to reduce any balance in the FHLBank's restricted retained earnings account;
•if the FHLBank incurs net losses for a cumulative year-to-date period resulting in a decline to the balance of its restricted retained earnings account, the FHLBank's required allocation percentage will increase from 20 percent to 50 percent of quarterly net income until its restricted retained earnings account balance is restored to an amount equal to the regular required allocation (net of the amount of the decline);
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•if the balance in the FHLBank's restricted retained earnings account exceeds 150 percent of its total required contribution to the account, the FHLBank may release such excess from the account;
•in the event of the liquidation of the FHLBank, or the taking of the FHLBank's retained earnings by future federal action, such event will not affect the rights of the FHLBank's Class B stockholders under the FHLBank Act in the FHLBank's retained earnings, including those held in the restricted retained earnings account;
•the payment of dividends from amounts in the restricted retained earnings account be restricted for at least one year following the termination of the Joint Capital Agreement; and
•certain procedural mechanisms be followed for determining when an automatic termination event has occurred.

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

•creating any new or higher assessment or taxation on the net income or capital of any FHLBank;
•requiring the FHLBanks to retain a higher level of restricted retained earnings than what is required under the agreement; or
•establishing general restrictions on dividend payments requiring a new or higher mandatory allocation of an FHLBank's net income to any retained earnings account than the amount specified in the agreement or prohibiting dividend payments from any portion of an FHLBank's retained earnings not held in the restricted retained earnings account.

Off-Balance-Sheet Arrangements

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

 •    commitments that obligate us for additional advances;
 •    standby letters of credit;
 •    commitments for unused lines-of-credit advances; and
 •    unsettled COs.

Off-balance-sheet arrangements are more fully discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 15 — 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. For additional discussion regarding the application of these and other accounting policies, see Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies.

Estimation of Fair Values

Overview.

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Certain assets and liabilities, including investment securities classified as available-for-sale or trading, as well as all derivatives, are presented in the Statements of Condition at fair value. Management also estimates the changes in fair value of hedged items in fair-value hedge relationships (e.g., advance, investment security, or consolidated obligation) that are attributable to changes in the designated benchmark interest rate (hereinafter referred to as "changes in the benchmark fair value"), which we have designated as either the overnight-index swap rate based on SOFR (SOFR-OIS) or the overnight-index swap rate based on the federal funds effective rate (Federal Funds-OIS) at the inception of each hedge relationship. Finally, management also estimates the fair value of some of the collateral that borrowers pledge against advance borrowings to confirm that collateral is sufficient to meet regulatory requirements and to protect against losses.

Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. GAAP establishes a fair value hierarchy and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The fair values of the Bank's assets and liabilities that are carried at fair value are estimated based on quoted market prices when available. However, some of these instruments lack an available trading market characterized by frequent transactions between a willing buyer and willing seller engaging in an exchange transaction (for example, derivatives). In these cases, such values are generally estimated using a valuation model and inputs that are observable for the asset or liability, either directly or indirectly. The assumptions and inputs used have a significant effect on the reported carrying values of assets and liabilities and the related income and expense. The use of different assumptions or inputs could result in materially different net income and reported carrying values.

The book values and fair values of our financial assets and liabilities, along with a description of the fair value hierarchy and the valuation methodologies used to determine the fair values of these financial instruments, is disclosed in Part II - Item 8 — Financial Statements — Notes to the Financial Statements — Note 14 — Fair Values.

Valuation of Derivatives and Hedged Items.

All derivatives are required to be carried on the statement of condition at fair value. Changes in the fair value of all derivatives, excluding those designated as cash-flow hedges, are recorded each period in current earnings, while changes in the fair value of derivatives that are designated and qualify as cash-flow hedges are recorded in accumulated other comprehensive income (AOCI) until earnings are affected by the variability of the cash flows of the hedged transaction. We are required to recognize unrealized gains and losses on derivative positions whether or not the transaction qualifies for hedge accounting. The judgments and assumptions that are most critical to the application of this accounting policy are the estimation of fair values of derivatives and hedged items, which have a significant impact on the actual results being reported.

Fair-value hedge accounting. If the transaction is designated and qualifies for fair-value hedge accounting, offsetting losses or gains on the hedged assets or liabilities may also be recognized each period in current earnings. Therefore, to the extent certain derivative instruments do not qualify for fair-value hedge accounting, or changes in the fair values of derivatives are not exactly offset by changes in fair values of the associated hedged items, the accounting framework introduces the potential for a considerable mismatch between the timing of income and expense recognition for assets and liabilities being hedged and their associated hedging instruments. As a result, during periods of significant changes in market prices and interest rates, our reported earnings may exhibit considerable variability.

At inception of each fair-value hedge transaction, the Bank formally documents the hedge relationship and the risk management objective and strategy for undertaking the hedge, including identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value attributable to the hedged risk will be assessed. In all cases involving a recognized asset, liability or firm commitment, the designated risk being hedged is the risk of changes in its benchmark fair value.

For hedging relationships that are designated as fair-value hedges and qualify for hedge accounting, the change in the benchmark fair value of the hedged item is recorded in earnings, thereby providing some offset to the change in fair value of the associated derivative. The difference between the change in fair value of the derivative and the change in the benchmark fair value of the hedged item represents hedge ineffectiveness. All of our fair-value hedge relationships are treated as long-haul fair-value hedge relationships, where the change in the benchmark fair value of the hedged item must be measured separately from the change in fair value of the derivative. See Table 7.2 - Net Gains (Losses) on Fair Value Hedging Relationships in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 7 — Derivatives and Hedging Activities for a summary of our fair-value hedge ineffectiveness for the three years ended December 31, 2024, 2023, and 2022.
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For derivative transactions to qualify for long-haul fair-value hedge-accounting treatment, hedge effectiveness testing is performed at the inception of each hedging relationship to determine whether the hedge is expected to be highly effective in offsetting the identified risk, and at each month-end thereafter to ensure that the hedge relationship has been effective historically and to determine whether the hedge is expected to be highly effective in the future. We perform testing at hedge inception based on regression analysis of the hypothetical performance of the hedge relationship using historical market data. We then perform regression testing each month thereafter using accumulated actual values in conjunction with hypothetical values. Each month we use a consistently applied statistical methodology that uses a sample of at least 31 historical interest-rate environments and includes an R-square test, a slope test, and an F-statistic test. These tests measure the degree of correlation of movements in estimated fair values between the derivative and the related hedged item. For the hedging relationship to be considered effective, the R-square must be greater than 0.8, the slope must be between -0.8 and -1.25, and the computed F-statistic test significance must be less than 0.05.

If a hedge fails the effectiveness test at inception, we do not apply hedge accounting. If the hedge fails the effectiveness test during the life of the transaction, we discontinue hedge accounting prospectively. In that case, we will continue to carry the derivative on the statement of condition at fair value, recognize the changes in fair value of that derivative in current earnings, cease to adjust the hedged item for changes in its benchmark fair value, and amortize the cumulative basis adjustment of the formerly hedged item into earnings over its remaining term. Unless and until the derivative is redesignated in a qualifying fair value hedging relationship for accounting purposes, changes in its fair value are recorded in current earnings without an offsetting change in the benchmark fair value from a hedged item.

For purposes of estimating the fair value of derivatives and hedged items for which we are hedging changes in the benchmark fair value, we employ a valuation model that uses market data from the Eurodollar futures, U.S. Treasury obligations, federal funds rates, Federal Funds-OIS, SOFR-OIS, and the U.S. dollar interest-rate-swap markets to construct discount and forward-yield curves using standard financial market techniques. This valuation model is subject to external validation approximately every three years. In those years when an external validation is not performed, the valuation model is subject to an internal model validation review. We periodically review and refine, as appropriate, the assumptions and valuation methodologies to reflect market indications as closely as possible. Additionally, for derivatives, we compare the fair values obtained from our valuation model to clearinghouse valuations (in the case of cleared derivatives) and non-binding dealer estimates (in the case of bilateral derivatives), and may also compare derivative fair values to those of similar instruments, to ensure such fair values are reasonable.

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

Depending upon the spreads between Federal Funds-OIS and SOFR-OIS rates, the use of the one interest-rate index as the discount rate for valuing our interest-rate exchange agreements and a different interest-rate index (plus or minus a constant spread) as the discount rate for valuing our hedged items can result in increased fair-value hedge ineffectiveness. In addition, while not likely, this valuation methodology has the potential to lead to the loss of hedge accounting for some of these hedging relationships. Either of these outcomes could result in increased earnings volatility, which could potentially be material. However, through December 31, 2024, no hedge relationships failed our hedge effectiveness criteria as a result of using different interest-rate indices as the discount rate for the derivative and the discount rate for the hedged item.

Economic hedges. We generally employ hedging techniques that qualify for and are effective under GAAP hedge-accounting requirements. However, not all of our hedging relationships meet these requirements. In some cases, we have elected to retain or enter into derivatives that are economically effective at reducing risk but do not meet the hedge-accounting requirements, either because the cost of the hedge was economically superior to nonderivative hedging alternatives or because no nonderivative hedging alternative was available, and available hedge strategies did not meet hedge accounting requirements. As required by FHFA regulation and our policy, derivatives that do not qualify as hedging instruments pursuant to GAAP may be used only if we document a nonspeculative purpose.

For derivatives where no identified hedged item qualifies for hedge accounting, changes in the fair value of the derivative are reflected in current earnings. As of December 31, 2024, we held $3.0 billion notional of interest-rate swaps with a fair value of $723 thousand that are economically hedging $3.0 billion of CO discount notes. Additionally, as of December 31, 2024, we held $32.7 million notional of mortgage-delivery commitments with a fair value of $(100) thousand. The following table shows
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the estimated changes in the fair value of the interest-rate swaps under alternative parallel interest-rate shifts (for example the same change to interest rates on short-, intermediate-, and long-term fixed income maturities):

Table 36 - Estimated Change in Fair Value of Undesignated Derivatives
(dollars in thousands)
As of December 31, 2024
 -200 basis points-150 basis points-100 basis points-50 basis points+50 basis points+100 basis points+150 basis points+200 basis points
Change from base case  
Interest-rate swaps$15,581 $11,668 $7,767 $3,878 $(3,866)$(7,720)$(11,562)$(15,392)

Valuation of Investment Securities.

To value our holdings of investment securities, other than HFA floating-rate securities, we obtain prices from three designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price these securities. The inputs to those models are derived from various sources including, but not limited to, benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data. Because many securities do not trade on a daily basis, the pricing vendors use available information as applicable such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all security valuations, which facilitates resolution of potentially erroneous prices identified by the Bank. Recently, we conducted reviews of the three pricing vendors to reconfirm our understanding of the vendors' pricing processes, methodologies and control procedures and were satisfied that those processes, methodologies, and control procedures were adequate and appropriate.

As of December 31, 2024, multiple vendor prices were received for substantially all of our investment securities and the final prices for substantially all of those securities were computed by averaging those prices. Based on our review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers or significant yield variances, our additional analyses), we believe the final prices used are reasonably likely to be exit prices and further that the fair-value measurements are classified appropriately in the fair-value hierarchy.

The following table provides the estimated valuation of our available-for-sale investment securities, other than HFA floating-rate securities, as of December 31, 2024, under three different pricing scenarios: the lowest vendor price received for each security, the fair values reported in our financial statements based on the methodology described above, and the highest vendor price received for each security.

Table 37 - Estimated Valuation of Available-for-Sale Securities Under Alternative Pricing Scenarios
(dollars in thousands)
December 31, 2024
 Lowest PriceFair
 Value		 Highest Price
U.S. Treasury obligations$5,807,139 $5,807,665 $5,808,169 
Supranational institutions336,147 337,352 339,160 
U.S. government-owned corporations220,893 221,769 222,798 
GSE94,388 94,614 95,026 
 6,458,567 6,461,400  6,465,153 
MBS    
U.S. government guaranteed – single-family178,467 179,052 179,570 
U.S. government guaranteed – multifamily462,415 464,823 468,167 
GSE – single-family1,944,332 1,953,153 1,962,647 
GSE – multifamily7,375,549 7,405,829 7,433,031 
 9,960,763 10,002,857  10,043,415 
Total$16,419,330 $16,464,257  $16,508,568 

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Amortization of Premiums and Accretion of Discounts Associated with Prepayable MBS

When we purchase MBS, we often pay an amount that is different from the par value. The difference between the purchase price and the contractual note amount is a premium if the purchase price is higher, and a discount if the purchase price is lower. Accounting guidance permits us to incorporate estimates of prepayments when we amortize (or accrete) these premiums (or discounts) in a manner such that the yield recognized on the underlying asset is constant over the asset's estimated life.

We typically pay more than the par value when the interest rates on the purchased MBS are greater than prevailing market yields for similar MBS on the transaction date. The net purchase premiums paid are then amortized using the constant-effective-yield method over the expected lives of the MBS as a reduction in their book yields (that is, interest income). Similarly, if we pay less than the par value due to interest rates on the purchased MBS being lower than prevailing market yields on similar MBS on the transaction date, the net discount is accreted in the same manner as the premiums, resulting in an increase in the MBS's book yields. The constant-effective-yield amortization method is applied using expected cash flows that incorporate prepayment projections that are based on mathematical models that describe the likely rate of consumer refinancing activity in response to incentives created (or removed) by changes in interest rates as well as other factors. While changes in interest rates have the greatest effect on the extent to which mortgages underlying the MBS may prepay, in general prepayment behavior can also be affected by factors not contingent on interest rates. Moreover, many of the MBS that we purchase are part of a multi-tranche securitization through which our exposure to cash flow timing uncertainty is mitigated. In addition, many of the MBS that we purchase are backed by commercial mortgage loans secured by multi-family housing, which may have embedded prepayment penalty fees that serve as a mitigant to prepayment risk.

We estimate prepayment speeds on each individual security using the most recent three months of historical constant prepayment rates, as available, or may subscribe to third-party data services that provide prepayment estimates used to calculate cash flows, from which we determine expected asset lives. The constant-effective-yield method uses actual historical prepayments received and projected future prepayment speeds, as well as scheduled principal payments, to determine the amount of premium/discount that should be recognized so that the book yield of each MBS is constant for each month until maturity.

In general, for MBS comprised of single-family residential mortgage loans that contain no prepayment fees, lower prevailing interest rates are expected to result in the acceleration of premium and discount amortization and accretion, compared with the effect of higher prevailing interest rates that would tend to decelerate the amortization and accretion of premiums and discounts. Exact trends will depend on the relationship between market interest rates and coupon rates on outstanding mortgage assets, the historical evolution of mortgage interest rates, the age of the mortgage loans, demographic and population trends, and other market factors, as well as the structural design of our security within the overall group of securities backed by the underlying pool of mortgage loans. Changes in amortization will also be impacted by differences between projected prepayments and actual experience. Prepayment projections are inherently subject to uncertainty because it is difficult to accurately predict future market conditions and the response of borrowing consumers in terms of refinancing activity to future market conditions even if the market conditions were known. However, actual prepayment speeds observed in these rate environments can be influenced by factors such as home price trends and lender credit underwriting standards.

The effect on interest income from the amortization and accretion of premiums and discounts on MBS, including MBS in both the held-to-maturity and available-for-sale portfolios, for the years ended December 31, 2024, 2023 and 2022, was a net (decrease) increase to income of $(3.5) million, $(3.9) million, and $24.3 million, respectively.

RECENT ACCOUNTING DEVELOPMENTS

None.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

We summarize certain significant legislative and regulatory actions and related developments for the period covered by this report below.

Regulatory Environment. We are subject to various legal and regulatory requirements and regulatory expectations. Changes in the regulatory environment under the current federal executive administration, including regulatory priorities and areas of focus, could affect our business operations, results of operations and reputation. Certain early actions by the executive administration suggest that our regulatory environment is changing. For example, on January 20, 2025, the new administration ordered all executive departments and agencies to, among other things, not propose or issue any rule until a department or agency head appointed or designated by the president reviews and approves the rule. This order applies to proposed rules, among other
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regulatory actions, including those discussed in this Legislative and Regulatory Developments section. As a result, there is uncertainty with respect to the ultimate result of the impacted regulatory actions and their ultimate effects on us and the FHLBank System.

Finance Agency’s Review and Analysis of the FHLBank System. On November 7, 2023, the FHFA issued a written report titled “FHLBank System at 100: Focusing on the Future,” (System at 100 Report) presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System. The report focuses on four broad themes as part of a multi-year collaborative effort with the FHLBanks, their member institutions, and other stakeholders to: update and clarify its regulatory statement of the FHLBanks' mission; clarify the FHLBanks' liquidity role; expand the FHLBanks' housing and community development focus and promote the FHLBanks' operational efficiency.

The FHFA has since issued rulemakings and requests for input and made legislative recommendations for the FHLBank System in its 2023 Report to Congress issued on June 14, 2024, consistent with proposed plans and actions included in the System at 100 Report.

Given the current regulatory environment, we are unable to predict what actions, if any, will ultimately result from the FHFA’s recommendations in the report, the timing of any such actions, the extent of any changes to us or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System of any such actions. For discussion of the related risks, see Part I — Item 1A — Risk Factors.

Advisory Bulletin Federal Home Loan Bank System Climate-Related Risk Management. On September 30, 2024, the FHFA issued an advisory bulletin setting forth the FHFA’s expectation that each FHLBank should integrate climate-related risk management into its existing enterprise risk management framework over time. The advisory bulletin provides that an effective framework should address climate-related risk governance, such as selection of the related risk appetite and setting strategy and objectives, establishing and implementing plans to mitigate and monitor and report material exposures to such risks, and establishing roles and responsibilities for the board of directors and management. The advisory bulletin requires the FHLBanks to establish metrics that track exposure to climate-related risks and collect related data to quantify risk exposures, conduct climate-related scenario analyses, implement processes to report and communicate climate-related risks to internal stakeholders, and have a plan to respond to natural disasters and support climate resiliency. The advisory bulletin also requires the Bank to identify and incorporate climate-related legal and compliance risk into its existing enterprise risk management framework, including applicable climate-related regulations and federal and state disclosure requirements.

Relatedly, we continue to monitor developments relevant to the SEC’s final rule on the enhancement and standardization of climate-related disclosures and note recent statements from the Acting SEC Chair that indicate that the SEC could take steps to rescind the rule. We also continue to monitor the status of certain climate-related state laws to assess their possible impacts on us.

Advisory Bulletin on FHLBank Member Credit Risk Management. On September 27, 2024, the FHFA issued an advisory bulletin setting forth their expectations that an FHLBank’s underwriting and credit decisions should reflect a member’s financial condition and not rely solely on the collateral securing the member’s credit obligations. The advisory bulletin provides guidance for the FHLBanks to implement policies for credit risk governance, member credit assessment, and monitoring of credit conditions, among other considerations. It also provides guidance on the oversight of members in financial distress by recommending implementation of escalation policies, processes for coordination with members’ prudential regulators, and management policies addressing default, failure, and insolvency situations. We have implemented appropriate adjustments to our relevant policies and procedures.

Finance Agency Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On May 16, 2024, the FHFA published its final rule that specifies requirements related to the FHLBanks’ compliance with fair housing and fair lending laws and related regulations, including the Fair Housing Act and the Equal Credit Opportunity Act, and prohibitions on unfair or deceptive acts or practices under the Federal Trade Commission Act (the FTC Act). The final rule: (i) addresses the enforcement authority of the FHFA; (ii) articulates standards related to boards of directors’ oversight of fair housing, fair lending, and the prohibitions on unfair or deceptive acts or practices under the FTC Act; and (iii) requires each FHLBank to annually report actions it voluntarily takes to address barriers to sustainable housing opportunities for underserved communities (Equitable Housing Report Requirements). The final rule became effective on July 15, 2024, except that the Equitable Housing Report Requirements will become effective on February 15, 2026. The Finance Agency has since issued advisory bulletins setting forth its expectations regarding the FHLBanks’ compliance with the final rule. We have reviewed this rule and related advisory bulletins and expect to continue developing our program to comply with the requirements and proceed in accordance
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with the guidance. We continue to review the final rule and related guidance and evaluate the impact it may have on our financial condition and results of operations.

Agreements Regarding Process to End the Conservatorships of Fannie Mae and Freddie Mac (the Enterprises). The Enterprises have been in conservatorship since September 2008. On January 2, 2025, the FHFA and the U.S. Department of the Treasury entered into certain agreements one of which, among other things, sets out a process that would govern the resolution of the conservatorships of the Enterprises other than in the instances of receivership of the Enterprises.

The resolution of the Enterprises’ conservatorships could result in heightened competition with the Enterprises for the purchase of mortgage loans. For example, the Enterprises currently operate subject to certain asset and indebtedness limitations. However, the resolution of their conservatorships could result in such limitations being lifted resulting in increases of their purchases of mortgage loans, which could result in upward pressure on mortgage loan prices. As a result, our opportunities to purchase mortgage loans or the profitability from our investments in mortgage loans could be reduced. Further, the ultimate resolution of their conservatorships could result in an actual or perceived competitive advantage to the Enterprises in the issuance of unsecured debt relative to the FHLBanks thereby resulting in less favorable debt funding costs for us.

Proposed Rule on FHLBank System Boards of Directors and Executive Management. On November 4, 2024, the FHFA published a notice of proposed rulemaking that would revise regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance. If adopted as proposed, it would, among other things: (1) affect director compensation by allowing the Director of the FHFA to establish an annual amount of director compensation that the Director determines is reasonable; (2) require the FHLBanks to complete and submit background checks to the FHFA on every nominee for a directorship; (3) change public interest independent director qualifications, in part, by requiring a person to have advocated for, or otherwise acted primarily on behalf of or for the direct benefit of, consumers or the community to meet the representation requirement; (4) expand the list of qualifying experiences for all Bank independent directors to include artificial intelligence, information technology and security, climate-related risk, Community Development Financial Institutions business models, and modeling; and (5) establish a review process for director performance and participation, together with a process for removing FHLBank directors for cause. Other proposed revisions address, among other things, Bank conflicts of interest policies, covering all our employees, including specific limitations on executive officers and senior management, and record retention.

Several of the proposed revisions would result in significant changes to the nomination, election, and retention of directors on our board if adopted as proposed. Additional director eligibility requirements and limitations on, and potential reductions or limitations to, director compensation resulting from the proposed rule could hinder our ability to recruit and retain the talent and expertise that are critical to our ability to satisfy our mission, particularly given the growing complexities of the finance industry. We continue to consider the effect that the proposed rule could have on us.

CREDIT RATING AGENCY DEVELOPMENTS

As of February 28, 2025, Moody’s long- and short-term credit ratings for us and the 10 other FHLBanks are Aaa and P-1, with a negative outlook.

As of February 28, 2025, S&P’s long- and short-term credit ratings for us and the 10 other FHLBanks are AA+ and A-1+, with a stable outlook.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Sources and Types of Market and Interest-Rate Risk

Market risk is the risk to earnings or shareholder value due to adverse movements in interest rates, market prices, or interest-rate spreads. Market risk arises in the normal course of business from our investment in mortgage assets, where risk cannot be eliminated; from the fact that assets and liabilities are priced in different markets; and from tactical decisions to, from time to time, assume some risk to generate income.

Our balance sheet is comprised of different portfolios that require different market- and interest-rate-risk management strategies. The majority of our balance sheet is comprised of assets that can be funded individually or collectively without imposing significant residual interest-rate risk on ourselves.

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However, those assets with embedded options, particularly our mortgage-related assets, including the portfolio of whole loans acquired through the MPF Program, our portfolio of MBS, and our portfolio of bonds issued by HFAs, represent more complex cash-flow structures and contain more risk of prepayment and/or call options.

Further, unequal moves in the various different yield curves associated with our assets and liabilities create risks that changes in individual portfolio or instrument valuations, or changes in projected income, will not be equally offset by changes in valuations or projected income associated with individual portfolios or instruments on the opposite side of the balance sheet, even if the financial terms of the opposing financial portfolios or instruments are closely matched.

These risks cannot always be profitably managed with a strategy in which each asset is offset by a liability with a substantially identical cash-flow structure. Therefore, we generally view each portfolio as a whole and allocate funding and hedging to these portfolios based on an evaluation of the collective market and interest-rate risks posed by these portfolios. We measure the estimated impact to fair value of these portfolios as well as the potential for income to decline due to movements in interest rates, and make adjustments to the funding and hedge instruments assigned as necessary to keep the portfolios within established risk limits.

We also incur interest-rate risk in the investment of our capital stock and retained earnings in interest-earning assets. Traditionally, we have sought to invest our capital in liquid short-term money-market assets to maintain liquidity and to provide our members with a money-market-based return on capital that is responsive to changes in prevailing interest rates over time. While this capital investment strategy is comparatively risk-neutral in terms of our market risk, it exposes our interest income to the level and volatility of interest rates in the markets.

Types of Market and Interest-Rate Risk

Interest-rate and market risk can be divided into several categories, including repricing risk, yield-curve risk, basis risk, and options risk. Repricing risk refers to differences in the average sensitivities of asset and liability yields attributable to differences in the average timing of maturities and/or coupon rate resets between assets and liabilities. Differences in the timing of repricing of assets and liabilities can cause spreads between assets and liabilities to either increase or decline.

Yield-curve risk reflects the sensitivity of net income to changes in the shape or slope of the yield curve that could impact the performance of assets and liabilities differently, even though average sensitivities are the same.

When assets and liabilities are affected by yield changes in different markets, basis risk can result. For example, if we invest in SOFR-based floating-rate assets and fund those assets with short-term discount notes, potential compression in the spread between SOFR and discount-note rates could adversely impact our net income.

We also face options risk, particularly in our portfolio of advances, mortgage loans, MBS, and HFA securities. When a borrower prepays an advance, we could suffer lower future income if the principal portion of the prepaid advance is reinvested in lower-yielding assets that continue to be funded by higher-cost debt. For this reason, we are required by regulation to assess a prepayment fee that makes us financially indifferent to the prepayment, or in the case of callable advances, to charge an interest rate that is reflective of the value of the member's option to prepay the advance without a fee. However, in the mortgage loan, MBS, and HFA-bond portfolios, borrowers or issuers often have the right to repay their obligations prior to maturity without penalty, potentially requiring us to reinvest the returned principal at lower yields. If interest rates decline, borrowers may be able to refinance existing mortgage loans at lower interest rates, resulting in the prepayment of these existing mortgages and forcing us to reinvest the proceeds in lower-yielding assets. If interest rates rise, borrowers may avoid refinancing mortgage loans for periods longer than the average term of liabilities funding the mortgage loans, causing us to refinance the assets at higher cost. This right of redemption is effectively a call option that we have written to the obligor. Another less prominent form of options risk is coupon-cap risk, which may be embedded into certain floating-rate MBS and limit the amount by which asset coupon rates may increase.

Strategies to Manage Market and Interest-Rate Risk

General

We use various strategies and techniques in an effort to manage our market and interest-rate risk. Principal among our tools for interest-rate-risk management is the issuance of debt that can be used to match interest-rate-risk exposures of our assets. For example, we can issue a CO with a maturity of five years to fund an investment with a five-year maturity. The debt may be noncallable until maturity or callable on and/or after a certain date.

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COs may be issued to match interest-rate-risk exposures of our assets.

COs may also be issued with embedded call options to mitigate interest-rate and prepayment risks of our mortgage loans and certain MBS.

To achieve certain risk-management objectives, we also use interest-rate derivatives that alter the effective maturities, repricing frequencies, or option-related characteristics of financial instruments. These may include swaps, caps, collars, and floors. For example, as an alternative to issuing a fixed-rate bond to fund a fixed-rate advance, we might enter into an interest-rate swap that receives a floating-rate coupon and pays a fixed-rate coupon, thereby effectively converting the fixed-rate advance to a floating-rate advance.

Advances may be issued together with interest-rate swaps that pay a coupon rate that offsets the advance coupon rate and any optionality embedded in the advance, thereby effectively creating a floating-rate asset.

Available-for-sale securities may be purchased together with interest-rate swaps that pay a coupon rate that offsets the security’s coupon rate, thereby effectively creating a floating-rate asset.

Because the interest-rate swaps and hedged assets and liabilities trade in different markets, they are subject to basis risk that is reflected in our VaR calculations and fair-value disclosures, but that is not reflected in hedge ineffectiveness, because these interest-rate swaps are designed to only hedge changes in fair values of the hedged items that are attributable to changes in the designated benchmark interest rate.

Advances

In addition, to the general strategies described above, we use contractual provisions that require borrowers to pay us prepayment fees, which make us financially indifferent if the borrower prepays such advances prior to maturity. These provisions protect against a loss of income under certain interest-rate environments.

Prepayment-fee income can be used to offset the cost of purchasing and retiring high-cost debt to maintain our asset-liability sensitivity profile. In cases where derivatives are used to hedge prepaid advances, prepayment-fee income can be used to offset the cost of terminating the associated hedge.

Investments and Mortgage Loans

We hold certain U.S. Treasury obligations as well as long-term bonds issued by HFAs, U.S. government corporations, GSEs, and supranational institutions as available-for-sale. To hedge the market and interest-rate risk associated with these assets, we may enter into interest-rate swaps with matching terms to those of the bonds to create synthetic floating-rate assets.

We also manage the market and interest-rate risk in our MBS portfolio. For MBS classified as held-to-maturity, we use debt that matches the characteristics of the portfolio assets. For commercial MBS that are nonprepayable or prepayable for a fee for an initial period, we may use fixed-rate debt. For commercial MBS classified as available-for-sale and which are nonprepayable or prepayable for a fee during an initial lock-out period, we may enter into interest-rate swaps for a partial term of the MBS that is equal to or shorter than the lock-out period of the hedged MBS to create synthetic floating-rate assets during the hedged period.

We manage the interest-rate and prepayment risk associated with mortgage loans through the issuance of both callable and noncallable debt to achieve cash-flow patterns and liability durations similar to those expected on the mortgage loans.

We mitigate our exposure to changes in interest rates by funding a portion of our mortgage portfolio with callable debt. When interest rates change, our option to redeem this debt offsets a large portion of the fair-value change driven by the mortgage-prepayment option. However, because this option is not fully hedged by the callable debt, the combined market value of our mortgage assets and debt will be affected by changes in interest rates.

Swapped Consolidated Obligation Debt

We may also issue CO bonds together with interest-rate swaps (either cleared if no optionality or uncleared if containing optionality) that receive a coupon rate that offsets the bond coupon rate and any optionality embedded in the bond, thereby effectively creating a floating-rate liability. We may employ this strategy to secure long-term debt that meets funding needs versus relying on short-term CO discount notes.
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In addition, derivatives may be used to hedge the interest-rate risk of anticipated future CO debt issuance.

The following table provides the outstanding balances for the strategies to manage market and interest-rate risk noted above.

Table 38 - Interest-Rate Risk Management
(dollars in thousands)
Outstanding Par Value/Notional Balance as of
December 31, 2024December 31, 2023
Fixed-rate noncallable debt, not hedged by interest-rate swaps$10,740,345 $10,286,735 
Fixed-rate callable debt not hedged by interest-rate swaps1,521,500 1,131,500 
CO debt hedged by interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships
25,272,984 26,662,140 
Advances hedged by interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships12,157,089 12,624,180 
Available-for-sale securities (non-MBS) hedged by interest-rate-exchange agreements6,861,915 6,861,915 
Available-for-sale securities (MBS) hedged by interest-rate-exchange agreements4,928,093 5,529,245 
Total hedged available-for-sale securities 11,790,008 12,391,160 
Notional principal balance of forward starting interest-rate swaps hedging the anticipated future issuance of CO debt741,000 1,391,000 

Measurement of Market and Interest-Rate Risk and Related Policy Constraints

We measure our exposure to market and interest-rate risk using several techniques applied to the balance sheet and to certain portfolios within the balance sheet. Principal among these measurements as applied to the balance sheet is the potential change in market value of equity (MVE) and interest income due to potential changes in interest rates, interest-rate volatility, spreads, and market prices. We also measure Value at Risk (VaR), duration of equity, MVE sensitivity, and the other metrics discussed below.

We use certain quantitative models to evaluate our risk position. These models are capable of employing various interest-rate term-structure models and valuation techniques to determine the values and sensitivities of complex or option-embedded instruments such as mortgage loans, MBS, callable bonds and swaps, and adjustable-rate instruments with embedded caps and floors, among others. These models require the following:

•specification of the contractual and behavioral features of each instrument;
•determination and specification of appropriate market data, such as yield curves and implied volatilities;
•utilization of appropriate term-structure and prepayment models to reasonably describe the potential evolution of interest rates over time and the expected behavior of financial instruments in response;
•for option-free instruments, the expected cash flows are discounted using spot rates derived from the term structure of interest rates; and
•for option-embedded instruments, the models use standardized option pricing methodology to determine the likelihood of embedded options being exercised in accordance with the term structure of interest rates and volatilities, and potential changes in the same.

We use various measures of market and interest-rate risk, as set forth below in this section. Some measures have associated, prescriptive management action triggers or limits under our policies, as described below, but others do not.

Market Value of Equity Estimation. MVE is the net economic value of total assets and liabilities, including any derivative transactions. In contrast to the GAAP-based shareholders' equity account, MVE represents the shareholders' equity account in present-value terms. Specifically, MVE equals the difference between the estimated market value of our assets and the estimated market value of our liabilities, net of derivative transactions.

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Market Value of Equity/Book Value of Equity Ratio. MVE and, in particular, the ratio of MVE to the book value of equity (BVE), is a measure of the current value of shareholder investment based on market rates, spreads, prices, and volatility at the reporting date. However, these valuations may not be fully representative of future realized prices. Valuations are based on market yields and prices of individual assets, liabilities, and derivatives, and therefore embed elements of option, credit, and liquidity risk which may not be representative of future net income to be earned from the spread between asset yields and funding costs. Further, MVE does not consider future new business activities, or income or expense derived from sources other than financial assets or liabilities.

For purposes of measuring this ratio, the BVE is equal to the par value of capital stock including mandatorily redeemable capital stock, retained earnings, and accumulated other comprehensive (loss) income. At December 31, 2024, our MVE was $3.68 billion and our BVE was $3.86 billion, resulting in a ratio of MVE to BVE of 95 percent. At December 31, 2023, our MVE was $3.49 billion and our BVE was $3.54 billion, resulting in a ratio of MVE to BVE of 99 percent.

Market Value of Equity/Par Stock Ratio. We also measure the ratio of our MVE to the par value of our Class B Stock, which we refer to as our MVE to par stock ratio. We have established an MVE to par stock ratio floor of 125 percent with an associated management action trigger of 130 percent, reflecting our intent to preserve the value of our members' capital investment. As of December 31, 2024, and December 31, 2023, that ratio was 167 percent and 170 percent, respectively.

In addition, we measure the ratio of MVE to Par Stock subjected to a +/- 2 standard deviation basis shock of the overnight-index swap rate based on the Federal Funds-OIS, SOFR, Treasury and CO curves. We have established a management action trigger for the ratio to maintain above 125 percent under a +/- 2 standard deviation shock of historically determined basis changes of the SOFR, Federal Funds-OIS, Treasury, and CO yield curves. At December 31, 2024 and 2023 the +2 standard deviation shock was 159 percent and 161 percent, respectively, and the -2 standard deviation shock was 174 percent and 179 percent, respectively.

Value at Risk. VaR, which measures the potential change in our MVE, is based on a set of stress scenarios using historically based interest-rate, volatility, and option-adjusted spread (OAS) movements starting at the most recent month-end and going back monthly to 1998. For risk-based capital purposes and compliance with our internal management action trigger, VaR is reported as the average of the five worst scenarios.

The table below presents the VaR estimate as of December 31, 2024, and December 31, 2023, and represents the estimates of potential reduction to our MVE from potential future changes in interest rates and other market factors, as described above. Estimated potential market value loss exposures are expressed as a percentage of the current MVE. The table is intended to represent a statistically based range of VaR exposures.

Table 39 - Value-at-Risk
(dollars in millions)
 Value-at-Risk
(Gain) Loss Exposure
 December 31, 2024December 31, 2023
Confidence Level
% of
MVE (1)
Amount
% of
MVE (1)
Amount
50%5.89 %$216.7 6.91 %$241.3 
75%6.85 252.0 7.97 278.4 
95%8.67 318.8 9.34 326.1 
99%10.23 376.3 10.68 373.0 
Average of five worst scenarios - as of period end10.75 395.3 10.95 382.5 
Average of five worst scenarios - average for the year416.2 386.5 
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(1)    Loss exposure is expressed as a percentage of base MVE.

In certain months during 2024 and 2023, we exceeded our VaR management action trigger. For example, as of July 31, 2024, our VaR measured 13.4 percent of the base case MVE, which exceeded our management action trigger of 12 percent. The VaR calculation is based on a combination of interest-rate, volatility and OAS shock model inputs provided by the FHFA for
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establishment of the market risk component of our risk-based capital requirement. Beginning in the second quarter of 2023, the OAS shocks as provided by the FHFA were significantly increased from prior periods, which resulted in an increased VaR absent an equivalent change in the composition of the balance sheet or exposures as measured by other market risk metrics. The higher OAS shocks are a result of changes made by the FHFA to the assumption underlying this calculation in connection with the cessation of LIBOR in 2023. The potential exists for the FHFA to further change the OAS, interest-rate, and volatility shocks in the future. With the concurrence of the board of directors, senior management decided not to take action because the OAS shocks are applied to only assets and they believed that capital levels were sufficient relative to the metric.

Duration of Equity. Another measure of risk that we use is duration of equity. Duration of equity is calculated as the estimated percentage change to MVE for a 100 basis point parallel rate shock. A positive duration of equity generally indicates an appreciation in shareholder value in times of falling rates and a depreciation in shareholder value for increasing rate environments. We have established a limit of +/- 4.0 years for duration of equity with an associated management action trigger of +/- 3.5 years based on a balanced consideration of market-value sensitivity and net interest-income sensitivity. Should the limit be exceeded, our policies require us to notify our board of directors' Risk Committee of such breach.

Our duration of equity, calculated in accordance with guidance from the FHFA which requires the constraining of projected future interest rates and discounting yields to a minimum of zero percent, was +1.25 years at December 31, 2024, compared with +0.75 years at December 31, 2023. For purposes of measuring against the management action triggers and limits, management considered an alternative methodology which does not constrain interest rates to a minimum of zero percent. For the periods ended December 31, 2024, and December 31, 2023, the results of the constrained and unconstrained metrics were the same. We did not exceed our duration of equity limit at any time during the years ended December 31, 2024 and December 31, 2023.

MVE Sensitivity. We measure MVE sensitivity by using the percent change in MVE from base in an up or down 200 basis point parallel rate shock scenario and have established a management action trigger at a decline of 10 percent and a limit at a decline of 15 percent. Our policies require management to notify the board of directors' Risk Committee if the limit is breached.

For purposes of measuring against the management action triggers and limits, management considered an alternative methodology which does not constrain interest rates to a minimum of zero percent. For the periods ended December 31, 2024, and December 31, 2023, the results of the constrained and unconstrained metrics were the same. We were below the limit at each of December 31, 2024, and December 31, 2023.

See Table 40 for our MVE sensitivity, as calculated in accordance with guidance from the FHFA which requires that we constrain projected future interest rates and discounting yields to a minimum of zero percent.

Duration Gap. We measure the duration gap of our assets and liabilities, including all related hedging transactions. Duration gap is the difference between the estimated durations (percentage change in market value for a 100 basis point parallel rate shock) of assets and liabilities (including the effect of related hedges) and reflects the extent to which estimated sensitivities to market changes, including, but not limited to, maturity and repricing cash flows for assets and liabilities, are matched. Higher numbers, whether positive or negative, indicate greater sensitivity in the MVE in response to changing interest rates. A positive duration gap means that our total assets have an aggregate duration, or sensitivity to interest-rate changes, greater than our liabilities, and a negative duration gap means that our total assets have an aggregate duration less than our liabilities.

Our duration gap, as calculated in accordance with guidance from the FHFA which requires that we constrain projected future interest rates and discounting yields to a minimum of zero percent, was +0.76 months at December 31, 2024, compared with +0.46 months at December 31, 2023.

For the periods ended December 31, 2024, and December 31, 2023, the results of the constrained and unconstrained metrics were the same.

Income Simulation. To provide an additional perspective on market and interest-rate risks, we have an income-simulation model that projects adjusted net income over the ensuing 12-month period using a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and changes in basis risk. The income simulation metric is based on projections of adjusted net income divided by capital stock (including mandatorily redeemable capital stock). Projections of adjusted net income exclude: a) projected prepayment of advances and prepayment penalties; b) loss on early extinguishment of debt; c) changes in fair values from hedging activities; and d) changes in fair values of trading securities. The simulations are solely based on simulated movements in interest rates and do not reflect potential impacts of credit events, including, but not limited to, potential provision for credit losses.
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Management has put in place management action triggers whereby senior management is explicitly informed of instances where our projected return on capital stock (ROCS) falls below the average yield on SOFR plus our current dividend spread over a twelve-month horizon in a variety of interest-rate shock scenarios limited to +/- 200 basis points and a +/- 2 standard deviation historically based immediate shock to basis spreads followed by an incremental reversion to current levels over 12 months. Our ROCS spread to SOFR remained above this management action trigger minimum during 2024. The results of this analysis for December 31, 2024, showed that in the base case our ROCS was 565 basis points over SOFR, and in the worst case modeled, the down 200 basis points scenario, our ROCS fell 205 basis points to 360 basis points over SOFR. For December 31, 2023, the results of this analysis showed in the base case our ROCS was 671 basis points over SOFR, and in the worst case modeled, the down 200 basis point scenario, our ROCS fell 224 basis points to 447 basis points over SOFR.

Economic Capital Ratio Limit. We have established a limit of 4.0 percent for the ratio of the MVE to the market value of assets, referred to as the economic capital ratio. FHFA regulations require us to maintain a regulatory capital ratio of book value of regulatory capital to book value of total assets of no less than 4.0 percent, as discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 11 — Capital. We seek to ensure that the regulatory capital ratio will not fall below the 4.0 percent threshold at a future time by establishing the economic capital ratio limit at 4.0 percent. We also maintain a management action trigger of 4.5 percent for this ratio. The economic capital ratio serves as a proxy for benchmarking future capital adequacy by discounting our balance sheet and derivatives at current market expectations of future values. Our economic capital ratio was 5.1 percent as of December 31, 2024, compared with 5.2 percent as of December 31, 2023.

Our economic capital ratio was not below 4.0 percent at any time during the years ended December 31, 2024, and December 31, 2023.

Table 40 - Market and Interest-Rate Risk Metrics
(dollars in millions)
December 31, 2024
Down 300(1)
Down 200(1)
Down 100(1)
BaseUp 100Up 200Up 300
MVE$3,748$3,734$3,714$3,678$3,624$3,550$3,464
Percent change in MVE from base1.9%1.5%1.0%—%(1.5)%(3.5)%(5.8)%
MVE/BVE97%97%96%95%94%92%90%
MVE/Par Stock170%170%169%167%165%161%157%
Duration of Equity+0.50 years+0.44 years+0.71 years+1.25 years+1.78 years+2.26 years+2.61 years
Return on Capital Stock less SOFR2.74%3.60%4.66%5.65%6.13%6.81%7.42%
Net income percent change from base(60.06)%(41.16)%(20.15)%—%14.98%31.83%48.02%
December 31, 2023
Down 300(1)
Down 200(1)
Down 100(1)
BaseUp 100Up 200Up 300
MVE$3,522$3,518$3,511$3,492$3,459$3,408$3,347
Percent change in MVE from base0.9%0.7%0.5%—%(0.9)%(2.4)%(4.2)%
MVE/BVE99%99%99%99%98%96%94%
MVE/Par Stock172%172%171%170%169%166%163%
Duration of Equity+0.11 years+0.12 years+0.38 years+0.75 years+1.19 years+1.65 years+1.81 years
Return on Capital Stock less SOFR3.28%4.47%5.69%6.71%7.84%8.66%9.42%
Net income percent change from base(56.49)%(37.14)%(17.69)%—%18.74%34.55%49.88%
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(1)    In an environment of low interest rates, downward rate shocks are floored as they approach zero, and therefore may not be fully representative of the indicated rate shock.

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ITEM 8. FINANCIAL STATEMENTS

Index to financial statements:
 
Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP (PCAOB ID 238)
 
  
  
  
  
  
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Management's Report on Internal Control over Financial Reporting

The management of the Federal Home Loan Bank of Boston is responsible for establishing and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of internal control over financial reporting as of December 31, 2024, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of December 31, 2024, internal control over financial reporting is effective based on the criteria established in Internal Control – Integrated Framework (2013).

Additionally, our internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Federal Home Loan Bank of Boston

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying statements of condition of Federal Home Loan Bank of Boston (the "Bank") as of December 31, 2024 and 2023, and the related statements of operations, of comprehensive income (loss), of capital, and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “financial statements”). We also have audited the Bank's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Bank as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Bank's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Bank’s financial statements and on the Bank's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Bank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.




PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Suite 500, Boston, MA 02210
T: (617) 530 5000, www.pwc.com/us
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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Interest-Rate Derivatives and Hedged Items

As described in Notes 7 and 14 to the financial statements, the Bank uses derivative instruments to reduce funding costs and/or to manage interest-rate risks. The total notional amount of derivatives as of December 31, 2024 was $50.0 billion, of which 94.0% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2024 was $301.9 million and $4.7 million, respectively. The fair values of interest-rate derivatives and hedged items are determined using standard valuation techniques such as discounted cash-flow analysis and comparisons with similar instruments. The discounted cash-flow model uses market-observable inputs, including discount rate, forward interest rate, and volatility assumptions.

The principal considerations for our determination that performing procedures relating to the valuation of interest-rate derivatives and hedged items is a critical audit matter are the significant audit effort in evaluating the discount rate, forward interest rate, and volatility assumptions used to fair value these derivatives and hedged items, and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the valuation of interest-rate derivatives and hedged items, including controls over the model, data and assumptions. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of interest-rate derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. Developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the discount rate, forward interest rate, and volatility assumptions.


/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 14, 2025

We have served as the Bank's auditor since 1990.

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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CONDITION
(dollars and shares in thousands, except par value)
 December 31, 2024December 31, 2023
ASSETS
Cash and due from banks$5,149 $53,412 
Interest-bearing deposits1,958,353 1,643,587 
Securities purchased under agreements to resell1,500,000 1,600,000 
Federal funds sold2,505,000 2,500,000 
Investment securities: 
Trading securities1,489 1,395 
Available-for-sale securities (amortized cost of $16,792,153 and $15,684,997 at December 31, 2024 and 2023, respectively)
16,470,908 15,343,745 
Held-to-maturity securities (a)63,318 78,905 
Total investment securities16,535,715 15,424,045 
Advances45,163,175 41,958,583 
Mortgage loans held for portfolio, net of allowance for credit losses of $2,200 and $2,000 at December 31, 2024 and 2023, respectively
3,679,150 3,059,331 
Accrued interest receivable262,203 185,709 
Derivative assets, net301,873 383,073 
Other assets82,348 334,534 
Total Assets$71,992,966 $67,142,274 
LIABILITIES  
Deposits
Interest-bearing$842,062 $896,005 
Non-interest-bearing35,019 26,874 
Total deposits877,081 922,879 
Consolidated obligations (COs): 
Bonds48,192,171 40,248,743 
Discount notes18,546,504 22,000,546 
Total consolidated obligations66,738,675 62,249,289 
Mandatorily redeemable capital stock5,086 6,083 
Accrued interest payable328,596 269,517 
Affordable Housing Program (AHP) payable104,300 87,164 
Derivative liabilities, net4,746 3,017 
Other liabilities81,637 65,711 
Total liabilities68,140,121 63,603,660 
Commitments and contingencies (Note 15)
CAPITAL  
Capital stock – Class B – putable ($100 par value), 21,952 shares and 20,425 shares issued and outstanding at December 31, 2024 and 2023, respectively
2,195,167 2,042,453 
Retained earnings:
Unrestricted1,403,455 1,339,546 
Restricted509,245 451,154 
Total retained earnings1,912,700 1,790,700 
Accumulated other comprehensive loss(255,022)(294,539)
Total capital3,852,845 3,538,614 
Total Liabilities and Capital$71,992,966 $67,142,274 
_______________________________________
(a)    Fair values of held-to-maturity securities were $63,197 and $78,478 at December 31, 2024 and 2023, respectively.

The accompanying notes are an integral part of these financial statements.

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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF OPERATIONS
(dollars in thousands)
For the Year Ended December 31,
202420232022
INTEREST INCOME
Advances$2,141,419 $2,112,864 $631,838 
Prepayment fees on advances, net924 868 3,309 
Interest-bearing deposits139,108 145,358 34,869 
Securities purchased under agreements to resell70,504 99,404 25,065 
Federal funds sold198,834 200,021 88,071 
Investment securities:
Trading securities74 71 585 
Available-for-sale securities936,312 793,846 354,512 
Held-to-maturity securities4,175 4,373 3,090 
Total investment securities940,561 798,290 358,187 
Mortgage loans held for portfolio131,258 93,198 85,431 
Other1 716 194 
Total interest income3,622,609 3,450,719 1,226,964 
INTEREST EXPENSE
Consolidated obligations:
Bonds2,159,454 1,837,365 591,546 
Discount notes993,701 1,200,138 344,370 
Total consolidated obligations3,153,155 3,037,503 935,916 
Deposits35,404 37,233 7,794 
Mandatorily redeemable capital stock440 545 474 
Other borrowings128 129 318 
Total interest expense3,189,127 3,075,410 944,502 
NET INTEREST INCOME433,482 375,309 282,462 
Provision for credit losses196 77 171 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES433,286 375,232 282,291 
OTHER INCOME (LOSS)
Service fees12,690 14,055 14,198 
Other, net(243)749 (554)
Total other income12,447 14,804 13,644 
OTHER EXPENSE
Compensation and benefits49,570 45,513 41,879 
Other operating expenses31,375 29,242 25,034 
AHP voluntary contribution 2,767 2,000 5,479 
Discretionary housing and community investment programs24,906 12,928 5,975 
Federal Housing Finance Agency (the FHFA)5,124 6,147 4,771 
Office of Finance4,778 4,291 4,155 
Other4,436 3,975 3,910 
Total other expense122,956 104,096 91,203 
INCOME BEFORE ASSESSMENTS322,777 285,940 204,732 
AHP assessments32,322 28,648 20,521 
NET INCOME$290,455 $257,292 $184,211 

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
For the Year Ended December 31,
202420232022
Net income$290,455 $257,292 $184,211 
Other comprehensive income:
Net unrealized gains (losses) on available-for-sale securities20,007 9,029 (408,294)
Net unrealized gains relating to hedging activities18,562 3,482 68,773 
Pension and postretirement benefits948 (625)4,129 
Total other comprehensive income (loss)39,517 11,886 (335,392)
Comprehensive income (loss)$329,972 $269,178 $(151,181)

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CAPITAL
YEARS ENDED DECEMBER 31, 2024, 2023, and 2022
(dollars and shares in thousands)
 Capital Stock Class B – PutableRetained EarningsAccumulated Other Comprehensive Loss
 SharesPar ValueUnrestrictedRestrictedTotalTotal
Capital
BALANCE, DECEMBER 31, 20219,536 $953,638 $1,179,986 $368,420 $1,548,406 $28,967 $2,531,011 
Comprehensive income152,936 31,275 184,211 (335,392)(151,181)
Proceeds from issuance of capital stock45,292 4,529,192 4,529,192 
Repurchase/redemption of capital stock(34,427)(3,442,691)(3,442,691)
Stock reclassified to mandatorily redeemable capital stock(89)(8,961)(8,961)
Cash dividends on capital stock  (42,049)(42,049) (42,049)
BALANCE, DECEMBER 31, 202220,312 2,031,178 1,290,873 399,695 1,690,568 (306,425)3,415,321 
Comprehensive income205,833 51,459 257,292 11,886 269,178 
Proceeds from issuance of capital stock50,722 5,072,144 5,072,144 
Repurchase/redemption of capital stock(50,588)(5,058,773)(5,058,773)
Stock reclassified to mandatorily redeemable capital stock(21)(2,096)(2,096)
Cash dividends on capital stock(157,160)(157,160)(157,160)
BALANCE, DECEMBER 31, 202320,425 2,042,453 1,339,546 451,154 1,790,700 (294,539)3,538,614 
Comprehensive income232,364 58,091 290,455 39,517 329,972 
Proceeds from issuance of capital stock27,609 2,760,861 2,760,861 
Repurchase/redemption of capital stock(26,082)(2,608,147)(2,608,147)
Cash dividends on capital stock(168,455)(168,455)(168,455)
BALANCE, DECEMBER 31, 202421,952 $2,195,167 $1,403,455 $509,245 $1,912,700 $(255,022)$3,852,845 

The accompanying notes are an integral part of these financial statements.

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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the Year Ended December 31,
 202420232022
OPERATING ACTIVITIES  
Net income$290,455 $257,292 $184,211 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization(5,942)(11,184)31,639 
Provision for credit losses196 77 171 
Net change in derivatives and hedging activities(88,646)(349,754)1,538,920 
Other adjustments, net8,193 7,898 5,229 
Net change in: 
Market value of trading securities(94)111 360 
Accrued interest receivable(76,494)(51,441)(65,908)
Other assets2,915 (2,754)3,737 
Accrued interest payable59,098 139,019 69,547 
Other liabilities32,391 8,093 (3,661)
Total adjustments(68,383)(259,935)1,580,034 
Net cash provided by (used in) operating activities222,072 (2,643)1,764,245 
INVESTING ACTIVITIES  
Net change in:  
Interest-bearing deposits101,348 276,933 (2,633,996)
Securities purchased under agreements to resell100,000 (1,600,000)800,000 
Federal funds sold(5,000)206,000 (762,000)
Advances to members(3,225,570)(235,880)(29,483,375)
Trading securities:  
Proceeds— — 500,000 
Available-for-sale securities:  
Proceeds984,767 370,366 582,454 
Purchases(1,755,400)(2,003,522)(3,081,067)
Held-to-maturity securities:  
Proceeds15,704 20,117 47,847 
Mortgage loans held for portfolio:  
Proceeds318,007 251,498 435,935 
Purchases(944,719)(558,758)(83,683)
Other investing activities, net(2,219)(11,061)(209)
Net cash used in investing activities(4,413,082)(3,284,307)(33,678,094)
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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CASH FLOWS — (Continued)
(dollars in thousands)

For the Year Ended December 31,
202420232022
FINANCING ACTIVITIES  
Net change in deposits(40,183)271,148 (228,545)
Net payments on derivatives with a financing element27,798 1,580 125,890 
Net proceeds from issuance of consolidated obligations:  
Discount notes95,148,058 142,078,706 208,264,181 
Discount notes transferred from other FHLBanks614,234 — — 
Bonds40,811,568 32,019,521 18,916,991 
Bonds transferred from other FHLBanks5,804,945 — — 
Payments for maturing and retiring consolidated obligations:  
Discount notes(98,634,089)(147,077,036)(183,656,942)
Discount notes transferred to other FHLBanks(613,811)— — 
Bonds(38,958,995)(23,810,885)(12,737,176)
Payment of financing lease(40)(173)(169)
Proceeds from issuance of capital stock2,760,861 5,072,144 4,529,192 
Payments for repurchase of capital stock(2,608,147)(5,058,773)(3,442,691)
Payments for redemption of mandatorily redeemable capital stock(997)(6,303)(12,233)
Cash dividends paid(168,455)(157,160)(42,049)
Net cash provided by financing activities4,142,747 3,332,769 31,716,449 
Net (decrease) increase in cash and due from banks(48,263)45,819 (197,400)
Cash and due from banks at beginning of the year53,412 7,593 204,993 
Cash and due from banks at end of the year$5,149 $53,412 $7,593 
Supplemental disclosures:  
Interest paid$3,149,312 $2,941,454 $741,552 
Noncash transfers of mortgage loans held for portfolio to other assets$339 $621 $543 
Noncash lease liabilities arising from obtaining/modifying right-of-use assets$171 $26,314 $(552)

The accompanying notes are an integral part of these financial statements.

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FEDERAL HOME LOAN BANK OF BOSTON
NOTES TO FINANCIAL STATEMENTS

Note 1 — Background Information

We are a federally-chartered corporation and one of 11 district Federal Home Loan Banks (the FHLBanks or the FHLBank System). The FHLBanks are government-sponsored enterprises (GSEs) that were organized under the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), to serve the public by enhancing the availability of credit for residential mortgages, targeted community development and economic growth. Each FHLBank operates in a specifically defined geographic territory, or district. We provide a readily available, competitively priced source of funds to our members and certain nonmember institutions located within the six New England states, which are Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. Certain regulated financial institutions, including community development financial institutions (CDFIs) and insurance companies with their principal places of business in New England and engaged in residential housing finance, may apply for membership. Additionally, certain nonmember institutions (referred to as housing associates) that meet applicable legal criteria may also borrow from us. While eligible to borrow, housing associates are not eligible to become members and, therefore, are not allowed to hold capital stock. As we are a cooperative, current and former members own all of our outstanding capital stock and may receive dividends on their investment. We do not have any wholly or partially owned subsidiaries, and we do not have an equity position in any partnerships, corporations, or off-balance-sheet special-purpose entities.

All members must purchase our stock as a condition of membership and as a condition of engaging in certain business activities with us.

The Federal Housing Finance Agency (FHFA), our primary regulator, an independent agency in the executive branch of the U.S. government, supervises and regulates the FHLBanks, Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae). A purpose of the FHFA is to ensure the FHLBanks fulfill their mission by operating in a safe and sound manner, including maintenance of adequate capital and internal controls. In addition, the FHFA is responsible for ensuring that: 1) the operations and activities of each FHLBank foster liquid, efficient, competitive, and resilient national housing finance markets; 2) each FHLBank complies with the title and the rules, regulations, guidelines, and orders issued under the Housing and Economic Recovery Act (HERA) and the authorizing statutes; 3) each FHLBank carries out its statutory mission through only activities that are authorized under and consistent with HERA and the authorizing statutes, and; 4) the activities of each FHLBank and the manner in which such FHLBank is operated is consistent with the public interest. Each FHLBank is a separate legal entity with its own management, employees, and board of directors.

The Office of Finance is the FHLBanks' fiscal agent and is a joint office of the FHLBanks established to facilitate the issuance and servicing of the FHLBanks' COs and to prepare the combined quarterly and annual financial reports of all the FHLBanks. As provided by the FHLBank Act, and applicable regulations, COs are backed only by the financial resources of all the FHLBanks and are our primary source of funds. Deposits, other borrowings, and the issuance of capital stock, which is principally held by our current and former members, provide other funds. We primarily use these funds to provide loans, called advances, to invest in single-family mortgage loans under the Mortgage Partnership Finance® (MPF®) program, and also to fund other investments. In addition, we offer correspondent services, such as wire-transfer, securities-safekeeping, and settlement services.

"Mortgage Partnership Finance", "MPF" and "MPF Xtra" are registered trademarks of the FHLBank of Chicago.

Note 2 — Summary of Significant Accounting Policies

Use of Estimates

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in accordance with GAAP requires management to make subjective assumptions and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. The most significant of these estimates include, but are not limited to, accounting for derivatives and hedging activities, estimation of fair values, and amortization of premiums and discounts associated with prepayable mortgage-backed securities. Actual results could differ from these estimates.

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Fair Value

We determine the fair-value amounts recorded on the statement of condition and in the note disclosures for the periods presented by using available market and other pertinent information, and reflect our best judgment of appropriate valuation methods. Although we use our best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in market transactions at the reporting dates. See Note 14 — Fair Values for more information.

Financial Instruments Meeting Netting Requirements

We present certain financial instruments on a net basis when they are subject to a legal right of offset and all other requirements for netting are met (collectively referred to as the netting requirements). For these financial instruments, we have elected to offset our asset and liability positions, as well as cash collateral received or pledged, when we have met the netting requirements.

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time when this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the requirements for netting, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. See Note 7 — Derivatives and Hedging Activities for additional information regarding these agreements.

Securities purchased under agreements to resell are also subject to netting requirements. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented. There were no offsetting amounts related to these securities at December 31, 2024 and 2023.

Interest-Bearing Deposits, Securities Purchased Under Agreements to Resell, and Federal Funds Sold

We invest in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold. Interest-bearing deposits include bank notes not meeting the definition of a security. Securities purchased under agreements to resell are treated as short-term collateralized loans. Federal funds sold consist of short-term, unsecured loans transacted with counterparties that we consider to be of investment quality. These investments provide short-term liquidity and are carried at cost. Accrued interest receivable is recorded separately on the statements of condition. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision for credit losses. Interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold are evaluated quarterly for expected credit losses if not expected to be repaid according to the contractual terms. We have not sold or repledged the collateral received on securities purchased under agreements to resell.

For securities purchased under agreements to resell, as a practical expedient we use the fair value of collateral to measure the estimate of expected credit losses. Consequently, a credit loss would be recognized if there is a collateral shortfall which we do not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost.

See Note 4 — Investments for details on the allowance methodologies relating to these investments.

Investment Securities

We classify investments as trading, available-for-sale, or held-to-maturity at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading. Securities classified as trading are carried at fair value and we record changes in the fair value of these investments in other income (loss) on the statement of operations. FHFA regulations prohibit trading in or the speculative use of these instruments and limit the credit risks we have from these instruments.

Available-for-sale. We classify certain investments that are not classified as held-to-maturity or trading as available-for-sale and carry them at fair value. Changes in fair value of available-for-sale securities not being hedged by derivatives, or in an economic hedging relationship, are recorded in other comprehensive income. For available-for-sale securities that have been hedged under fair-value hedge designations, we record the portion of the change in the fair value of the investment related to the risk being hedged in available-for-sale interest income together with the related change in the fair value of the derivative.

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For securities classified as available-for-sale, we evaluate individual securities for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the statements of condition and is not included in the amortized cost basis. Impairment exists when the fair value of the investment is less than its amortized cost. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, we assess whether a credit loss exists on an impaired security by considering whether there would be a shortfall in receiving all cash flows contractually due on the investment. When a shortfall is considered possible, we compare the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision for credit losses. The allowance is limited to the difference between the amortized cost and the fair value on the individual security and excludes uncollectible accrued interest receivable, which is measured separately. Any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gains (losses) on available-for-sale securities within other comprehensive income.

If management intends to sell an impaired security classified as available-for-sale, or it is more likely than not that we will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net losses on available-for-sale securities.

Held-to-Maturity. Certain investments for which we have both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, which is original cost net of periodic principal repayments and amortization of premiums and accretion of discounts using the level-yield method. Accrued interest receivable is recorded separately on the statement of condition.

Certain changes in circumstances may cause    us to change our intent to hold a security to maturity without calling into question our intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of a held-to-maturity security due to certain changes in circumstances, such as evidence of significant deterioration in the issuer's creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for us that could not have been reasonably anticipated may cause us to sell or transfer a held-to-maturity security without necessarily calling into question our intent to hold other debt securities to maturity. In addition, a sale of a debt security that meets either of the following two conditions would not be considered inconsistent with the original classification of that security.

•The sale occurs near enough to its maturity date (for example, within three months of maturity), or call date if exercise of the call is probable, that interest-rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security's fair value; or
•The sale of a security occurs after we have already collected a substantial portion (at least 85 percent) of the par value at acquisition due either to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

For any improvements in expected future cash flows for held-to-maturity securities with an allowance for credit losses recognized, the allowance for credit losses associated with recoveries may be derecognized up to its full amount immediately in the current period.

Premiums and Discounts. We amortize premiums and accrete discounts on mortgage-backed securities (MBS) using the level-yield method over the estimated lives of the securities. This method requires a retrospective adjustment of the effective yield each time we change the estimated life, based on actual prepayments received and changes in expected prepayments, as if the new estimate had been known since the original acquisition date of the securities. We estimate prepayment speeds on each individual security using the most recent three months of historical constant prepayment rates, as available, or may utilize third-party data services that provide estimates of future cash flows, from which we determine expected asset lives. We amortize premiums and accrete discounts on other investments using the level-yield method to the contractual maturity of the securities.

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Gains and Losses on Sales. We compute gains and losses on sales of investment securities using the specific identification method and include these gains and losses in other income (loss) on the statement of operations. See Note 4 — Investments for a summary of our sales of investment securities.

Advances

Advances are carried at amortized cost, which is original cost net of periodic principal repayments, amortization of premiums and accretion of discounts, and fair-value hedge accounting adjustments, as discussed in Note 5 — Advances. Advances are evaluated quarterly for expected credit losses. We generally record our advances at par. However, we may record premiums or discounts on advances in the following cases:

•Advances may be acquired from another FHLBank when one of our members acquires a member of another FHLBank. In these cases, we may purchase the advances from the other FHLBank at a price that results in a fair market yield for the acquired advance.
•When the prepayment of an advance is followed by disbursement of a new advance and the transactions effectively represent a modification of the previous advance, the prepayment fee received is deferred and recorded as a discount to the modified advance.
•When an advance is modified under our advance restructuring program and our analysis of the restructuring concludes that the transaction is an extinguishment of the prior advance rather than a modification, the deferred prepayment fee is recognized into income immediately and recorded as a premium on the new advance.
•When we make an AHP advance, the present value of the variation in the cash flow caused by the difference in the interest rate between the AHP advance rate and our related cost of funds for comparable maturity funding is charged against the AHP liability and recorded as a discount on the AHP advance.
•Advances issued under our Jobs for New England (JNE) and CDFI Advance programs have an interest rate at a significant discount to market rates. Due to the below market interest rate, we record a discount on the advance and an interest rate subsidy expense based on the present value of the variation in the cash flow caused by the difference in the interest rate between the advance rate and our related cost of funds for comparable maturity funding at the time that we transact the advance. The subsidy expenses for these advances are recorded in the statement of operations as discretionary housing and community investment programs expense.

We amortize the premiums and accrete the discounts on advances to interest income using the level-yield method. We record interest on advances to interest income as earned. Accrued interest receivable is recorded separately on the statements of condition.

Prepayment Fees. We charge borrowers a prepayment fee when they prepay certain advances before the original maturity. We record prepayment fees net of hedging fair-value adjustments included in the carrying value of the prepaid advance in the statement of operations as prepayment fees on advances, net.

Advance Modifications. In cases in which we fund a new advance concurrently with or within a short period of time of the prepayment of an existing advance by the same member, we evaluate whether the new advance meets the accounting criteria to qualify as a modification of the existing advance or whether it constitutes a new advance. We compare the present value of cash flows on the new advance with the present value of cash flows remaining on the existing advance. If there is at least a 10 percent difference in the present value of cash flows or if we conclude the difference between the advances is more than minor based on a qualitative assessment of the modifications made to the advance's original contractual terms, the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification.

If a new advance qualifies as a modification of the existing advance, the net prepayment fee on the prepaid advance is deferred, recorded in the basis of the modified advance, and amortized to interest income over the life of the modified advance using the level-yield method. This amortization is recorded in advance interest income. If the modified advance is hedged, changes in fair value are recorded after the amortization of the basis adjustment in advance interest income.

For prepaid advances that were hedged and meet the hedge-accounting requirements, we terminate the hedging relationship upon prepayment and record the prepayment fee net of the hedging fair-value adjustment in the basis of the advance as advance interest income. If we fund a new advance to a member concurrent with or within a short period of time after the prepayment of a previous advance to that member, we evaluate whether the new advance qualifies as a modification of the original hedged advance. If the new advance qualifies as a modification of the original hedged advance, the hedging fair-value adjustment and the prepayment fee are included in the carrying amount of the modified advance and are amortized in interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the
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hedging criteria, the modified advance is marked to fair value after the modification, and subsequent fair-value changes are recorded in advance interest income.

If a new advance does not qualify as a modification of an existing advance, prepayment of the existing advance is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to advance interest income in the statement of operations.

We also offer an advance restructuring program under which the prepayment fee on prepaid advances may be satisfied by the borrower's agreement to pay an interest rate on a new advance sufficient to amortize the prepayment fee by the maturity date of the new advance, rather than paying the fee in immediately available funds to us. If we conclude an advance restructuring is an extinguishment of the prior loan rather than a modification, the deferred prepayment fee is recognized into income immediately.

Service Fees

We record commitment fees for standby letters of credit to members as deferred fee income when received and amortize these fees on a straight-line basis to service-fees income in the statement of operations over the term of the standby letter of credit. Based upon past experience, we believe the likelihood of standby letters of credit being drawn upon is remote. See Note 15 – Commitments and Contingencies for additional information on standby letters of credit. Additionally, we record correspondent services fees and MPF nonorigination fees in the statement of operations as service-fees income.

Mortgage Loans Held for Portfolio

We participate in the MPF Program through which we invest in conventional, residential, fixed-rate mortgage loans (conventional mortgage loans) and government-insured or -guaranteed residential fixed-rate mortgage loans (government mortgage loans) that are purchased from participating financial institutions (see Note 6 — Mortgage Loans Held for Portfolio). We classify our investments in mortgage loans for which we have the intent and ability to hold for the foreseeable future or until maturity or payoff as held for portfolio. As of December 31, 2024, all our investments in mortgage loans are held for portfolio. Mortgage loans held for portfolio are recorded at amortized cost, which is original cost, net of periodic principal repayments and amortization of premiums and accretion of discounts, and direct write-downs. Accrued interest receivable is recorded separately on the statements of condition. We perform a quarterly assessment of our mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision for credit losses. We do not purchase mortgage loans with credit deterioration present at the time of purchase.

Quarterly we measure expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis. When developing the allowance for credit losses, we measure the expected loss over the estimated remaining life of a mortgage loan, which also considers how our credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. We include estimates of expected recoveries within the allowance for credit losses.
The allowance excludes uncollectible accrued interest receivable, as we write off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

Premiums and Discounts. We compute the amortization of mortgage-loan-origination fees (premiums and discounts) as interest income using the level-yield method over the contractual term to maturity of each individual loan, which results in income recognition in a manner that is effectively proportionate to the actual repayment behavior of the underlying assets and reflects the contractual terms of the assets without regard to changes in estimated prepayments based on assumptions about future borrower behavior.

Credit-Enhancement Fees. For conventional mortgage loans, participating financial institutions retain a portion of the credit risk on the loans in which we invest by providing credit-enhancement protection either through a direct liability to pay credit losses up to a specified amount or through a contractual obligation to provide supplemental mortgage insurance. Participating financial institutions are paid a credit-enhancement fee for assuming credit risk and in some instances all or a portion of the credit-enhancement fee may be performance-based. Credit-enhancement fees are paid monthly and are determined based on the remaining par value of the pertinent MPF loans. The required credit-enhancement amount varies depending on the MPF product. Credit-enhancement fees are recorded as an offset to mortgage-loan-interest income. To the extent that losses in the current month exceed performance-based credit-enhancement fees accrued, the remaining losses may be recovered from future performance-based credit-enhancement fees payable to the participating financial institution.

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Mortgage-Loan Participations. We may purchase or sell participations in MPF loans from or to other FHLBanks from time to time. References to our investments in mortgage loans throughout this report include any participation interests we own.

Nonaccrual Loans. 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. When a conventional mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income in the current period. We generally record cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement unless we consider the collection of the remaining principal amount due to be doubtful. If we consider the collection of the remaining principal amount to be doubtful, cash payments received are applied first solely to 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 recording interest income. A loan on nonaccrual status may be restored to accrual status when the collection of the contractual principal and interest is less than 90 days past due. We do not place government mortgage loans on nonaccrual status when the collection of the contractual principal or interest is 90 days or more past due because of the U.S. government guarantee of the loan and the contractual obligations of each related servicer, as more fully discussed in Note 6 – Mortgage Loans Held for Portfolio.

Collateral-dependent Loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral. A loan that is considered collateral-dependent is measured for credit loss on an individual basis based on the fair value of the underlying property less estimated selling costs, with any shortfall recognized as an allowance for credit losses or charged-off.

Charge-Off Policy. A charge-off is recorded if it is estimated that the recorded investment in a loan will not be recovered. The recorded investment in a loan is the par value of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, hedging adjustments, and direct write-downs. We evaluate whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure or notification of a claim against any of the credit enhancements. We charge off the portion of outstanding conventional mortgage loan balances in excess of fair value of the underlying property less estimated selling costs, and adjusted for any available credit-enhancements for loans that are 180 or more days past due, when the borrower has filed for bankruptcy protection and the loan is at least 30 days past due, or when there is evidence of fraud.

Mortgage Loan Modifications. Generally, we only grant mortgage loan modifications to borrowers experiencing financial difficulty. If the terms of the modified loan are at least as favorable to the lender as the terms offered to borrowers with similar collection risks for comparable loans and the modification to the terms of the loan is more than minor, the loan meets the accounting criteria for a new loan. Generally, a modification would not result in a new loan because the modified terms are not as favorable to the lender as terms for comparable loans that would be offered to similar borrowers.

See Note 6 — Mortgage Loans Held for Portfolio for additional details on the allowance methodology.

Derivatives and Hedging Activities

All derivatives are recognized on the statement of condition at fair value and are reported as either derivative assets or derivative liabilities, net of cash collateral and accrued interest received from or pledged to clearing members and/or counterparties. We offset fair-value amounts recognized for derivatives and fair-value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivatives recognized at fair value executed with the same clearing member and/or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability. Derivative assets and derivative liabilities reported on the statement of condition also include net accrued interest. Cash flows associated with derivatives are reflected as cash flows from operating activities in the statement of cash flows unless the derivative meets the criteria to be a financing derivative.

Types of Qualifying and non-Qualifying Hedges. We have the following types of hedges qualifying for hedge accounting treatment (qualifying hedges) and hedges that do not qualify for hedge accounting treatment (non-qualifying hedges):

•a qualifying hedge of the change in fair value of a recognized asset or liability or an unrecognized firm commitment (a fair value hedge);
•a qualifying hedge of a forecasted transaction (a cash-flow hedge); or
•a nonqualifying hedge of an asset or liability (an economic hedge) for asset-liability-management purposes.

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We utilize two derivatives clearing organizations (DCOs), for all cleared derivative transactions, Chicago Mercantile Exchange, Inc. (CME Inc.) and LCH Limited (LCH Ltd.). At both DCOs, variation margin is characterized as daily settlement payments and initial margin is considered collateral.

Accounting for Fair-Value and Cash-Flow Hedges. If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship and an expectation to be highly effective, they qualify for fair-value or cash-flow hedge accounting. For cash-flow hedges, we measure effectiveness using the hypothetical derivative method, which compares the cumulative change in fair value of the actual derivative designated as the hedging instrument to the cumulative change in fair value of a hypothetical derivative having terms that identically match the critical terms of the hedged forecasted transaction.

Derivatives that are used in fair-value hedges are typically executed at the same time as the hedged items, and we designate the hedged item in a qualifying hedging relationship as of the trade date. We then record the changes in fair value of the derivative and the hedged item beginning on the trade date.

The differential between accrual of interest receivable and payable on derivatives designated as a fair-value hedge or as a cash-flow hedge is recognized through adjustments to the interest income or interest expense of the designated hedged investment securities, advances, COs, or other financial instruments. Changes in the fair value of a derivative that is designated and qualifies as a fair-value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk, are recorded in net interest income in the same line as the earnings effect of the hedged item. Changes in the fair value of a derivative that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income, a component of capital, until the hedged transaction affects earnings.

Accounting for Economic Hedges. An economic hedge is defined as a derivative hedging specific or nonspecific assets, liabilities, or firm commitments that does not qualify or was not designated for fair-value or cash-flow hedge accounting, but is an acceptable hedging strategy under our risk-management policy. These economic hedging strategies also comply with FHFA regulatory requirements prohibiting speculative derivative transactions. We recognize only the net interest and the change in fair value of these derivatives in other income (loss) with no offsetting fair-value adjustments for the economically hedged assets, liabilities, or firm commitments.

Discontinuance of Hedge Accounting. We may discontinue hedge accounting prospectively when:

•we determine that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item attributable to the hedged risk (including hedged items such as firm commitments or forecasted transactions);
•the derivative and/or the hedged item expires or is sold, terminated, or exercised;
•it is no longer probable that the forecasted transaction in a cash-flow hedge will occur in the originally expected period or within the following two months;
•a hedged firm commitment in a fair-value hedge no longer meets the definition of a firm commitment; or
•we determine that designating the derivative as a hedging instrument is no longer appropriate.

If fair value hedge accounting is discontinued because we determine that the derivative no longer qualifies as an effective fair-value hedge of an existing hedged item, we either terminate the derivative or continue to carry the derivative on the statement of condition at its fair value and cease to adjust the hedged asset or liability for changes in fair value. We will then begin to amortize the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield method.

If hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, we will continue to carry the derivative on the statement of condition at its fair value, removing from the statement of condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

If cash flow hedge accounting is discontinued because we determine that the derivative no longer qualifies as an effective cash-flow hedge of an existing hedged item, we will continue to carry the derivative on the statement of condition at its fair value and amortize the cumulative other comprehensive income adjustment to earnings when earnings are affected by the existing hedged item.

If it is no longer probable that a forecasted transaction will occur by the end of the originally expected period or within two months thereafter, we immediately recognize in earnings the gain or loss that was in accumulated other comprehensive income.
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Embedded Derivatives. We may issue debt, make advances, or purchase financial instruments in which a derivative is embedded. Upon execution of these transactions, we assess whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the debt, advance, or other financial instrument (the host contract) and whether a separate, nonembedded instrument with the same terms as the embedded instrument would meet the definition of a derivative. When we determine that (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument. If the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current earnings (for example, an investment security classified as trading, as well as hybrid financial instruments) or if we cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract is carried on the statement of condition at fair value and no portion of the contract is designated as a hedging instrument. At December 31, 2023, we had certain advances with embedded features that met the requirement to be separated from the host contract and designated the embedded features as stand-alone derivatives. The value of the embedded derivatives is included in total advances on the statement of condition. See Note 5 — Advances for the fair value of these embedded derivatives.

Premises, Software, Equipment and Leases

We record premises, software, and equipment at cost less accumulated depreciation and amortization and compute depreciation on a straight-line basis over estimated useful lives ranging from three years to 10 years. We amortize leasehold improvements on a straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. We capitalize improvements and major renewals but expense ordinary maintenance and repairs when incurred. We include gains and losses on disposal of premises, software, and equipment in other income (loss) on the statement of operations. The cost of purchased software and certain costs incurred in developing computer software for internal use are capitalized and amortized over future periods.

We lease office space and office equipment to run our business operations. For leases with a term of 12 months or less, we have made an accounting policy election to not recognize lease right-of-use assets and lease liabilities. At December 31, 2024 and 2023, we included in the statement of condition $19.3 million and $20.2 million, respectively, of lease right-of-use assets in other assets as well as $26.5 million and $27.5 million, respectively, of lease liabilities in other liabilities. We have recognized operating lease costs in other operating expenses on the statement of operations of $2.2 million, $3.7 million, and $2.4 million, respectively, for the years ended December 31, 2024, 2023, and 2022.

Consolidated Obligations

We record COs at amortized cost.

Discounts and Premiums. We accrete discounts and amortize premiums on COs to interest expense using the level-yield method over the contractual term to maturity of the CO.

Concessions on COs. We pay concessions to dealers in connection with the issuance of certain COs. The Office of Finance prorates the amounts paid to dealers based upon the percentage of debt issued that we assumed. We record concessions paid on COs as a direct reduction from their carrying amounts, consistent with the presentation of discounts on COs. These dealer concessions are amortized using the level-yield method over the contractual term to maturity of the COs. The amortization of those concessions is included in CO interest expense on the statement of operations.

Off-Balance Sheet Credit Exposures

We evaluate our off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision for credit losses.

Mandatorily Redeemable Capital Stock

We reclassify stock subject to redemption from equity to a liability after a member exercises a written redemption request, gives notice of intent to withdraw from membership, or attains nonmember status by merger or acquisition, charter termination, or other involuntary termination from membership, since the shares meet the definition of a mandatorily redeemable financial
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instrument upon such instances. Member shares meeting this definition are reclassified to a liability at fair value. Dividends declared on mandatorily redeemable capital stock are accrued at the expected dividend rate for Class B stock and reflected as interest expense on the statement of operations. The repayment of these mandatorily redeemable financial instruments is reflected as cash outflows in the financing activities section of the statement of cash flows once settled.

We do not take into consideration our members' right to cancel a redemption request in determining when shares of capital stock should be classified as a liability because such cancellation would be subject to a cancellation fee equal to two percent of the par amount of the shares of Class B stock that is the subject of the redemption notice. If a member cancels its written notice of redemption or notice of withdrawal, we will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock will no longer be classified as interest expense.

Restricted Retained Earnings

The joint capital enhancement agreement, as amended (the Joint Capital Agreement), provides that each FHLBank will, on a quarterly basis, contribute 20 percent of its net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least 1 percent of that FHLBank's average balance of outstanding COs (excluding fair-value adjustments) for the calendar quarter. Restricted retained earnings are not available to pay dividends, and we present them separate from other retained earnings on the statement of condition. Any amount of restricted retained earnings that exceeds 150 percent of the contribution requirement may be reclassified to unrestricted retained earnings. No reclassification from restricted retained earnings to unrestricted retained earnings occurred during 2024.

FHFA Expenses

We fund a portion of the costs of operating the FHFA. The portion of the FHFA's expenses and working capital fund paid by the FHLBanks is allocated among the FHLBanks based on the ratio of each FHLBank's minimum required regulatory capital to the aggregate minimum required regulatory capital of every FHLBank. We must pay an amount equal to one-half of our annual assessment twice each year.

Office of Finance Expenses

Each FHLBank's proportionate share of Office of Finance operating and capital expenditures has been calculated using a formula based upon the following components: (1) two-thirds based upon each FHLBank's share of total COs outstanding and (2) one-third divided equally among the FHLBanks.

Voluntary Housing and Community Investment Expenses

Voluntary AHP contributions are expensed when our board of directors approves the terms of the contribution, the likelihood of award is probable, and the amount is estimable. The amount contributed is subject to the same regulatory requirements as AHP assessments.

Other discretionary housing and community investment initiatives primarily consist of voluntary grants and subsidized advances. Voluntary grants and contributions are recognized as an expense in the period in which the grant or contribution is considered an unconditional promise to give. Subsidized advances are advances that have an interest rate below the customary interest rate for non-subsidized advances with similar terms. See the Advances section above for additional information on subsidized advances.

Assessments

Affordable Housing Program. The FHLBank Act requires us to establish and fund AHP based on positive annual net earnings, providing grants to members to assist in the purchase, construction, or rehabilitation of housing for very low, low-, or moderate-income households. We charge the required funding as well as any discretionary funding for AHP to earnings and establish a liability, except when annual net earnings are zero or negative, in which case there is no requirement to fund AHP. The liability is reduced as awards are distributed to qualifying projects in the form of grants or as interest rate subsidies for AHP subsidized advances that have at interest rates below the customary interest rate for non-subsidized advances. A discount on the AHP advance and charge against the AHP liability is recorded for the present value of the variation in the cash flow caused by the difference in the interest rate between the AHP advance rate and our related cost of funds for comparable maturity funding. The discount on AHP advances is accreted to interest income on advances using the level-yield method over the life of the advance. See Note 10 — Affordable Housing Program and Discretionary Contributions for additional information.

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Cash Flows

In the statement of cash flows, we consider noninterest bearing cash and due from banks as cash and cash equivalents. Federal funds sold and interest-bearing deposits are not treated as cash equivalents for purposes of the statement of cash flows, but are instead treated as short-term investments and are reflected in the investing activities section of the statement of cash flows.

Related-Party Activities

We define related parties as members who owned 10 percent or more of the voting interests of our outstanding capital stock at December 31, 2024. See Note 16 — Transactions with Shareholders for additional information.

Segment Reporting

We engage in business activities to provide funding, liquidity, and services to members, and manage these operations as one operating segment.

Our primary business activities are providing advances to members and housing associates and acquiring residential mortgage loans from members. In addition, we maintain a portfolio of investments. The primary source of funding and liquidity is the issuance of COs in the capital markets and we are capitalized through the purchase of capital stock by members. Our net income is primarily attributable to the difference between the interest income earned on advances, mortgage loans, and investments, and the interest expense paid on COs. We report on an enterprise-wide method of evaluating our financial information.

The chief operating decision maker (CODM) is our president and chief executive officer, who assesses performance and allocation of resources primarily based on net income. This measure is used for benchmarking and budget analysis. Other items, including significant expenses, reported to the CODM include those reported in our financial statements and footnotes.

For the year ended December 31, 2024, we did not have any major customer with revenues in excess of 10 percent of our total revenue, which includes interest income and non-interest income.

Reclassification

Certain amounts in the 2023 and 2022 financial statements have been reclassified to conform to the financial statement presentation for the year ended December 31, 2024.

Note 3 — Cash and Due from Banks

Cash and due from banks includes cash on hand, cash items in the process of collection, compensating balances, and amounts due from correspondent banks and the Federal Reserve Bank of Boston.

Compensating Balances. We maintain collected cash balances with a commercial bank in return for certain services. The related agreement contains no legal restrictions on the withdrawal of funds. The average collected cash balance was $11.6 million and $13.8 million for the years ended December 31, 2024 and 2023, respectively.

Note 4 — Investments

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold

We invest in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide liquidity. These investments are generally transacted with counterparties that have received, or whose guarantors have received, a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO), or the equivalent. At December 31, 2024 and 2023, none of these investments were made to counterparties or, if applicable, guaranteed by entities rated below single-A or the equivalent.

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated daily to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an amount of additional securities as collateral or remit an equivalent amount of cash sufficient to comply with collateral maintenance provisions, generally by the next business day.
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Based upon the collateral held as security and collateral maintenance provisions with our counterparties, we determined that no allowance for credit losses was needed for our securities purchased under agreements to resell at December 31, 2024 and 2023.

Federal funds sold are unsecured loans that are transacted on an overnight term or short-term basis. FHFA regulations include a limit on the amount of unsecured credit we may extend to a counterparty. All investments in interest-bearing deposits and federal funds sold outstanding as of December 31, 2024 and 2023, have been repaid according to the contractual terms. No allowance for credit losses was recorded for these assets at December 31, 2024 and 2023.

Debt Securities

We invest in debt securities, which are classified as either trading, available-for-sale, or held-to-maturity. We are prohibited by FHFA regulations from investing in certain higher-risk securities, such as equity securities and debt instruments that are not investment quality, other than certain investments targeted at low-income persons or communities. We are not required to divest instruments that experience credit deterioration after their purchase.

Trading Securities

Table 4.1 - Trading Securities by Major Security Type
(dollars in thousands)
 December 31, 2024 December 31, 2023
Corporate bonds$1,489 $1,395 

For the years ended December 31, 2024, 2023, and 2022 net gains (losses) on trading securities held at period end were $94 thousand, $(111) thousand, and $65 thousand, respectively. For the year ended December 31, 2022, net losses on trading securities that matured during the year totaled $425 thousand.

We do not participate in speculative trading practices and typically hold these investments for longer periods of time.

Available-for-sale Securities

Table 4.2 - Available-for-Sale Securities by Major Security Type
(dollars in thousands)
December 31, 2024
 Amounts Recorded in Accumulated Other Comprehensive Income
 
Amortized
Cost (1)
Unrealized
Gains		 Unrealized
Losses		Fair
 Value
U.S. Treasury obligations$5,811,806 $1,415 $(5,556)$5,807,665 
State housing-finance-agency obligations (HFA securities)6,645 6 — 6,651 
Supranational institutions340,228 15  (2,891)337,352 
U.S. government-owned corporations235,839 —  (14,070)221,769 
GSE98,280 —  (3,666)94,614 
 6,492,798 1,436  (26,183)6,468,051 
Mortgage-backed securities (MBS)     
U.S. government guaranteed – single-family180,674 283  (1,905)179,052 
U.S. government guaranteed – multifamily509,859 —  (45,036)464,823 
GSE – single-family1,999,159 3,403  (49,409)1,953,153 
GSE – multifamily7,609,663 8,800 (212,634)7,405,829 
 10,299,355 12,486  (308,984)10,002,857 
Total$16,792,153 $13,922  $(335,167)$16,470,908 

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December 31, 2023
  Amounts Recorded in Accumulated Other Comprehensive Income
 
Amortized
Cost (1)
 Unrealized
Gains		 Unrealized
Losses		Fair
 Value
U.S. Treasury obligations$5,684,157 $122 $(19,827)$5,664,452 
HFA securities22,430 — (625)21,805 
Supranational institutions350,282  3  (3,910)346,375 
U.S. government-owned corporations252,585  —  (17,394)235,191 
GSE104,015  —  (4,594)99,421 
 6,413,469  125  (46,350)6,367,244 
MBS      
U.S. government guaranteed – single-family16,854  —  (2,421)14,433 
U.S. government guaranteed – multifamily521,203 — (43,527)477,676 
GSE – single-family954,298  1,665  (51,507)904,456 
GSE – multifamily7,779,173  3,517  (202,754)7,579,936 
 9,271,528  5,182  (300,209)8,976,501 
Total$15,684,997  $5,307  $(346,559)$15,343,745 
_______________________
(1)    Amortized cost of available-for-sale securities includes adjustments made to the cost basis of an investment for accretion, amortization, collection of cash, and fair-value hedge accounting adjustments. Amortized cost excludes accrued interest receivable of $45.2 million and $46.7 million at December 31, 2024 and 2023, respectively.

Table 4.3 - Available-for-Sale Securities in a Continuous Unrealized Loss Position
(dollars in thousands)
December 31, 2024
 Continuous Unrealized Loss Less than 12 MonthsContinuous Unrealized Loss 12 Months or MoreTotal
 Fair
 Value		Unrealized
 Losses		Fair
 Value		Unrealized
 Losses		Fair
 Value		Unrealized
 Losses
U.S. Treasury obligations$464,479 $(140)$3,153,111 $(5,416)$3,617,590 $(5,556)
Supranational institutions— — 325,028 (2,891)325,028 (2,891)
U.S. government-owned corporations— — 221,769 (14,070)221,769 (14,070)
GSE— — 94,614 (3,666)94,614 (3,666)
464,479 (140)3,794,522 (26,043)4,259,001 (26,183)
MBS      
U.S. government guaranteed – single-family— — 12,963 (1,905)12,963 (1,905)
U.S. government guaranteed – multifamily— — 464,823 (45,036)464,823 (45,036)
GSE – single-family627,702 (1,598)510,158 (47,811)1,137,860 (49,409)
GSE – multifamily828,243 (2,737)5,237,505 (209,897)6,065,748 (212,634)
1,455,945 (4,335)6,225,449 (304,649)7,681,394 (308,984)
Total$1,920,424 $(4,475)$10,019,971 $(330,692)$11,940,395 $(335,167)

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December 31, 2023
 Continuous Unrealized Loss Less than 12 MonthsContinuous Unrealized Loss 12 Months or MoreTotal
 Fair
 Value		Unrealized
 Losses		Fair
 Value		Unrealized
 Losses		Fair
 Value		Unrealized
 Losses
U.S. Treasury obligations$1,865,124 $(1,405)$3,319,996 $(18,422)$5,185,120 $(19,827)
HFA securities— — 21,805 (625)21,805 (625)
Supranational institutions82,354 (188)251,452 (3,722)333,806 (3,910)
U.S. government-owned corporations— — 235,191 (17,394)235,191 (17,394)
GSE— — 99,421 (4,594)99,421 (4,594)
 1,947,478 (1,593)3,927,865 (44,757)5,875,343 (46,350)
MBS      
U.S. government guaranteed – single-family— — 14,433 (2,421)14,433 (2,421)
U.S. government guaranteed – multifamily— — 477,676 (43,527)477,676 (43,527)
GSE – single-family55,457 (117)616,857 (51,390)672,314 (51,507)
GSE – multifamily1,238,598 (2,993)5,299,421 (199,761)6,538,019 (202,754)
1,294,055 (3,110)6,408,387 (297,099)7,702,442 (300,209)
Total$3,241,533 $(4,703)$10,336,252 $(341,856)$13,577,785 $(346,559)

Table 4.4 - Available-for-Sale Securities by Contractual Maturity
(dollars in thousands)
 December 31, 2024 December 31, 2023
Year of MaturityAmortized
Cost		 Fair
 Value		 Amortized
Cost		 Fair
 Value
Due in one year or less$1,803,427  $1,804,492  $13,820 $13,210 
Due after one year through five years4,393,367  4,385,160  6,082,462 6,058,571 
Due after five years through 10 years—  —  — — 
Due after 10 years296,004  278,399  317,187 295,463 
 6,492,798  6,468,051  6,413,469 6,367,244 
MBS (1)
10,299,355  10,002,857  9,271,528 8,976,501 
Total$16,792,153  $16,470,908  $15,684,997 $15,343,745 
_______________________
(1)    MBS are not presented by contractual maturity because their expected maturities will likely differ from contractual maturities since borrowers of the underlying loans may have the right to call or prepay obligations with or without call or prepayment fees.

Held-to-Maturity Securities

Table 4.5 - Held-to-Maturity Securities by Major Security Type
(dollars in thousands)
December 31, 2024
 
Amortized Cost(1)
Gross Unrecognized Holding GainsGross Unrecognized Holding LossesFair Value
MBS    
U.S. government guaranteed – single-family$2,738 $13 $— $2,751 
GSE – single-family60,580 435 (569)60,446 
Total$63,318 $448 $(569)$63,197 

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December 31, 2023
 
Amortized Cost(1)
Gross Unrecognized Holding GainsGross Unrecognized Holding LossesFair Value
MBS
U.S. government guaranteed – single-family$3,123 $19 $— $3,142 
GSE – single-family75,782 366 (812)75,336 
Total$78,905 $385 $(812)$78,478 
_______________________
(1)    Amortized cost of held-to-maturity securities includes adjustments made to the cost basis of an investment for accretion, amortization, and collection of cash. Amortized cost excludes accrued interest receivable of $359 thousand and $399 thousand at December 31, 2024 and 2023, respectively.

Sales of Available-for-Sale Securities and Held-to-Maturity Securities

During the years ended December 31, 2024 and December 31, 2022, we sold available-for-sale securities with an amortized cost of $72.9 million and $142.7 million and realized a net gain of $52 thousand and a net loss of $2 thousand, respectively.

During the year ended December 31, 2022, we sold held-to-maturity MBS with an amortized cost of $10.4 million and a realized gain of $20 thousand that had less than 15 percent of the acquired par value remaining at the time of the sale. Such sales are treated as maturities for the purposes of security classification. These sales do not impact our ability and intent to hold the remaining investments classified as held-to-maturity through their stated maturity dates.

Allowance for Credit Losses on Available-for-Sale Securities and Held-to-Maturity Securities

We evaluate available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. Our available-for-sale and held-to-maturity securities are principally debt securities of the U.S. Treasury, GSEs, U.S. government-owned corporations, supranational institutions, state housing finance agency obligations, and MBS issued by Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae) that are backed by single-family or multifamily mortgage loans. We only purchase investment-grade securities. At December 31, 2024 and 2023, all available-for-sale securities and held-to-maturity securities were rated double-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security.

We evaluate individual available-for-sale securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e. in an unrealized loss position). At December 31, 2024 and 2023, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as we expect to recover the entire amortized cost basis on these available-for-sale investment securities and we neither intend to sell these securities nor do we consider it more likely than not that we will be required to sell these securities before the anticipated recovery of each security's remaining amortized cost basis. Further, we have not experienced any material payment defaults on the instruments.

We evaluate held-to-maturity securities for impairment on a collective or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. We have not experienced and do not anticipate any payment defaults on these securities.

Based on our assessment of the credit worthiness of the issuers or guarantors, no allowance for credit losses was recorded on available-for-sale securities or held-to-maturity securities at December 31, 2024 and 2023.

Note 5 — Advances

General Terms. We offer a wide range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics, and optionality. Advances have maturities ranging from one day to 30 years or longer with the approval of our credit committee. At both December 31, 2024 and 2023, we had advances outstanding with interest rates ranging from 0.00 percent to 6.23 percent.

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Table 5.1 - Advances Outstanding by Year of Contractual Maturity
(dollars in thousands)
 December 31, 2024December 31, 2023
AmountWeighted
Average
Rate		AmountWeighted
Average
Rate
Overdrawn demand-deposit accounts$4,709 4.73 %$5,909 5.76 %
Due in one year or less30,382,356 4.54 21,829,742 5.25 
Due after one year through two years4,110,784 4.08 9,069,939 4.53 
Due after two years through three years3,216,983 4.22 3,306,934 4.02 
Due after three years through four years3,551,070 3.59 2,295,317 4.37 
Due after four years through five years2,288,069 3.80 3,905,361 3.52 
Due after five years through fifteen years1,694,930 3.40 1,601,794 3.26 
Thereafter43,325 1.85 51,660 1.72 
Total par value45,292,226 4.32 %42,066,656 4.71 %
Discounts(38,695) (37,289) 
Fair value of bifurcated derivatives (1)
— 790 
Fair value hedging adjustments(90,356) (71,574) 
Total (2)
$45,163,175  $41,958,583  
_________________________
(1)    At December 31, 2023, we had certain advances with embedded features that met the requirements to be separated from the host contract and designated those embedded features as stand-alone derivatives.
(2)    Excludes accrued interest receivable of $188.6 million and $115.0 million at December 31, 2024 and 2023, respectively.

We offer advances to members and eligible nonmembers that provide the borrower the right, based upon predetermined option exercise dates, to repay the advance prior to maturity without incurring prepayment or termination fees (callable advances). We also offer certain floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees. Other advances may only be prepaid by paying a fee (prepayment fee) that makes us financially indifferent to the prepayment of the advance.

Table 5.2 - Advances Outstanding by Year of Contractual Maturity or Next Call Date
(dollars in thousands)
December 31, 2024December 31, 2023
Overdrawn demand-deposit accounts$4,709 $5,909 
Due in one year or less31,664,678 26,546,662 
Due after one year through two years3,739,220 5,272,439 
Due after two years through three years2,602,744 2,989,434 
Due after three years through four years3,478,578 1,711,697 
Due after four years through five years2,158,154 3,887,061 
Due after five years through fifteen years1,600,818 1,601,794 
Thereafter43,325 51,660 
Total par value$45,292,226 $42,066,656 

We currently hold putable advances that provide us with the right to require repayment prior to maturity of the advance (and thereby extinguish the advance) on predetermined exercise dates (put dates). Generally, we would exercise the put options when interest rates increase relative to contractual rates.

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Table 5.3 - Advances Outstanding by Year of Contractual Maturity or Next Put Date
(dollars in thousands)
December 31, 2024December 31, 2023
Overdrawn demand-deposit accounts$4,709 $5,909 
Due in one year or less37,096,726 27,338,812 
Due after one year through two years2,686,484 8,472,939 
Due after two years through three years1,886,413 1,996,364 
Due after three years through four years2,175,570 1,447,317 
Due after four years through five years579,569 1,955,361 
Due after five years through fifteen years819,430 798,294 
Thereafter43,325 51,660 
Total par value$45,292,226 $42,066,656 

Table 5.4 - Advances by Current Interest Rate Terms
(dollars in thousands)
December 31, 2024 December 31, 2023
Fixed-rate
Due in one year or less$19,621,656 $20,896,467 
Due after one year13,585,791 15,434,085 
Total fixed-rate33,207,447 36,330,552 
Variable-rate
Due in one year or less10,765,409 939,184 
Due after one year1,319,370 4,796,920 
Total variable-rate12,084,779 5,736,104 
Total par value$45,292,226  $42,066,656 

Credit Risk Exposure and Security Terms. Our advances are primarily made to our members, including commercial banks, insurance companies, savings institutions, and credit unions. We manage our credit exposure to secured member credit products through an integrated approach that generally includes credit limits for borrowers based on ongoing reviews of each borrower's financial condition, the amount and value of available collateral, and collateral and lending policies that are intended to limit risk of loss while balancing borrowers' needs for a reliable source of funding.

In addition, we lend to eligible borrowers in accordance with federal law and FHFA regulations. Specifically, we are required to obtain sufficient collateral to fully secure credit products up to the counterparty’s total outstanding credit obligations plus unused credit lines. Collateral eligible to secure new or renewed advances includes:

•fully disbursed, first-mortgage loans on improved residential property (provided that the borrower is not in arrears by two or more payments), or securities representing a whole interest in such mortgages;
•securities issued, insured, or guaranteed by the U.S. government or any agency thereof (including without limitation, MBS issued or guaranteed by Freddie Mac, Fannie Mae, and Ginnie Mae);
•cash or deposits in a collateral account with us; and
•other real-estate-related collateral acceptable to us if such collateral has a readily ascertainable value and we can perfect our security interest in the collateral.

In addition, in the case of any community financial institution, as defined in accordance with the FHLBank Act, we may accept as collateral secured loans for small-business and agriculture, or securities representing a whole interest in such secured loans.

Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral pledged to secure each borrower's credit products is calculated by applying collateral discounts, or haircuts, to the market value or par
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value of the collateral, as applicable. We require all borrowers that pledge securities collateral to place physical possession of such securities collateral with our safekeeping agent, the borrower's approved designated agent, or the borrower's securities corporation, subject to a control agreement giving us appropriate control over such collateral. In addition, community financial institutions are eligible to use expanded statutory collateral provisions for small-business and agriculture loans. The Bank has a lien on and holds the stock of a member in the Bank as further collateral security for all indebtedness of the member to the Bank. Collateral arrangements may vary depending upon borrower credit quality, financial condition, performance, borrowing capacity, the type of member, collateral availability, and our overall credit exposure to the borrower. We can call for additional or substitute collateral to further safeguard our security interest. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications based on the risk profile of the borrower and other considerations. We believe that these policies effectively manage our credit risk from advances.

We either allow the borrower to retain possession of loan collateral pledged to us while agreeing to hold such collateral for our benefit or require the borrower to specifically assign or place physical possession of such loan collateral with us or a third-party custodian under a tri-party collateral control agreement that we approve.

We are provided an additional safeguard for our security interests by Section 10(e) of the FHLBank Act, which generally affords any security interest granted by a borrower to the Bank priority over the claims and rights of any other party. The exceptions to this prioritization are limited to claims that would be entitled to priority under otherwise applicable law and are held by bona fide purchasers for value or by secured parties with higher priority perfected security interests. The priority granted to our security interests under Section 10(e) of the FHLBank Act may not apply when lending to insurance company members due to the anti-preemption provision contained in the McCarran-Ferguson Act, which provides that federal law does not preempt state insurance law unless the federal law expressly regulates the business of insurance. Thus, if state law conflicts with Section 10(e) of the FHLBank Act, the protection afforded by this provision may not be available to us. However, we perfect our security interests in the collateral pledged by our members, including insurance company members, by filing Uniform Commercial Code (UCC)-1 financing statements, taking possession or control of such collateral, or taking other appropriate steps.

The Bank’s decision to lend is based principally on our analysis of each borrower’s financial condition and outlook, though we consider payment status as well as the types and level of collateral as additional factors. At December 31, 2024, and December 31, 2023, we had rights to collateral, on a borrower-by-borrower basis, with an estimated value greater than our outstanding extensions of credit.

We continue to evaluate and make changes to our collateral guidelines based on market conditions. At December 31, 2024 and December 31, 2023, none of our advances were past due, on nonaccrual status, or considered impaired. In addition, there were no modifications for borrowers experiencing financial difficulties related to advances during the years ended December 31, 2024 and 2023.

Based upon the collateral held as security, our credit extension and collateral policies, management's credit analysis, and the repayment history on advances, we have not recorded any allowance for credit losses on our advances at December 31, 2024 and December 31, 2023.

Prepayment Fees. We record prepayment fees received from borrowers on certain prepaid advances net of any associated basis adjustments related to hedging activities on those advances and net of deferred prepayment fees on advance prepayments considered to be loan modifications. Additionally, for certain advances products, the prepayment-fee provisions of the advance agreement could result in either a payment from the borrower or to the borrower when such an advance is prepaid, based upon market conditions at the time of prepayment (referred to as a symmetrical prepayment fee). Advances with a symmetrical prepayment fee provision are hedged with derivatives containing offsetting terms, so that we are financially indifferent to the borrower's decision to prepay such advances. The net amount of prepayment fees is reflected as interest income in the statement of operations.

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Table 5.5 - Advances Prepayment Fees
(dollars in thousands)
For the Year Ended December 31,
 202420232022
Prepayment fees received from borrowers$435 $135 $1,726 
Hedging fair-value adjustments on prepaid advances489 733 1,280 
Net discounts associated with prepaid advances— — 303 
Advance prepayment fees recognized in income, net$924 $868 $3,309 

Note 6 — Mortgage Loans Held for Portfolio

We invest in mortgage loans through the MPF Program. These mortgage loans are either guaranteed or insured by federal agencies, as is the case with government mortgage loans, or are credit-enhanced, directly or indirectly, by the related entity that sold the loan (a participating financial institution), as is the case with conventional mortgage loans. All such investments are held for portfolio. The mortgage loans are typically originated and credit-enhanced by the related participating financial institution. The majority of these loans are serviced by the originating institution or an affiliate thereof. However, a portion of these loans are sold servicing-released by the participating financial institution and serviced by a third-party servicer.

Table 6.1 - Mortgage Loans Held for Portfolio
(dollars in thousands)
 December 31, 2024December 31, 2023
Real estate  
Fixed-rate 15-year single-family mortgages
$158,349 $192,104 
Fixed-rate 20- and 30-year single-family mortgages
3,485,188 2,831,319 
Premiums
44,801 39,990 
Discounts
(5,921)(2,222)
Deferred derivative (losses) gains, net(1,067)140 
Total mortgage loans held for portfolio(1)
3,681,350 3,061,331 
Less: allowance for credit losses(2,200)(2,000)
Total mortgage loans, net of allowance for credit losses$3,679,150 $3,059,331 
________________________
(1)    Excludes accrued interest receivable of $23.8 million and $17.8 million at December 31, 2024, and December 31, 2023, respectively.

Table 6.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type
(dollars in thousands)
 December 31, 2024December 31, 2023
Conventional mortgage loans$3,509,254  $2,877,109 
Government mortgage loans134,283  146,314 
Total par value$3,643,537  $3,023,423 

Credit-Enhancements. Our allowance for credit losses factors in the credit-enhancements associated with conventional mortgage loans under the MPF Program. These credit-enhancements apply after the homeowner's equity is exhausted and can include primary and/or supplemental mortgage insurance or other kinds of credit-enhancement. The credit risk analysis of our conventional loans is performed at the individual master commitment level to determine the credit-enhancements available to recover losses on loans under each individual master commitment. The credit-enhancement amounts estimated to protect us against credit losses are determined through the use of a model. Any incurred losses that would be recovered from the credit-enhancements are not reserved as part of our allowance for loan losses. In such cases, a receivable is generally established to reflect the expected recovery from credit-enhancement arrangements.

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Assets delivered to us must be credit enhanced to an equivalent of a single-A-minus rated MBS. We share the risk of credit losses on our investments in mortgage loans with the related participating financial institution by structuring potential losses on these investments into layers with respect to each master commitment. We analyze the risk characteristics of our mortgage loans using a third-party model to determine the credit-enhancement amount at the time of purchase. This credit-enhancement amount is broken into two parts: the Bank's first-loss account and the participating financial institution's credit-enhancement obligation, which may be calculated based on the risk analysis to equal the difference between the amounts needed for the master commitment to have a rating equivalent to a single-A-minus rated MBS and our initial first-loss account exposure.

The first-loss account represents the first layer or portion of credit losses that we absorb with respect to our investments in mortgage loans after considering the borrower's equity and primary mortgage insurance. The participating financial institution is required to cover the next layer of losses up to an agreed-upon credit-enhancement obligation amount, which may consist of a direct liability of the participating financial institution to pay credit losses up to a specified amount, a contractual obligation of a participating financial institution to provide supplemental mortgage insurance, or a combination of both. We absorb any remaining unallocated losses.

Credit and special hazard losses that are not covered by the liquidation value of the real property or primary mortgage insurance are first charged to us, with a corresponding reduction of the first-loss account for that master commitment up to the amount in the first-loss account at that time. Over time, the first-loss account may cover the credit losses on a master commitment, although excessive losses might not be so covered. In that case, the excess losses would be charged to the participating financial institution's credit-enhancement amount, then to us after the participating financial institution's credit-enhancement amount has been exhausted.

For loans in which we buy or sell participations from or to other FHLBanks that participate in the MPF Program (MPF Banks), the amount of the first-loss account remaining to absorb losses for loans that we own is partly dependent on the percentage of our participation in such loans. Assuming losses occur on a proportional basis between loans that we own and loans owned by other MPF Banks, at December 31, 2024 and 2023, the amount of first-loss account remaining for losses allocable to us was $36.8 million and $33.5 million, respectively.

Participating financial institutions are paid a credit-enhancement fee for assuming credit risk and in some instances all or a portion of the credit-enhancement fee may be performance based. For certain MPF products, our losses incurred under the first-loss account can be mitigated by withholding future performance-based credit-enhancement fees that would otherwise be payable to the participating financial institutions. We record credit-enhancement fees paid to participating financial institutions as a reduction to mortgage-loan-interest income.

Withheld performance-based credit-enhancement fees can mitigate losses from our investments in mortgage loans and therefore we consider our expectations for each master commitment for such withheld fees in determining the allowance for loan losses. More specifically, we determine the amount of credit-enhancement fees available to mitigate losses as follows: accrued credit-enhancement fees to be paid to participating financial institutions; plus projected credit-enhancement fees to be paid to the participating financial institutions using the weighted average life of the loans within each relevant master commitment; minus any losses incurred or expected to be incurred.

Payment Status of Mortgage Loans. Payment status is a key credit quality indicator for conventional mortgage loans and allows us to monitor borrower performance. A past due loan is one for which the borrower has failed to make a full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. Tables 6.3 and 6.4 present the payment status for conventional mortgage loans and other delinquency statistics for all mortgage loans at December 31, 2024 and 2023.

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Table 6.3 - Credit Quality Indicator for Conventional Mortgage Loans
(dollars in thousands)
December 31, 2024
Year of Origination
Payment Status at Amortized Cost(1)
Prior to 20202020 to 2024Total
Past due 30-59 days delinquent$18,396 $6,605 $25,001 
Past due 60-89 days delinquent4,808 1,851 6,659 
Past due 90 days or more delinquent5,419 692 6,111 
Total past due28,623 9,148 37,771 
Total current loans1,279,577 2,227,402 3,506,979 
Total conventional mortgage loans$1,308,200 $2,236,550 $3,544,750 
December 31, 2023
Year of Origination
Payment Status at Amortized Cost(1)
Prior to 20192019 to 2023Total
Past due 30-59 days delinquent$9,392 $5,630 $15,022 
Past due 60-89 days delinquent3,068 1,694 4,762 
Past due 90 days or more delinquent6,841 889 7,730 
Total past due19,301 8,213 27,514 
Total current loans1,169,734 1,715,134 2,884,868 
Total conventional mortgage loans$1,189,035 $1,723,347 $2,912,382 
_________________________
(1)    Amortized cost excludes accrued interest receivable.

Table 6.4 - Other Delinquency Statistics of Mortgage Loans
(dollars in thousands)
December 31, 2024
Amortized Cost in Conventional Mortgage Loans Amortized Cost in Government Mortgage LoansTotal
In process of foreclosure (1)
$1,144 $771 $1,915 
Serious delinquency rate (2)
0.17 %1.51 %0.22 %
Past due 90 days or more still accruing interest$— $2,060 $2,060 
Loans on nonaccrual status (3)
$6,111 $— $6,111 
December 31, 2023
Amortized Cost in Conventional Mortgage LoansAmortized Cost in Government Mortgage LoansTotal
In process of foreclosure (1)
$1,742 $623 $2,365 
Serious delinquency rate (2)
0.27 %0.94 %0.30 %
Past due 90 days or more still accruing interest$— $1,356 $1,356 
Loans on nonaccrual status (3)
$7,913 $— $7,913 
_______________________
(1)    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu of foreclosure has been reported.
(2)    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the amortized cost of the total loan portfolio class.
(3)    As of December 31, 2024 and 2023, $3.2 million and $4.3 million, respectively, of conventional mortgage loans on nonaccrual status did not have an associated allowance for credit losses because either these loans were charged off or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.

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Allowance for Credit Losses for Mortgage Loans.

Conventional Mortgage Loans. Conventional mortgage loans are evaluated collectively when similar risk characteristics exist. Conventional mortgage loans that do not share risk characteristics with other mortgage loans are evaluated for expected credit losses on an individual basis. We determine our allowance for credit losses on conventional mortgage loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. We use a discounted cash flow model to project our expected losses. We use a third-party model to project cash flows to estimate the expected credit losses over the life of the loans. The model relies on several inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior. We incorporate associated credit enhancements and expected recoveries, if any, to determine our estimate of expected credit losses.

Certain conventional mortgage loans may be evaluated for credit losses by using the practical expedient for collateral dependent assets. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be made substantially through the sale of the underlying collateral. We estimate the fair value of this collateral by using a third-party property valuation model. The expected credit loss of a collateral dependent conventional mortgage loan is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. We reserve for these estimated losses or record a direct charge-off of the loan balance if certain triggering criteria are met.

Table 6.5 presents a roll forward of the allowance for credit losses on conventional mortgage loans for the years ended December 31, 2024, 2023, and 2022.

Table 6.5 - Allowance for Credit Losses on Conventional Mortgage Loans
(dollars in thousands)
For the Year Ended December 31,
202420232022
Allowance for credit losses (1)
Balance, beginning of period$2,000 $1,900 $1,700 
Net recoveries4 23 29 
Provision for credit losses196 77 171 
Balance, end of period$2,200 $2,000 $1,900 
_________________________
(1)    These amounts exclude government mortgage loans because we make no allowance for credit losses based on our investments in government mortgage loans, as discussed below under — Government Mortgage Loans Held for Portfolio.

Government Mortgage Loans Held for Portfolio. We invest in government mortgage loans secured by one- to four-family residential properties. Government mortgage loans are mortgage loans insured or guaranteed by the Federal Housing Administration (the FHA), the U.S. Department of Veterans Affairs (the VA), the Rural Housing Service of the U.S. Department of Agriculture (RHS), or the U.S. Department of Housing and Urban Development (HUD).

Any losses incurred on these loans that are not recovered from the insurer or guarantor are absorbed by the related servicer. Therefore, we only have credit risk for these loans if the servicer fails to pay for losses not covered by insurance or guarantees, but in such instances, we will have recourse against the servicer for such failure. Due to government guarantees or insurance on our government loans, there is no allowance for credit losses for the government mortgage loan portfolio as of December 31, 2024 and 2023. Additionally, government mortgage loans are not placed on nonaccrual status due to the government guarantee or insurance on these loans and the contractual obligation of the loan servicers to repurchase their related loans when certain criteria are met.

Note 7 — Derivatives and Hedging Activities

Nature of Business Activity

We are exposed to interest-rate risk primarily from the effects of interest-rate changes on interest-earning assets and interest-bearing liabilities that finance these assets. The goal of our interest-rate risk-management strategy is to manage interest-rate risk within appropriate limits. As part of our effort to mitigate the risk of loss, we have established policies and procedures,
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including guidelines on the amount of exposure to interest-rate changes we will accept. In addition, we monitor the risk to our interest income, net interest margin, and average maturity of interest-earning assets and interest-bearing liabilities.

Consistent with FHFA regulations, we enter into derivatives to manage the interest-rate-risk exposures inherent in otherwise unhedged assets and liabilities and achieve our risk-management objectives. FHFA regulation prohibits us from the speculative use of these derivative instruments. The use of derivatives is an integral part of our financial and risk management strategy. We may enter into derivatives that do not qualify for hedge accounting provided that we document a non-speculative use.

We reevaluate our hedging strategies periodically and may change the hedging techniques we use or may adopt new strategies. The most common ways in which we use derivatives are to:

•effectively change the coupon repricing characteristics of assets and liabilities from fixed-rate to floating-rate;
•hedge the mark-to-market sensitivity of existing assets or liabilities;
•offset or neutralize embedded options in assets and liabilities; and
•hedge the potential yield variability of anticipated asset or liability transactions.

Application of Derivatives

We formally document at inception all relationships between derivatives designated as hedging instruments and hedged items, as well as our risk-management objectives and strategies for undertaking various hedge transactions and our method of assessing hedge effectiveness for all derivatives designated in an accounting hedge relationship. This process includes linking all derivatives that are designated as fair-value or cash-flow hedges to specific assets or liabilities on the statement of condition, firm commitments, or forecasted transactions.

We may use derivatives to adjust the effective maturity, repricing frequency, or option characteristics of our financial instruments, including our advances products, investments, and COs to achieve risk-management objectives. We have the following types of hedges qualifying for hedge accounting treatment (qualifying hedges) and hedges that do not qualify for hedge accounting treatment (non-qualifying hedges):

•a qualifying fair-value hedge of a non-derivative financial instrument or a cash-flow hedge of a forecasted transaction; and
•a non-qualifying economic hedge in general asset-liability management where derivatives serve a documented risk-mitigation purpose but do not qualify for hedge accounting. These hedges are primarily used to manage certain mismatches between the coupon features of our assets and liabilities.

We transact all derivatives with counterparties who are major banks or securities firms, and in a few instances, with their affiliates with unconditional guarantees provided by the respective major bank or securities firm. Some of these derivative counterparties and their affiliates buy, sell, and distribute COs. Derivative transactions may be either over-the-counter with a counterparty (uncleared derivatives) or cleared through a futures commission merchant (clearing member) with a DCO as the counterparty (cleared derivatives).

We are not a derivatives dealer and do not trade derivatives for short-term profit.

Types of Derivatives

We primarily use the following derivatives instruments to reduce funding costs and/or to manage our interest-rate risks:

•Interest-Rate Swaps. An interest-rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be exchanged and the manner in which the cash flows will be calculated. One of the simplest forms of an interest-rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional amount at a predetermined fixed rate for a stated period of time to the counterparty. In return for this promise, this party receives cash flows equivalent to the interest on the same notional amount at a variable-rate index for the same period of time from the counterparty. The variable-rate indices on our outstanding derivative transactions are either the overnight-index swap rate based on the federal funds effective rate (Federal Funds-OIS), or the overnight-index swap rate based on the Secured Overnight Financing Rate (SOFR-OIS).
•Optional Termination Interest-Rate Swaps. In an optional termination interest-rate swap, one counterparty has the right, but not the obligation, to terminate the interest-rate swap prior to its stated maturity date. We use optional termination interest-rate swaps to hedge callable CO bonds and putable advances. In most cases, we own an option to terminate the hedged
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item, that is, redeem a callable bond or demand repayment of a putable advance on specified dates, and the counterparty to the optional termination interest-rate swap owns the option to terminate the interest-rate swap on those same dates.
•Forward-Start Interest-Rate Swaps. A forward-start interest-rate swap is an interest-rate swap (as described above) with a deferred effective date. We designate forward-start interest-rate swaps as cash-flow hedges of expected debt issuances.
•Interest-Rate Cap and Floor Agreements. In an interest-rate cap agreement, a cash flow is generated if the price or rate of an underlying variable rises above a certain threshold or cap price. In an interest-rate floor agreement, a cash flow is generated if the price or rate of an underlying variable falls below a certain threshold or floor price. These agreements are intended to serve as protection against the interest rate on a variable-rate asset or liability falling below or rising above a certain level.

Types of Assets and Liabilities Hedged

Investments. We use derivatives to manage the interest-rate and prepayment risk associated with certain investment securities that are classified either as available-for-sale or as trading securities.

We may also manage the risk arising from changing market prices or cash flows of certain investment securities classified as trading securities by entering into economic hedges that offset the changes in fair value or cash flows of the securities. These economic hedges are not specifically designated as hedges of individual assets, but rather are collectively managed to provide an offset to the changes in the fair values of the assets. The market-value changes of trading securities are included in net unrealized losses on trading securities in the statement of operations, while the changes in fair value of the associated derivatives are included in other income as net losses on derivatives.

Advances. We offer a wide range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics and optionality. We may use interest-rate swaps to manage the repricing and/or options characteristics of advances to more closely match the characteristics of our funding liabilities. Typically, we hedge the fair value of fixed-rate advances with interest-rate swaps where we pay a fixed-rate coupon and receive a variable-rate coupon, effectively converting the advance to a floating-rate advance. We also hedge the fair value of certain floating-rate advances that contain either an interest-rate cap or floor, or both a cap and a floor, with a derivative containing an offsetting cap and/or floor.

With each issuance of a putable advance, we effectively purchase from the borrower an embedded put option that enables us to terminate a fixed-rate advance on predetermined put dates, and offer, subject to certain conditions, replacement funding at then-current advances rates. We may hedge a putable advance by entering into a derivative that is cancelable by the derivative counterparty, where we pay a fixed-rate coupon and receive a variable-rate coupon. This type of hedge is treated as a fair-value hedge. The swap counterparty would normally exercise its option to cancel the derivative at par on any defined exercise date if interest rates had risen, and at that time, we could, at our option, require immediate repayment of the advance.

Additionally, the borrower's option to prepay an advance can create interest-rate risk. When a borrower prepays an advance, we could suffer lower future income if the principal portion of the prepaid advance were invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, we generally charge a prepayment fee that makes us financially indifferent to a borrower's decision to prepay an advance. If the advance is hedged with a derivative instrument, the prepayment fee will generally offset the cost of terminating the designated hedge. When we offer advances that a borrower may prepay without a prepayment fee (other than floating-rate advances that may be prepaid on a floating-rate reset date without a prepayment fee), we usually finance such advances with callable debt or with an interest-rate swap cancellable by us.

COs. We may enter into derivatives to hedge (or partially hedge, depending on the risk strategy) the interest-rate risk associated with our specific debt issuances, including using derivatives to change the effective interest-rate sensitivity of debt to better match the characteristics of funded assets. We endeavor to manage the risk arising from changing market prices and volatility of a CO by matching the cash inflow on the derivative with the cash outflow on the CO.

As an example of such a hedging strategy, when fixed-rate COs are issued, we may simultaneously enter into a matching derivative in which we receive a fixed-interest cash flows designed to mirror in timing and amount the interest cash outflows we pay on the CO. At the same time, we may pay variable cash flows that closely match the interest payments we receive on short-term or variable-rate assets. In some cases, the hedged CO may have a nonstatic coupon that is subject to fair-value risk and that is matched by the receivable coupon on the hedging interest-rate swap. These transactions are treated as fair-value hedges.

In a typical cash-flow hedge of anticipated CO issuance, we may enter into interest-rate swaps to hedge the cost of anticipated future issuance of fixed-rate CO bonds against potential rising interest rates. The interest-rate swap is terminated upon issuance
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of the fixed-rate CO bond. Changes in fair value of the hedging derivative, to the extent that the hedge is effective, will be recorded in accumulated other comprehensive income and reclassified into earnings in the period or periods during which the cash flows of the fixed-rate CO bond affect earnings (beginning upon issuance and continuing over the life of the CO bond).

Firm Commitments. Mortgage loan purchase commitments are considered derivatives. When the mortgage loan purchase commitment derivative settles, the current market value of the commitment is included in the basis of the mortgage loan. The basis adjustments on the resulting performing loans are then amortized into net interest income over the life of the loans.

We may also hedge a firm commitment for a forward-starting CO bond through the use of an interest-rate swap. In this case, the interest-rate swap functions as the hedging instrument for both the firm commitment and the subsequent CO bond and is treated as a fair value hedge. The fair-value change associated with the firm commitment is recorded as a basis adjustment of the CO bond at the time the commitment is terminated and the CO bond is issued. The basis adjustment is then amortized into interest expense over the life of the CO bond.

Financial Statement Impact and Additional Financial Information. The notional amount of derivatives is a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives reflects our involvement in the various classes of financial instruments and represents neither the actual amounts exchanged nor our overall exposure to credit and market risk; the overall risk is much smaller. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the tenor of the derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.

Table 7.1 - Fair Value of Derivative Instruments
(dollars in thousands)
December 31, 2024December 31, 2023
 Notional
Amount of
Derivatives		Derivative
Assets		Derivative
Liabilities		Notional
Amount of
Derivatives		Derivative
Assets		Derivative
Liabilities
Derivatives designated as hedging instruments   
Interest-rate swaps$46,232,807 $59,871 $(651,429)$51,587,480 $77,093 $(1,009,217)
Forward-start interest-rate swaps741,000 224 — 1,391,000 254 (170)
Total derivatives designated as hedging instruments46,973,807 60,095 (651,429)52,978,480 77,347 (1,009,387)
Derivatives not designated as hedging instruments
Interest-rate swaps2,987,274 — (32)90,000 — (729)
Mortgage-delivery commitments (1)
32,729 8 (108)29,995 290 — 
Total derivatives not designated as hedging instruments3,020,003 8 (140)119,995 290 (729)
Total notional amount of derivatives$49,993,810   $53,098,475   
Total derivatives before netting and collateral adjustments 60,103 (651,569)77,637 (1,010,116)
Netting adjustments and cash collateral, including related accrued interest (2)
 241,770 646,823 305,436 1,007,099 
Derivative assets and derivative liabilities $301,873 $(4,746)$383,073 $(3,017)
_______________________
(1)    Mortgage-delivery commitments are classified as derivatives with changes in fair value recorded in other income.
(2)    Amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions with the same counterparty. Cash collateral posted, including accrued interest, was $898.0 million and $1.3 billion at December 31, 2024 and 2023, respectively. The change in cash collateral posted is included in the net change in interest-bearing deposits in the statement of cash flows. Cash collateral received, including accrued interest, was $9.4 million and $3.8 million at December 31, 2024 and 2023.

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Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair-value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. For designated cash-flow hedges, the entire change in the fair value of the hedging instrument (assuming it is included in the assessment of hedge effectiveness) is reported in other comprehensive income until the hedged transaction affects earnings. At that time, this amount is reclassified from other comprehensive income and recorded in net interest income in the same line as the earnings effect of the hedged item.

Table 7.2 presents the net gains (losses) on qualifying fair-value hedging relationships. Gains (losses) on derivatives include unrealized changes in fair value as well as net interest settlements.

Table 7.2 - Net Gains (Losses) on Fair Value Hedging Relationships
(dollars in thousands)
For the Year Ended December 31, 2024
AdvancesAvailable-for-sale SecuritiesCO Bonds
Total interest income (expense) presented on the statements of operations$2,141,419 $936,312 $(2,159,454)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$22,499 $(63,501)$305,523 
Hedged items
(20,258)68,710 (307,071)
Net changes in fair value before price alignment interest2,241 5,209 (1,548)
Price alignment interest(1)
(5,535)(48,771)1,482 
Net interest settlements on derivatives(2)(3)
211,453 465,397 (580,642)
Net gains (losses) on qualifying hedging relationships208,159 421,835 (580,708)
Amortization/accretion of discontinued hedging relationships(880)2,035 6,430 
Net gains (losses) on derivatives and hedging activities recorded in net interest income$207,279 $423,870 $(574,278)

For the Year Ended December 31, 2023
AdvancesAvailable-for-sale SecuritiesCO Bonds
Total interest income (expense) presented on the statements of operations$2,112,864 $793,846 $(1,837,365)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$(126,844)$(314,934)$490,730 
Hedged items
123,385 303,057 (489,360)
Net changes in fair value before price alignment interest(3,459)(11,877)1,370 
Price alignment interest(1)
(8,267)(51,573)1,505 
Net interest settlements on derivatives(2)(3)
181,022 465,478 (639,270)
Net gains (losses) on qualifying hedging relationships169,296 402,028 (636,395)
Amortization/accretion of discontinued hedging relationships(1,701)— (2,100)
Net gains (losses) on derivatives and hedging activities recorded in net interest income$167,595 $402,028 $(638,495)
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For the Year Ended December 31, 2022
AdvancesAvailable-for-sale SecuritiesCO Bonds
Total interest income (expense) presented on the statements of operations$631,838 $354,512 $(591,546)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$209,234 $1,438,662 $(1,206,071)
Hedged items
(206,017)(1,397,528)1,207,056 
Net changes in fair value before price alignment interest3,217 41,134 985 
Price alignment interest(1)
(2,285)(12,540)391 
Net interest settlements on derivatives(2)(3)
7,704 33,981 (114,582)
Net gains (losses) on qualifying hedging relationships8,636 62,575 (113,206)
Amortization/accretion of discontinued hedging relationships(990)— 2,045 
Net gains (losses) on derivatives and hedging activities recorded in net interest income$7,646 $62,575 $(111,161)
_______________________
(1)    Relates to derivatives for which variation margin payments are characterized as daily settled contracts.
(2)    Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.
(3)    Excludes the interest income/expense of the respective hedged items recorded in net interest income.

Table 7.3 presents the net gains (losses) on qualifying cash flow hedging relationships.

Table 7.3 - Net (Losses) Gains on Cash Flow Hedging Relationships
(dollars in thousands)
For the Year Ended December 31,
 202420232022
Forward-start interest rate swaps - CO Bonds
Gains (losses) reclassified from accumulated other comprehensive loss into interest expense$2,280 $(4,422)$(5,539)
Gains (losses) recognized in other comprehensive income20,842 (940)63,235 

For the years ended December 31, 2024 and 2023, there were no reclassifications from accumulated other comprehensive income into earnings as a result of the discontinuance of cash-flow hedges because the original forecasted transactions were not expected to occur by the end of the originally specified period or within a two-month period thereafter. As of December 31, 2024, the maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted transactions is six years.

As of December 31, 2024, the amount of deferred net losses on derivatives accumulated in other comprehensive income related to cash flow hedges expected to be reclassified to earnings during the next 12 months is $11.7 million.

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Table 7.4 - Cumulative Basis Adjustments for Fair-Value Hedges
(dollars in thousands)

December 31, 2024
Line Item in Statement of Condition
Amortized Cost of Hedged Asset/ Liability(1)
Basis Adjustments for Active Hedging Relationships Included in Amortized CostBasis Adjustments for Discontinued Hedging Relationships Included in Amortized CostCumulative Amount of Fair Value Hedging Basis Adjustments
Advances$12,066,732 $(95,339)$4,983 $(90,356)
Available-for-sale securities10,884,883 (615,377)(200,815)(816,192)
Consolidated obligation bonds21,723,851 (587,032)25,173 (561,859)
_______________________
(1)    Includes only the amortized cost of hedged items in active fair-value hedging relationships.

Impacts on Statement of Cash Flows. Cash paid or received for cleared derivatives variation margin is included on the statement of cash flows in either net change in derivatives and hedging activities as an operating activity or net payments on derivatives with a financing element as a financing activity. The table below shows the impact of variation margin for cleared derivatives on the statement of cash flows:

Table 7.5 - Impact of Variation Margin for Cleared Derivatives on the Statement of Cash Flows
(dollars in thousands)
Increase (decrease) on Cash Flow Statement
For the Year Ended December 31,
202420232022
Operating activity - net change in derivatives and hedging activities$(362,286)$(161,627)$1,633,293 
Financing activity - net receipts on derivatives with a financing element32,598 16,926 161,289 
Total variation margin (paid) received on cleared derivatives$(329,688)$(144,701)$1,794,582 

Managing Credit Risk on Derivatives. We are subject to credit risk on our hedging activities due to the risk of nonperformance by nonmember counterparties (including DCOs and their clearing members acting as agent to the DCOs as well as uncleared counterparties) to the derivative agreements. We manage credit risk through credit analyses of derivative counterparties, collateral requirements and adherence to the requirements set forth in our policies, U.S. Commodity Futures Trading Commission (the CFTC) regulations, and FHFA regulations.

Uncleared Derivatives. All counterparties must execute master-netting agreements prior to entering into any uncleared derivative with us. Our master-netting agreements for uncleared derivatives contain bilateral-collateral exchange agreements that require that credit exposure be secured by readily marketable U.S. Treasury, U.S. Government-guaranteed, or GSE securities, or cash. Credit exposures are measured daily and adjustments to collateral positions are made in accordance with the terms of the master-netting agreements. These master-netting agreements also contain bilateral ratings-tied termination events permitting us to terminate all outstanding derivatives transactions with a counterparty in the event of a specified rating downgrade by Moody's or S&P.

We execute uncleared derivatives with nonmember counterparties rated in at least the third-highest internal rating category on a scale of FHFA-1 through FHFA-7 at the time of the transaction, although risk-reducing trades may be permitted for counterparties whose ratings have fallen below these ratings. The internal rating scale of FHFA-1 through FHFA-7 reflects progressively lower credit quality, with FHFA-1 through FHFA-4 considered to be investment quality. Some of these counterparties or their affiliates buy, sell, and distribute COs. See Note 9 — Consolidated Obligations for additional information.

Uncleared derivative transactions entered on or after September 1, 2022, are subject to two-way initial margin requirements as mandated by the Wall Street Reform and Consumer Protection Act, if the aggregate uncleared derivative transaction exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin regulations but can only take ownership upon the occurrence of certain events, including its counterparty's event of default due to bankruptcy, insolvency, or similar
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proceeding. As of December 31, 2024, none of our aggregate uncleared derivative transaction exposures with any of our counterparties exceeded the specified delivery thresholds for initial margin.

Based on credit analyses and collateral requirements, we do not anticipate any credit losses on our uncleared derivative agreements.

Derivatives that we use containing any optionality are not currently eligible for clearing. Accordingly, such derivatives, including the derivatives used to hedge issuance of callable CO bonds, are executed with our uncleared derivatives counterparties. Certain of our uncleared derivatives master-netting agreements contain provisions that require us to post additional collateral with our uncleared derivatives counterparties if our credit rating is lowered to a certain level by Moody's Investors Service Inc. (Moody's) or Standard & Poor's Financial Services LLC (S&P). In the event of a split between such credit ratings, the lower rating governs. The aggregate fair value of all uncleared derivatives with these provisions that were in a net-liability position (before cash collateral and related accrued interest) at December 31, 2024, was $603.9 million for which we had delivered collateral with a post-haircut value of $595.5 million in accordance with the terms of the master-netting agreements. Securities collateral is subject to valuation haircuts in accordance with the terms of the master-netting arrangements. Table 7.6 sets forth the post-haircut value of incremental collateral that certain uncleared derivatives counterparties could have required us to deliver based on incremental credit rating downgrades at December 31, 2024.

Table 7.6 - Post Haircut Value of Incremental Collateral to be Delivered as of December 31, 2024
(dollars in thousands)
Ratings Downgrade (1)
FromToIncremental Collateral
AA+AA or AA-$— 
AA-A+, A or A-— 
A-below A-61,649 
_______________________
(1)    Ratings are expressed in this table according to S&P's conventions but include the equivalent of such rating by Moody's. If there is a split rating, the lower rating is used.

Cleared Derivatives. For cleared derivatives, the DCO is our counterparty. The DCO notifies the clearing member of the required initial and variation margin and our agent (clearing member) in turn notifies us. We utilize one of two DCOs, for each cleared derivative transaction, Chicago Mercantile Exchange, Inc. (CME Inc.) or LCH Limited (LCH Ltd). Based upon their rulebooks, we characterize variation margin payments as daily settlement payments, rather than as collateral. At both DCOs, posted initial margin is considered collateral. We post initial margin and exchange variation margin through a clearing member of the DCO which clears our trades, acts as our agent to the DCO, and guarantees our performance to the DCO, subject to the terms of relevant agreements. These arrangements expose us to credit risk in the event that one of our clearing members or one of the DCOs fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because the DCO, which is fully secured at all times through margin received from its clearing members, is substituted for the credit risk exposure of individual counterparties in uncleared derivatives, and collateral is posted at least once daily for changes in the fair value of cleared derivatives through a clearing member.

For cleared derivatives, the DCO determines initial margin requirements. Our clearing members, which are U.S. Commodity Futures Trading Commission-registered futures commission merchants, may require us to post margin in excess of DCO requirements based on our credit or other considerations, including but not limited to, credit rating downgrades.

Offsetting of Certain Derivatives. We present derivatives, any related cash collateral received or pledged, and associated accrued interest, on a net basis by counterparty.

We have analyzed the rights, rules, and regulations governing our cleared and uncleared derivatives and determined that those rights, rules, and regulations should result in a net claim with each of our counterparties (which, in the context of cleared derivatives is through each of our clearing members with the related DCO) upon an event of default of our counterparty (solely in the case of uncleared derivatives) or the bankruptcy, insolvency, or a similar proceeding involving our counterparty (and/or one of our clearing members, in the case of cleared derivatives). For this purpose, "net claim" generally means a single net amount reflecting the aggregation of all amounts owed by us to the relevant counterparty and payable to us from the relevant counterparty.

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Table 7.7 presents separately the fair value of derivatives that are subject to netting due to a legal right of offset based on the terms of our master netting arrangements or similar agreements as of December 31, 2024, and December 31, 2023, which includes cleared and uncleared interest rate swaps, and the fair value of derivatives that are not subject to such netting, which includes mortgage delivery commitments and CO bond firm commitments. Derivatives subject to netting include any related cash collateral received from or pledged to counterparties.

Table 7.7 - Netting of Derivative Assets and Derivative Liabilities
(dollars in thousands)
December 31, 2024
Derivative Instruments Meeting Netting Requirements
Gross Recognized AmountGross Amounts of Netting Adjustments and Cash CollateralDerivative Instruments Not Meeting Netting RequirementsTotal Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared$56,360 $(55,375)$985 
Cleared3,735 297,145 300,880 
Mortgage delivery commitments$8 8 
Total$301,873 
Derivative Liabilities
Interest-rate swaps
Uncleared$(651,106)$646,468 $(4,638)
Cleared(355)355 — 
Mortgage delivery commitments$(108)(108)
Total$(4,746)

December 31, 2023
Derivative Instruments Meeting Netting Requirements
Gross Recognized AmountGross Amounts of Netting Adjustments and Cash CollateralDerivative Instruments Not Meeting Netting RequirementsTotal Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared$72,517 $(69,838)$2,679 
Cleared4,830 375,274 380,104 
Mortgage delivery commitment$290 290 
Total$383,073 
Derivative Liabilities
Interest-rate swaps
Uncleared$(997,974)$994,957 $(3,017)
Cleared(12,142)12,142 — 
Total$(3,017)

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Note 8 — Deposits

We offer demand and overnight deposits for members and qualifying nonmembers. Members that service mortgage loans may deposit funds collected in connection with mortgage loans pending disbursement of such funds, which we classify as "other" in the following table.

Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. The average interest rate paid on average deposits during 2024 and 2023 was 4.46 percent and 4.36 percent, respectively.

Table 8.1 - Deposits
(dollars in thousands)
 December 31, 2024 December 31, 2023
Interest-bearing  
Demand and overnight$842,062  $896,005 
Noninterest-bearing   
Other35,019  26,874 
Total deposits$877,081  $922,879 

None of the deposits are federally insured.

Note 9 — Consolidated Obligations

COs consist of CO bonds and CO discount notes. CO bonds may be issued to raise short-, intermediate-, and long-term funds and are not subject to any statutory or regulatory limits on maturity. CO discount notes are issued to raise short-term funds and have original maturities of up to one year. These notes sell at less than their face amount and are redeemed at par value when they mature.

Although we are primarily liable for the portion of COs issued for which we received issuance proceeds, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all COs. The FHFA, at its discretion, may require any FHLBank to make principal or interest payments due on any CO whether or not the CO represents a primary liability of such FHLBank. Although an FHLBank has never paid the principal or interest payments due on a CO on behalf of another FHLBank, if that event should occur, FHFA regulations provide that the paying FHLBank is entitled to reimbursement from the noncomplying FHLBank for any payments made on its behalf and other associated costs, including interest to be determined by the FHFA. If, however, the FHFA determines that the noncomplying FHLBank is unable to satisfy its repayment obligations, the FHFA may allocate the outstanding liabilities of the noncomplying FHLBank among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all COs outstanding or in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner. See Note 15 – Commitments and Contingencies for additional information regarding the FHLBanks' joint and several liability.

The par values of the FHLBanks' outstanding COs, including COs on which other FHLBanks are primarily liable, were $1.2 trillion at both December 31, 2024 and 2023, respectively. Regulations require each FHLBank to maintain unpledged qualifying assets equal to outstanding COs for which it is primarily liable. Such qualifying assets include cash; secured advances; obligations of or fully guaranteed by the U.S.; obligations, participations, or other instruments of or issued by Fannie Mae or Ginnie Mae; mortgages, obligations, or other securities which are or ever have been sold by Freddie Mac; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. Any assets subject to a lien or pledge for the benefit of holders of any issues of COs are treated as if they were free from lien or pledge for purposes of compliance with these regulations.

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CO Bonds.

Table 9.1 - CO Bonds Outstanding by Contractual Maturity
(dollars in thousands)
 December 31, 2024December 31, 2023
Amount 
Weighted
Average
Rate (1)
Amount
Weighted
Average
Rate (1)
Due in one year or less$27,884,310  4.08 %$17,841,615  4.27 %
Due after one year through two years7,948,755  2.15 7,476,350  2.86 
Due after two years through three years3,545,350  3.31 7,014,955  1.76 
Due after three years through four years3,889,675  3.40 2,854,250  2.94 
Due after four years through five years2,151,145  4.10 2,712,400 2.94 
Thereafter3,322,820 3.45 3,193,305  2.95 
Total par value48,742,055  3.62 %41,092,875 3.30 %
Premiums24,852   32,419  
Discounts(12,877) (14,451) 
Hedging adjustments(561,859)  (862,100) 
Total$48,192,171   $40,248,743  
_______________________
(1)    The CO bonds' weighted-average rate excludes concession fees.

CO bonds outstanding were issued with either fixed-rate or variable-rate coupon-payment terms that may use a variety of indices for interest-rate resets, such as SOFR. To meet the expected specific needs of certain investors in CO bonds, both fixed-rate and variable-rate CO bonds may contain features which may result in complex coupon-payment terms and call options. When these CO bonds are issued, we may enter into derivatives containing features that offset the terms and embedded options, if any, of the CO bonds.

Table 9.2 - CO Bonds Outstanding by Early Redemption Feature
(dollars in thousands)
December 31, 2024 December 31, 2023
Noncallable and nonputable$30,786,555  $18,882,235 
Callable17,955,500  22,210,640 
Total par value$48,742,055  $41,092,875 

Table 9.3 - CO Bonds Outstanding by Contractual Maturity or Next Call Date
(dollars in thousands)
December 31, 2024December 31, 2023
Due in one year or less$39,328,810 $30,900,615 
Due after one year through two years3,976,755 4,203,850 
Due after two years through three years1,639,850 2,487,955 
Due after three years through four years2,024,675 852,750 
Due after four years through five years346,145 1,171,400 
Thereafter1,425,820 1,476,305 
Total par value$48,742,055 $41,092,875 

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Table 9.4 - CO Bonds by Interest Rate-Payment Type
(dollars in thousands)
December 31, 2024 December 31, 2023
Fixed-rate$29,530,555  $32,454,235 
Simple variable-rate14,194,500  3,012,500 
Step-up (1)
5,017,000  5,626,140 
Total par value$48,742,055  $41,092,875 
_______________________
(1)    Step-up bonds pay interest at increasing fixed rates for specified intervals over the life of the CO bond and can be called at our option on the step-up dates.

CO Discount Notes. Outstanding CO discount notes for which we were primarily liable, all of which are due within one year, were as follows:

Table 9.5 - CO Discount Notes Outstanding
(dollars in thousands)
 Book Value Par Value 
Weighted Average
Rate (1)
December 31, 2024$18,546,504  $18,661,769  4.49 %
December 31, 2023$22,000,546  $22,150,970  5.31 %
_______________________
(1)    CO discount notes' weighted-average rate represents a yield to maturity excluding concession fees.

Note 10 — Affordable Housing Program and Discretionary Contributions

The FHLBank Act requires each FHLBank to establish and maintain an AHP to provide direct grants or below-market interest-rate subsidies on advances (AHP advances). These funds are intended to assist in the purchase, construction, or rehabilitation of housing for very low, low-, or moderate-income households with incomes at or below 80 percent of area median income. Each FHLBank recognizes AHP assessment expense at least equal to the greater of 10 percent of its previous year's net income before interest expense associated with mandatorily redeemable capital stock and the assessment for AHP (AHP earnings), or the prorated sum required to ensure the aggregate contribution by the FHLBanks is no less than $100 million for each year. We accrue this expense monthly based on our AHP earnings, and the accruals are accumulated into our AHP payable account.

If we experience a net loss during a quarter, but still have AHP earnings for the year, our obligation to the AHP would be calculated based on our AHP earnings for that calendar year. In annual periods where our AHP earnings are zero or less, our required AHP assessment is zero since our required annual contribution is limited to our annual AHP earnings. If the result of the aggregate 10 percent calculation described above is less than $100 million for all the FHLBanks, then each FHLBank would be required to contribute such prorated sums as may be required to ensure that the aggregate contributions by the FHLBanks equals $100 million. The proration would be made on the basis of the income of the FHLBanks for the year, except that the required annual AHP contribution for an FHLBank cannot exceed its AHP earnings for the year pursuant to an FHFA regulation. Each FHLBank's required annual AHP contribution is limited to its annual net earnings. There was no shortfall, as described above, in 2024, 2023, or 2022. If an FHLBank is experiencing financial instability and finds that its required AHP contributions are contributing to the financial instability, the FHLBank may apply to the FHFA for a temporary suspension of its contributions. We did not make such an application in 2024, 2023, or 2022.

At our discretion, we may allocate up to 35 percent of the AHP assessment to one or more homeownership set-aside programs. We have elected to allocate 20 percent of the 2024 AHP assessment to our Equity Builder Program (EBP) homeownership assistance program.

In addition to the statutory AHP assessment, we may make voluntary contributions to the AHP or other housing and community investment subsidy programs. The income statement effects of our voluntary contributions reduce net income before assessments which, in turn, reduces the statutory AHP assessment each year. As such, we have committed to make supplemental voluntary contributions to the AHP by an amount that equals what the statutory assessment would be in the absence of these effects. Statutory AHP assessments and all voluntary contributions to the AHP are recorded in the AHP liability on the statements of condition. Statutory AHP assessments accrued in the current year are primarily awarded in the subsequent year and may be disbursed over several years. The AHP liability is reduced as subsidies are awarded in the form of
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direct grants or advance rate subsidies for projects to acquire, build, or rehabilitate housing or as homeownership assistance grants provided through our members via EBP.

Table 10.1 - AHP Liability
(dollars in thousands)
For the Year Ended December 31,
202420232022
Balance at beginning of year$87,164 $76,622 $70,503 
AHP expense for the period32,322 28,648 20,521 
AHP voluntary contribution2,767 2,000 5,479 
AHP direct grant disbursements(17,259)(16,144)(17,683)
AHP subsidy for AHP advance disbursements(998)(3,965)(3,155)
Return of previously disbursed grants and subsidies304 3 957 
Balance at end of period$104,300 $87,164 $76,622 

Other discretionary housing and community investment programs consist of grants and subsidies to support other housing and community investment initiatives (non-AHP) and are recorded in other liabilities in the statement of condition.

Table 10.2 - Discretionary Housing and Community Investments Liability
(dollars in thousands)
For the Year Ended December 31,
202420232022
Balance at beginning of period$— $— $— 
Discretionary housing and community investment expense for the period24,906 12,928 5,975 
Direct grant disbursements(14,807)(7,600)(2,900)
Subsidy for advance disbursements(7,709)(5,328)(3,075)
Balance at end of period$2,390 $— $— 

Note 11 — Capital

Regulatory Capital Requirements. We are subject to three capital requirements at all times under our Capital Plan, the Federal Home Loan Bank Act of 1932 (as amended, the FHLBank Act), and FHFA regulations and guidance:

1.    Risk-based capital. We are required to maintain permanent capital, defined as the amounts paid-in for Class B stock and retained earnings, in an amount at least equal to the sum of our credit-risk, market-risk, and operational-risk capital requirements, all of which are calculated in accordance with FHFA rules and regulations, referred to herein as the risk-based capital requirement.

2.    Total regulatory capital. We are required to maintain a total capital-to-assets ratio of at least four percent. Regulatory capital is the sum of permanent capital, the amount of any general loss allowance if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

3.    Leverage capital. We are required to maintain a leverage capital-to-assets ratio of at least five percent. Leverage capital is defined as the sum of permanent capital weighted 1.5 times and all other components of total capital.

The FHFA has authority to require us to maintain greater minimum capital levels than are required based on FHFA rules and regulations.

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Table 11.1 - Regulatory Capital Requirements
(dollars in thousands)
 December 31, 2024December 31, 2023
 RequiredActualRequiredActual
Risk-based capital$640,669 $4,112,953 $628,052 $3,839,236 
Regulatory capital$2,879,719 $4,112,953 $2,685,691 $3,839,236 
Capital-to-asset ratio4.0 %5.7 %4.0 %5.7 %
Leverage capital$3,599,648 $6,169,430 $3,357,114 $5,758,854 
Leverage capital-to-assets ratio5.0 %8.6 %5.0 %8.6 %

We are a cooperative whose members own most of our capital stock. Former members, including certain nonmembers that own our capital stock as a result of merger or acquisition, relocation, or involuntary termination of membership, own the remaining capital stock to support business transactions still carried on our statement of condition or, for a small amount of capital stock held by former members, until the five-year redemption period applicable to their membership stock is complete. Shares of capital stock cannot be purchased or sold except between us and our members at $100 per share par value. Each member is required to purchase Class B stock equal to 0.05 percent of the value of the member's total assets measured as of December 31 of the preceding year, subject to a current minimum balance of $10 thousand and a current maximum balance of $5 million (the membership stock investment requirement), and 3.00 percent for overnight advances, 4.00 percent for all other advances, 0.25 percent for outstanding standby letters of credit, and 4.50 percent of the par value of certain mortgage loans we purchased through the MPF Program (collectively, the activity-based stock-investment requirement). The sum of the membership stock investment requirement and the activity-based stock investment requirement, rounded up to the nearest whole share, represents the total stock investment requirement.

Members may redeem Class B stock after no sooner than five years' notice provided in accordance with our Capital Plan (the redemption-notice period). The effective date of termination of membership for any member that voluntarily withdraws from membership is the end of the redemption-notice period, at which time any stock that is held as a condition of membership shall be divested, subject to any other applicable restrictions. At that time, any stock held pursuant to activity-based stock investment requirements shall remain outstanding until such requirements are eliminated by disposition of the related business activity. Any member that withdraws from membership, or otherwise has had its membership terminated, may not be readmitted to membership in any FHLBank until five years from the divestiture date for all capital stock that is held as a condition of membership. This restriction does not apply if the member is transferring its membership from one FHLBank to another on an uninterrupted basis.

The redemption-notice period can also be triggered by the involuntary termination of membership of a member by our board of directors or by the FHFA, the merger or acquisition of a member into a nonmember institution, or the relocation of a member to a principal location outside our district. At the end of the redemption-notice period, if the former member's activity-based stock investment requirement is greater than zero, we may require the associated remaining obligations to us to be satisfied in full prior to allowing the former member to redeem the remaining shares. Redemption of capital stock is subject to the redemption-notice period and our satisfaction of applicable minimum capital requirements.

Because our Class B stock is subject to redemption in certain instances, we can experience a reduction in our capital, particularly due to membership terminations due to merger and acquisition activity. However, there are several mitigants to this risk, including, but not limited to, the following:

•the activity-based stock-investment requirement allows us to retain stock beyond the redemption-notice period if the associated member-related activity is still outstanding, until the obligations are paid in full;
•the redemption notice period allows for a significant period in which we can restructure our balance sheet to accommodate a reduction in capital;
•our board of directors may modify the membership stock-investment requirement or the activity-based stock-investment requirement, or both, to address expected shortfalls in capitalization due to membership termination;
•our board of directors or the FHFA may suspend redemptions in the event that such redemptions would cause us not to meet our minimum regulatory capital requirements; and
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•the growth in our retained earnings, which are included in our equity capital, helps offset the risk that our capital could be reduced by redemptions.

Our board of directors may declare and pay dividends in either cash or capital stock, subject to limitations in applicable law and our Capital Plan.

Mandatorily Redeemable Capital Stock. We will reclassify capital stock subject to redemption from equity to liability once a member exercises a written notice of redemption, gives notice of intent to withdraw from membership, or attains nonmember status by merger or acquisition, charter termination, or involuntary termination from membership. Dividends related to capital stock classified as a liability are accrued at the expected dividend rate and reported as interest expense in the statement of operations. If a member cancels its written notice of redemption or notice of withdrawal, we will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification to equity, dividends on the capital stock would no longer be classified as interest expense.

For the years ended December 31, 2024, 2023, and 2022, dividends on mandatorily redeemable capital stock of $440 thousand, $545 thousand, and $474 thousand, respectively, were recorded as interest expense.

Table 11.2 - Mandatorily Redeemable Capital Stock
(dollars in thousands)
 202420232022
Balance at beginning of year$6,083 $10,290 $13,562 
Capital stock subject to mandatory redemption reclassified from capital— 2,096 8,961 
Redemption/repurchase of mandatorily redeemable capital stock(997)(6,303)(12,233)
Balance at end of year$5,086 $6,083 $10,290 

The number of stockholders holding mandatorily redeemable capital stock was 12, 14, and 11 at December 31, 2024, 2023, and 2022, respectively.

Table 11.3 - Mandatorily Redeemable Capital Stock by Expiry of Redemption Notice Period
(dollars in thousands)
December 31, 2024December 31, 2023
Past redemption date (1)
$2,669 $2,778 
Due in one year or less435 — 
Due after one year through two years689 435 
Due after two years through three years960 689 
Due after three years through four years333 960 
Due after four years through five years— 1,221 
Total$5,086 $6,083 
_______________________
(1)    Amount represents mandatorily redeemable capital stock that has reached the end of the five-year redemption-notice period but the member-related activity (for example, advances) remains outstanding. Accordingly, these shares of capital stock will not be redeemed until the activity is no longer outstanding.

A member may cancel or revoke its written notice of redemption or its notice of withdrawal from membership prior to the end of the redemption-notice period. Our Capital Plan provides that we will charge the member a cancellation fee in the amount of 2.0 percent of the par amount of the shares of Class B stock that is the subject of the redemption notice. We will assess a redemption-cancellation fee unless the board of directors decides that it has a bona fide business purpose for waiving the imposition of the fee, and such a waiver is consistent with the FHLBank Act.

Excess Capital Stock Repurchases. Our Capital Plan provides us with the sole discretion to repurchase capital stock from a member at par value that is in excess of the amount required to meet the member's total stock investment requirement (excess capital stock) subject to all applicable limitations. In conducting any repurchases, we repurchase any shares that are the subject of an outstanding redemption notice from the member from whom we are repurchasing prior to repurchasing any other shares that are in excess of the member's total stock-investment requirement (TSIR). We generally repurchase excess stock held by
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any shareholder whose excess stock exceeds the lesser of $3.0 million or 3.00 percent of the shareholder’s total stock investment requirement, subject to a minimum repurchase of $100,000. We plan to continue with this practice, subject to regulatory requirements and our anticipated liquidity or capital management needs, although continued repurchases remain at our sole discretion, and we retain authority to suspend repurchases of excess stock from any shareholder or all shareholders without prior notice. In addition to daily repurchases, subject to our sole discretion, shareholders may request that we voluntarily repurchase excess stock shares at any time. We may also allow the member to sell the excess capital stock at par value to another one of our members.

At December 31, 2024 and 2023, members and nonmembers with capital stock outstanding held excess capital stock totaling $42.9 million and $46.5 million, respectively, representing approximately 2.0 percent and 2.3 percent, respectively, of total capital stock outstanding. FHFA rules limit our ability to create member excess capital stock under certain circumstances. We may not pay dividends in the form of capital stock or issue new excess capital stock to members if our excess capital stock exceeds one percent of our total assets or if the issuance of excess capital stock would cause our excess capital stock to exceed one percent of our total assets. At December 31, 2024, we had excess capital stock outstanding totaling 0.1 percent of our total assets. For the year ended December 31, 2024, we complied with the FHFA's excess capital stock rule.

Restricted Retained Earnings. At December 31, 2024, our restricted retained earnings contribution requirement totaled $663.5 million. At December 31, 2024, and December 31, 2023, restricted retained earnings totaled $509.2 million and $451.2 million, respectively. These restricted retained earnings are not available to pay dividends.

Capital Classification Determination. We are subject to the FHFA's regulation on FHLBank capital classification and critical capital levels (the Capital Rule). The Capital Rule, among other things, defines criteria for four capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. An adequately capitalized FHLBank is one that has sufficient permanent and total capital to satisfy its risk-based and minimum capital requirements. We satisfied these requirements at December 31, 2024. However, pursuant to the Capital Rule, the FHFA has discretion to reclassify an FHLBank and modify or add to corrective action requirements for a particular capital classification. If we become classified into a capital classification other than adequately capitalized, we will be subject to the corrective action requirements for that capital classification in addition to being subject to prohibitions on declaring dividends and redeeming or repurchasing capital stock. By letter dated December 10, 2024, the Director of the FHFA notified us that, based on financial information at September 30, 2024, we met the definition of adequately capitalized under the Capital Rule.

Note 12 — Accumulated Other Comprehensive Income (Loss)
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Table 12.1 - Accumulated Other Comprehensive Income (Loss)
(dollars in thousands)
Net Unrealized Gain (Loss) on Available-for-sale SecuritiesNet Unrealized Gain (Loss) Relating to Hedging ActivitiesPension and Postretirement BenefitsTotal Accumulated Other Comprehensive Gain (Loss)
Balance, December 31, 2021$58,013 $(26,291)$(2,755)$28,967 
Other comprehensive (loss) income before reclassifications:
Net unrealized (losses) gains(408,296)63,234 — (345,062)
Net actuarial gain— — 4,310 4,310 
Reclassifications from other comprehensive income to net income
Reclassification of realized net loss included in net income2 — — 2 
Amortization - hedging activities (1)
— 5,539 — 5,539 
Amortization - pension and postretirement benefits (2)
— — (181)(181)
Other comprehensive (loss) income(408,294)68,773 4,129 (335,392)
Balance, December 31, 2022(350,281)42,482 1,374 (306,425)
Other comprehensive income (loss) before reclassifications:
Net unrealized gains (losses)9,029 (940)— 8,089 
Net actuarial loss— — (625)(625)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
— 4,422 — 4,422 
Other comprehensive income (loss)9,029 3,482 (625)11,886 
Balance, December 31, 2023(341,252)45,964 749 (294,539)
Other comprehensive income (loss) before reclassifications:
Net unrealized gains20,059 20,842 — 40,901 
Net actuarial gain— — 948 948 
Reclassifications from other comprehensive income to net income
Reclassification of realized net gain included in net income(52)— — (52)
Amortization - hedging activities (1)
— (2,280)— (2,280)
Other comprehensive income20,007 18,562 948 39,517 
Balance, December 31, 2024$(321,245)$64,526 $1,697 $(255,022)
_______________________
(1)    Recorded in CO bond interest expense in the statement of operations.
(2)    Recorded in other expenses in the statement of operations.

Note 13 — Employee Retirement Plans

Qualified Defined Benefit Multiemployer Plan.

The Bank previously participated in the Pentegra Defined Benefit Plan for Financial Institutions (the Pentegra Defined Benefit Plan), a funded, tax-qualified, noncontributory defined-benefit pension plan. In November 2020, the board of directors elected to freeze the Pentegra Defined Benefit Plan such that employees hired on or after January 1, 2021, were ineligible to participate in the Pentegra Defined Benefit Plan, and on January 1, 2024, future benefit accruals under the plan ceased for all employees that were hired before January 1, 2021. On June 27, 2024, the Bank completed an acceptance agreement with Midland National Life Insurance Company and transferred to them the future benefit obligations and annuity administration for participants under the Pentegra Defined Benefit Plan. As such, the Bank is no longer a party to the Pentegra Defined Benefit Plan. Refer to the 2023 Annual Report on Form 10-K for prior year details on the Pentegra Defined Benefit Plan.

Qualified Defined Contribution Plan. We maintain a Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified defined contribution plan. The plan covers substantially all of our employees. We contribute a percentage of the participants' compensation by making a matching contribution equal to a certain percentage of voluntary employee
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contributions, subject to certain limitations. Our matching contributions are charged to compensation and benefits expense and are not considered to be material.

The plan also includes a non-elective, non-matching contribution from the Bank of six percent of each eligible employee’s salary.

Nonqualified Defined Contribution Plan. We maintain the Thrift Benefit Equalization Plan, a nonqualified, unfunded deferred compensation plan covering certain of our senior officers and directors. The plan's liability consists of the accumulated compensation deferrals and the accumulated earnings on these deferrals. Our obligation from this plan was $16.6 million and $13.6 million at December 31, 2024 and 2023, respectively, which is recorded in other liabilities on the statement of condition. We maintain a rabbi trust, which is recorded in other assets on the statement of condition, intended to satisfy future benefit obligations. Our matching contributions are charged to compensation and benefits expense and are not considered to be material.

The plan also includes a non-elective, non-matching contribution from the Bank of six percent of each eligible executive participant's salary for certain senior officers.

Nonqualified Supplemental Defined Benefit Retirement Plan. We maintain a nonqualified, single-employer unfunded defined-benefit plan covering certain senior officers. We maintain a rabbi trust which is recorded in other assets on the statement of condition, intended to satisfy future benefit obligations. The benefit obligation for this plan was $15.6 million and $15.8 million at December 31, 2024 and 2023, respectively.

The board of directors elected to freeze this plan. Senior officers hired on or after January 1, 2021, were ineligible to participate in the plan, and on January 1, 2024, future benefit accruals under the plan ceased for all senior officers.

Supplemental Executive Retirement Plan (SERP). The Bank adopted a SERP on June 7, 2024, to be effective as of January 1, 2024. The SERP is a nonqualified, unfunded defined contribution plan for the Bank's participating executives as designated by the board of directors. The SERP is intended to address, among other things, the compensation gap that existed from the freeze of the Bank's qualified and nonqualified defined benefit retirement plans. The Bank will contribute to an eligible participant’s SERP account an amount equal to eight percent of their eligible compensation as defined in the plan. Our obligation from this plan was $435 thousand at December 31, 2024, which is recorded in other liabilities on the statement of condition.

Postretirement Benefits. We sponsor a fully insured postretirement benefit program that includes life insurance benefits for eligible retirees. We provide life insurance to all employees who retire on or after age 55 after completing six years of service. No contributions are required from the retirees. There are no funded plan assets that have been designated to provide postretirement benefits. The benefit obligation for this plan was $1.2 million at both December 31, 2024 and 2023.

The additional financial amounts related to these plans were not material for the reported periods.

Note 14 — Fair Values

Fair-Value Methodologies and Techniques

We have determined the fair-value amounts below using available market and other pertinent information and our best judgment of appropriate valuation methods. Fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the principal (or advantageous) market for the asset or liability at the measurement date (an exit price). Although we use our best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of our financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect our judgment of how a market participant would estimate the fair values. Additionally, these values do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account, among other things, future business opportunities and the net profitability of assets and liabilities.

Fair-Value Hierarchy.

GAAP establishes a fair-value hierarchy and requires an entity to maximize the use of significant observable inputs and minimize the use of significant unobservable inputs when measuring fair value. The inputs are evaluated and an overall level
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for the fair-value measurement is determined. This overall level is an indication of market observability of the fair-value measurement for the asset or liability. An entity must disclose the level within the fair value hierarchy in which the measurements are classified.

The fair-value hierarchy prioritizes the inputs used to measure fair value into three broad levels:

Level 1    Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date. An active market for the asset or liability is a market in which the transaction for the asset or liability occurs with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2    Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified or contractual term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, volatilities, and prepayment speeds); and (4) inputs that are derived principally from or corroborated by observable market data (e.g., implied spreads).

Level 3    Unobservable inputs for the asset or liability. Valuations are derived from techniques that use significant assumptions not observable in the market, which include pricing models, discounted cash flow models, or similar techniques.

We review the fair-value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no such transfers into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

Table 14.1 presents the carrying value, fair value, and fair value hierarchy of our financial assets and liabilities at December 31, 2024 and 2023. We record trading securities, available-for-sale securities, derivative assets, derivative liabilities, and certain other assets at fair value on a recurring basis and certain mortgage loans at fair value on a non-recurring basis. We record all other financial assets and liabilities at amortized cost. Refer to Table 14.2 for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.

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Table 14.1 - Fair Value Summary
(dollars in thousands)
 December 31, 2024
 Carrying
Value		Total Fair ValueLevel 1Level 2Level 3
Netting Adjustments and Cash Collateral(2)
Financial instruments  
Assets:  
Cash and due from banks$5,149 $5,149 $5,149 $— $— $— 
Interest-bearing deposits1,958,353 1,958,353 1,958,353 — — — 
Securities purchased under agreements to resell1,500,000 1,500,003 — 1,500,003 — — 
Federal funds sold2,505,000 2,504,990 — 2,504,990 — — 
Trading securities(1)
1,489 1,489 — 1,489 — — 
Available-for-sale securities(1)
16,470,908 16,470,908 — 16,464,257 6,651 — 
Held-to-maturity securities63,318 63,197 — 63,197 — — 
Advances45,163,175 45,080,045 — 45,080,045 — — 
Mortgage loans, net3,679,150 3,355,769 — 3,343,100 12,669 — 
Accrued interest receivable262,203 262,203 — 262,203 — — 
Derivative assets(1)
301,873 301,873 — 60,103 — 241,770 
Other assets (1)
32,738 32,738 20,742 11,996 — — 
Liabilities: 
Deposits(877,081)(877,035)— (877,035)— — 
COs:
Bonds(48,192,171)(47,928,851)— (47,928,851)— — 
Discount notes(18,546,504)(18,549,008)— (18,549,008)— — 
Mandatorily redeemable capital stock(5,086)(5,086)(5,086)— — — 
Accrued interest payable(328,596)(328,596)— (328,596)— — 
Derivative liabilities(1)
(4,746)(4,746)— (651,569)— 646,823 
Other:
Commitments to extend credit for advances— (1,264)— (1,264)— — 
Standby letters of credit(1,266)(1,266)— (1,266)— — 


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December 31, 2023
 Carrying
Value		Total Fair
Value		Level 1Level 2Level 3
Netting Adjustments and Cash Collateral(2)
Financial instruments  
Assets:  
Cash and due from banks$53,412 $53,412 $53,412 $— $— $— 
Interest-bearing deposits1,643,587 1,643,587 1,643,587 — — — 
Securities purchased under agreements to resell1,600,000 1,599,996 — 1,599,996 — — 
Federal funds sold2,500,000 2,499,995 — 2,499,995 — — 
Trading securities(1)
1,395 1,395 — 1,395 — — 
Available-for-sale securities(1)
15,343,745 15,343,745 — 15,321,940 21,805 — 
Held-to-maturity securities78,905 78,478 — 78,478 — — 
Advances41,958,583 41,834,762 — 41,834,762 — — 
Mortgage loans, net3,059,331 2,796,000 — 2,781,976 14,024 — 
Accrued interest receivable185,709 185,709 — 185,709 — — 
Derivative assets(1)
383,073 383,073 — 77,637 — 305,436 
Other assets(1)
28,369 28,369 13,724 14,645 — — 
Liabilities:  
Deposits(922,879)(922,830)— (922,830)— — 
COs:
Bonds(40,248,743)(39,887,287)— (39,887,287)— — 
Discount notes(22,000,546)(21,998,576)— (21,998,576)— — 
Mandatorily redeemable capital stock(6,083)(6,083)(6,083)— — — 
Accrued interest payable(269,517)(269,517)— (269,517)— — 
Derivative liabilities(1)
(3,017)(3,017)— (1,010,116)— 1,007,099 
Other:
Commitments to extend credit for advances— (2,101)— (2,101)— — 
Standby letters of credit(1,340)(1,340)— (1,340)— — 
_______________________
(1)Carried at fair value and measured on a recurring basis.
(2)These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

Summary of Valuation Methodologies and Primary Inputs

The valuation methodologies and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or nonrecurring basis in the Statement of Condition are listed below. The fair values and level within the fair value hierarchy of these assets and liabilities are reported in Table 14.2.

Investment Securities. We determine the fair values of our investment securities, other than HFA floating-rate securities, based on prices obtained for each of these securities that we request from multiple designated third-party pricing vendors. The fair value of each such security is the average of such vendor prices that are within a cluster pricing tolerance range. A cluster is defined as a group of available vendor prices for a given security that is within a defined price tolerance range of the median vendor price depending on the security type. An outlier is any vendor price that is outside of the defined cluster and is evaluated for reasonableness.

All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price. Vendor prices that are outside of a defined cluster are identified as outliers and are subject to additional review including, but not limited to, comparison to prices provided by an additional third-party valuation vendor, prices for similar securities, and/or nonbinding dealer estimates, or the use of internal model prices, which we believe reflect the
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facts and circumstances that a market participant would consider. We also perform this analysis in those limited instances where no third-party vendor price or only one third-party vendor price is available to determine fair value. If the analysis indicates that an outlier is not representative of fair value and that the average of the vendor prices within the tolerance threshold of the median price is the best estimate, then we use the average of the vendor prices within the tolerance threshold of the median price as the final price. If, on the other hand, we determine that an outlier (or some other price identified in the analysis) is a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price. In all cases, the final price is used to determine the fair value of the security.

As of December 31, 2024, multiple vendor prices were received for substantially all of our investment securities and the final prices for all of those securities were computed by averaging the prices received. The relative proximity of the prices received supports our conclusion that the final computed prices are reasonable estimates of fair value. Our fixed-rate HFA securities fall within Level 3 of the fair-value hierarchy due to the current lack of market activities for these bonds.

Investment Securities – HFA Floating Rate Securities. The fair value is determined by calculating the present value of the expected future cash flows. The discount rates used in these calculations are the rates for securities with similar terms. Our floating rate HFA securities fall within Level 3 of the fair-value hierarchy due to the current lack of market activity for these bonds.

Derivative Assets/Liabilities - Interest-Rate-Exchange Agreements. We base the fair values of interest-rate-exchange agreements on available market prices of derivatives having similar terms, including accrued interest receivable and payable. The fair-value methodology uses standard valuation techniques for derivatives such as discounted cash-flow analysis and comparisons with similar instruments.

The fair values of all interest-rate-exchange agreements are netted by clearing member and/or by counterparty, including cash collateral received from or delivered to the counterparty. If these netted amounts are positive, they are classified as an asset, and if negative, they are classified as a liability. We generally use a midmarket pricing convention based on the bid-ask spread as a practical expedient for fair-value measurements. Because these estimates are made at a specific point in time, they are susceptible to material near-term changes. We have evaluated the potential for the fair value of the instruments to be affected by counterparty risk and our own credit risk and have determined that no adjustments were significant to the overall fair-value measurements.

The discounted cash-flow model uses market-observable inputs (inputs that are actively quoted and can be validated to external sources), including the following:

•Discount rate assumption. For all derivatives cleared through a DCO the discount rate used is SOFR-OIS. For our bilateral, non-cleared interest-rate derivatives the discount rate used is either SOFR-OIS or Federal Funds-OIS.
•Forward interest-rate assumption. Forward rates based on the Federal Funds-OIS swap curve or forward rates implied by the SOFR-OIS swap curve.
•Volatility assumption. Market-based expectations of future interest-rate volatility implied from current market prices for similar options.

Derivative Assets/Liabilities – Commitments to Invest in Mortgage Loans. Commitments to invest in mortgage loans are recorded as derivatives in the statement of condition. The fair values of such commitments are based on the end-of-day delivery commitment prices provided by the FHLBank of Chicago and a spread, derived from MBS TBA delivery commitment prices with adjustment for the contractual features of the MPF Program, such as servicing and credit-enhancement features.

Subjectivity of Estimates. Estimates of the fair value of financial assets and liabilities using the methodologies described above are highly subjective and require judgments regarding significant matters such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest-rate volatility, possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair-value estimates. Since these estimates are made as of a specific point in time, they are susceptible to material near-term changes.

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Fair Value Measured on a Recurring and Nonrecurring Basis.

Table 14.2 - Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis
(dollars in thousands)
December 31, 2024
 Level 1Level 2Level 3
Netting Adjustments and Cash Collateral (1)
Total
Assets:     
Carried at fair value on a recurring basis
Trading securities:
Corporate bonds$— $1,489 $— $— $1,489 
Available-for-sale securities:     
U.S. Treasury obligations— 5,807,665 — — 5,807,665 
HFA securities— — 6,651 — 6,651 
Supranational institutions— 337,352 — — 337,352 
U.S. government-owned corporations— 221,769 — — 221,769 
GSE— 94,614 — — 94,614 
U.S. government guaranteed – single-family MBS— 179,052 — — 179,052 
U.S. government guaranteed – multifamily MBS— 464,823 — — 464,823 
GSE – single-family MBS— 1,953,153 — — 1,953,153 
GSE – multifamily MBS— 7,405,829 — — 7,405,829 
Total available-for-sale securities— 16,464,257 6,651 — 16,470,908 
Derivative assets:     
Interest-rate-exchange agreements— 60,095 — 241,770 301,865 
Mortgage delivery commitments— 8 — — 8 
Total derivative assets— 60,103 — 241,770 301,873 
Other assets20,742 11,996 — — 32,738 
Total assets carried at fair value on a recurring basis$20,742 $16,537,845 $6,651 $241,770 $16,807,008 
Liabilities:     
Carried at fair value on a recurring basis
Derivative liabilities     
Interest-rate-exchange agreements$— $(651,461)$— $646,823 $(4,638)
Mortgage delivery commitments— (108)— — (108)
Total liabilities carried at fair value on a recurring basis$— $(651,569)$— $646,823 $(4,746)


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December 31, 2023
 Level 1Level 2Level 3
Netting
Adjustments and Cash Collateral(1)
Total
Assets:     
Carried at fair value on a recurring basis
Trading securities:
Corporate bonds$— $1,395 $— $— $1,395 
Available-for-sale securities:     
U.S. Treasury obligations— 5,664,452 — — 5,664,452 
HFA securities— — 21,805 — 21,805 
Supranational institutions— 346,375 — — 346,375 
U.S. government-owned corporations— 235,191 — — 235,191 
GSE— 99,421 — — 99,421 
U.S. government guaranteed – single-family MBS— 14,433 — — 14,433 
U.S. government guaranteed – multifamily MBS— 477,676 — — 477,676 
GSE – single-family MBS— 904,456 — — 904,456 
GSE – multifamily MBS— 7,579,936 — — 7,579,936 
Total available-for-sale securities— 15,321,940 21,805 — 15,343,745 
Derivative assets:     
Interest-rate-exchange agreements— 77,347 — 305,436 382,783 
Mortgage delivery commitments— 290 — — 290 
Total derivative assets— 77,637 — 305,436 383,073 
Other assets13,724 14,645 — — 28,369 
Total assets carried at fair value on a recurring basis$13,724 $15,415,617 $21,805 $305,436 $15,756,582 
Liabilities:     
Carried at fair value on a recurring basis
Derivative liabilities     
Interest-rate-exchange agreements$— $(1,010,116)$— $1,007,099 $(3,017)
Total liabilities carried at fair value on a recurring basis$— $(1,010,116)$— $1,007,099 $(3,017)
_______________________
(1)    These amounts represent the effect of master-netting agreements intended to allow us to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same clearing member and/or counterparty.

Table 14.3 presents a reconciliation of available-for-sale securities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2024, 2023, and 2022.

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Table 14.3 - Roll Forward of Level 3 Available-for-Sale HFA Securities
(dollars in thousands)
For the Year Ended December 31,
202420232022
Balance at beginning of period$21,805 $32,774 $62,265 
Total gains (losses) included in other comprehensive income
Net unrealized gains (losses)631 1,181 (741)
Sales, maturities, and settlements
Maturities(13,820)(10,300)(27,000)
Settlements(1,965)(1,850)(1,750)
Balance at end of period$6,651 $21,805 $32,774 
Total amount of unrealized gains (losses) for the period included in other comprehensive income relating to securities held at period end$21 $719 $(960)

Note 15 — Commitments and Contingencies

Joint and Several Liability. COs are backed by the financial resources of the 11 district Federal Home Loan Banks (the FHLBanks). The FHFA has authority to require any FHLBank to repay all or a portion of the principal and interest on COs for which another FHLBank is the primary obligor. No FHLBank has ever been asked or required to repay the principal or interest on any CO on behalf of another FHLBank. We evaluate the financial condition of the other FHLBanks primarily based on known regulatory actions, publicly available financial information, and individual long-term credit-rating action as of each period-end presented. Based on this evaluation, as of December 31, 2024, and through the filing of this report, we do not believe it is likely that we will be required to repay the principal or interest on any CO on behalf of another FHLBank.

We have considered applicable FASB guidance and determined it is not necessary to recognize a liability for the fair value of our joint and several liability for all of the COs. The joint and several obligation is mandated by the FHLBank Act, as implemented by FHFA regulations, and is not the result of an arms-length transaction among the FHLBanks. The FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several obligation. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for the FHLBanks' COs, the FHLBanks' joint and several obligation is excluded from the initial recognition and measurement provisions. Accordingly, we have not recognized a liability for our joint and several obligation related to other FHLBanks' COs at December 31, 2024 and 2023. The par amounts of other FHLBanks' outstanding COs for which we are jointly and severally liable totaled $1.1 trillion at both December 31, 2024 and 2023. See Note 9 — Consolidated Obligations for additional information.

Off-Balance-Sheet Commitments

Table 15.1 - Off-Balance Sheet Commitments (1)
(dollars in thousands)
December 31, 2024December 31, 2023
Expire within one yearExpire after one yearTotalTotal
Standby letters of credit outstanding (2)
$7,795,371 $322,608 $8,117,979 $8,425,065 
Commitments for unused lines of credit - advances (3)
1,101,205 — 1,101,205 1,113,354 
Commitments to make additional advances59,570 33,355 92,925 33,633 
Commitments to invest in mortgage loans32,729 — 32,729 29,995 
Unsettled CO bonds, at par967,000 — 967,000 131,500 
Unsettled CO discount notes, at par314,000 — 314,000 61,008 
__________________________
(1)    We have determined that it is unnecessary to record any liability for credit losses on these agreements based on our credit extension and collateral policies.
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(2)    The amount of standby letters of credit outstanding excludes commitments to issue standby letters of credit. At December 31, 2024, and December 31, 2023, commitments to issue standby letters of credit that expire within one year totaled $30.4 million and $16.0 million, respectively, and at December 31, 2023, commitments to issue standby letters of credit that expire after one year totaled $13.1 million.
(3)    Commitments for unused line-of-credit advances are generally for periods of up to 12 months. Since many of these commitments are not expected to be drawn upon, the total commitment amount does not necessarily indicate future liquidity requirements.

Standby Letters of Credit. For a fee, we issue standby letters of credit on behalf of our members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are generally subject to collateralization and borrowing limits similar to advances. Standby letters of credit may be offered to assist members and nonmember housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from state and local government agencies. If we are required to make payment for a beneficiary's draw, our strategy is to take prompt action to recover the funds paid to the third-party beneficiary, including converting the payment amount into a collateralized advance to the primary obligor, withdrawing the payment amount from the primary obligor's demand deposit account with us, or selling collateral pledged by the primary obligor in a commercially reasonable manner to offset the payment amount. Historically, standby letters of credit usually expire without being drawn upon. At December 31, 2024, the outstanding standby letters of credit issued expire no later than 2039. Currently, we offer new standby letters of credit with terms typically up to 10 years, while terms greater than 10 years may be available on an exception basis. Unearned fees for the value of the guarantees related to standby letters of credit are recorded in other liabilities and totaled $1.3 million at both December 31, 2024 and 2023.

We monitor the creditworthiness of our members and housing associates that have standby letter of credit agreements outstanding based on our evaluations of the financial condition of the member or housing associate. We review available financial data, which can include regulatory call reports filed by depository institution members, regulatory financial statements filed with the appropriate state insurance department by insurance company members, audited financial statements of housing associates, SEC filings, and rating-agency reports to ensure that potentially troubled members are identified as soon as possible. In addition, we have access to most members' regulatory examination reports. We analyze this information on a regular basis.
Standby letters of credit are fully collateralized at the time of issuance. Based on our credit analyses and collateral requirements, we have not deemed it necessary to record any additional liability on these commitments.
Commitments to Invest in Mortgage Loans. Commitments to invest in mortgage loans are generally for periods not to exceed 60 business days. Such commitments are recorded as derivatives at their fair values on the statement of condition.

Pledged Collateral. We have pledged securities as collateral related to derivatives. See Note 7 — Derivatives and Hedging Activities for additional information about our pledged collateral and other credit-risk-related contingent features.

Legal Proceedings. We are subject to various legal proceedings arising in the normal course of business from time to time. We would record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount can be reasonably estimated. Management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on our financial condition, results of operations, or cash flows.

Other commitments and contingencies are discussed in Note 5 — Advances, Note 7 — Derivatives and Hedging Activities, Note 9 — Consolidated Obligations, Note 10 — Affordable Housing Program and Discretionary Contributions, and Note 11 — Capital.

Note 16 — Transactions with Shareholders

We are a cooperative whose members own our capital stock and may receive dividends on their investment in our capital stock. In addition, certain former members and nonmembers that still have outstanding transactions with us are required to maintain their investment in our capital stock until the transactions mature or are paid off. All advances are issued to members or housing associates, and mortgage loans held for portfolio are generally acquired from our members or housing associates. We also maintain demand-deposit accounts for members and housing associates primarily to facilitate settlement activities that are directly related to advances, mortgage-loan purchases, and other transactions between us and the member or housing associate. In instances where the member has an officer or director who serves as a director of the Bank, those transactions are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as transactions with all other members.

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Related Parties. We define related parties as members who owned 10 percent or more of the voting interests of our capital stock outstanding at year end. Each member eligible to vote is entitled to cast by ballot one vote for each share of stock that it was required to hold as of the record date, which is December 31, of the year prior to each election, subject to the limitation that no member may cast more votes than the average number of shares of our stock that is required to be held by all members located in such member's state. Under the FHLBank Act and FHFA regulations, each member directorship is designated to one of the six states in our district. Eligible members are permitted to vote all their eligible shares for one candidate for each open member directorship in the state in which the member is located and for each open independent directorship. A nonmember stockholder is not entitled to cast votes for the election of directors unless it was a member as of the record date. At December 31, 2024 and 2023, no shareholder owned more than 10 percent of the total voting interests due to statutory limits on members' voting rights, therefore, we did not have any related parties.

Shareholder Concentrations. We consider shareholder concentrations as holdings of capital stock (including mandatorily redeemable capital stock) by individual members or nonmembers in excess of 10 percent of total capital stock outstanding.

Table 16.1 - Shareholder Concentrations, Balance Sheet
(dollars in thousands)
Capital Stock
Outstanding		 Percent
of Total Capital Stock		Par
Value of
Advances		 Percent of Total Par Value
of Advances		Total Accrued
Interest
Receivable		 Percent of Total
Accrued Interest
Receivable on
Advances
December 31, 2024
State Street Bank and Trust Company$400,600 18.2 %$9,815,000 21.7 %$75,756 40.2 %

We held sufficient collateral to support the advances to the above institution such that we do not expect to incur any credit losses on these advances.

Transactions with Directors' Institutions. We provide, in the ordinary course of business, products and services to members whose officers or directors serve on our board of directors. In accordance with FHFA regulations, transactions with directors' institutions are conducted on the same terms as those with any other member.

Table 16.2 - Transactions with Directors' Institutions
(dollars in thousands)
Capital Stock
Outstanding		 Percent
of Total Capital Stock		Par
Value of
Advances		 Percent of Total Par Value
of Advances		Total Accrued
Interest
Receivable		 Percent of Total
Accrued Interest
Receivable on
Advances
December 31, 2024$29,365 1.3 %$180,954 0.4 %$528 0.3 %
December 31, 2023201,250 9.8 4,485,824 10.7 5,953 5.2 

Note 17 — Transactions with Other FHLBanks

We may occasionally enter into transactions with other FHLBanks. These transactions are summarized below.

Overnight Funds. We may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included within other interest income and interest expense from other borrowings in the statement of operations. During the years ended December 31, 2024, 2023 and 2022, we recorded $1 thousand, $716 thousand, $194 thousand, respectively, in interest income on loans to other FHLBanks. Interest expense for loans from other FHLBanks was $89 thousand, $113 thousand, and $307 thousand for the years ended December 31, 2024, 2023, and 2022, respectively.

MPF Mortgage Loans. We pay a transaction-services fee and a membership fee to the FHLBank of Chicago for our participation in the MPF Program. For the years ended December 31, 2024, 2023, and 2022, we recorded $2.3 million, $1.9 million, and $2.0 million, respectively in MPF transaction-services fee expense to the FHLBank of Chicago which has been recorded in the statement of operations as other expense. The membership fee has been recorded in the statement of operations as an operating expense, and totaled $600 thousand for each of the years ended December 31, 2024, 2023, and 2022. In
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addition, we may receive an MPF performance fee from the FHLBank of Chicago. We did not receive an MPF performance fee for the years ended December 31, 2024 and December 31, 2023. The MPF performance fee for the year ended December 31, 2022 amounted to $225 thousand and was recorded in the statement of operations as other income.

COs. From time to time, one FHLBank may transfer to another FHLBank the COs for which the transferring FHLBank was originally the primary obligor but upon transfer the assuming FHLBank becomes the primary obligor. During the year ended December 31, 2024, we transferred to other FHLBanks debt obligations with par amounts of $615.9 million and fair values of approximately $613.8 million on the day they were transferred. In addition, during the year ended December 31, 2024, we transferred in from other FHLBanks debt obligations with both a par amount and fair value of $6.4 billion on the day they were transferred. During the years ended December 31, 2023 and 2022, there were no transferred debt obligations.

Note 18 — Subsequent Events

On February 14, 2025, the board of directors declared a cash dividend at an annualized rate of 7.74 percent based on daily average capital stock balances outstanding during the fourth quarter of 2024. The dividend, including dividends classified as interest on mandatorily redeemable capital stock, amounted to $41.3 million and was paid on March 4, 2025.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, with the participation of the president and chief executive officer and chief financial officer, as of December 31, 2024. Based on that evaluation, our president and chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024.

Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

None

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.


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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our board of directors is constituted of a combination of member directors (each of whom must be a director or officer of a member) nominated and elected by our members on a state-by-state basis and independent directors nominated by our board and elected by a plurality of all our members. Our board of directors is currently constituted of eight member directorships and seven independent directorships. Three of the independent directorships are designated as "public interest" with a minimum of two required by law.

An FHFA regulation (the Election Regulation) regarding FHLBank board of director elections and director eligibility gives the Director of the FHFA the annual responsibility to determine the size of each FHLBank's board of directors. Further, for each FHLBank, the Election Regulation requires the Director of the FHFA to allocate:

•the directorships between member directorships and independent directorships, subject to the requirement that a majority, but no more than 60 percent, of the directorships be member directorships; and
•the member directorships among the states in each FHLBank's district based on the number of shares of FHLBank stock required to be held by members in each state as of December 31 of the prior year, with each state entitled to one directorship, subject to any state statutory minimum. For us, the only state statutory minimum is for Massachusetts, which is entitled to three member directorships.

If, during a director's term of office, the Director of the FHFA eliminates the directorship to which he or she has been elected or, for member directorships, redesignates such directorship to another state, the director's term will end as of December 31 of the year in which the Director of the FHFA takes such action.

If a member director ceases to be a director or officer of a member in the state from which the director was elected, that director loses eligibility as a member director and must leave the board. If an independent director becomes an officer or director of a member or other recipient of advances from us, or ceases to be a bona fide resident of the Bank's district, that director loses eligibility as an independent director and must leave the board.

Based on the requirements of the Election Regulation, the Director of the FHFA allocated our member directorships among the six New England states that comprise our district for each of 2024 and 2023 as follows:

Table 41 - Member Directorships by State
Member Directorships
Connecticut1
Maine1
Massachusetts3
New Hampshire1
Rhode Island1
Vermont1
Total8

Our annual election was completed in the fourth quarter of 2024 and involved elections for one Rhode Island member directorship, and two independent directorships. See — Annual Director Elections below for additional information on the election.

Director Requirements

Board of director elections are conducted in accordance with applicable law, including the Election Regulation, and our governance documents. Accordingly:

•each director is required to be a U.S. citizen;
•no director may be a member of our management;
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•each director is elected for a four-year term (unless the Director of the FHFA designates a shorter term for staggering of the expiration dates of the terms); and
•no director can be elected to more than three consecutive full terms.

Additional requirements are applicable to member directors, independent directors, and nominees for each as set forth in the following two sections. Apart from such additional requirements, however, FHLBanks are not permitted to establish additional eligibility criteria for directorships.

The Election Regulation provides for members to elect directors by ballot, rather than by voting at a meeting. As a result, we do not solicit proxies, and members are not permitted to solicit or use proxies to cast their votes in the election. A member may not split its votes among multiple nominees for a single directorship. There are no family relationships between any current director (or any of the nominees from the most recent election), any executive officer, and any proposed executive officer. No director or executive officer has an involvement in any legal proceeding required to be disclosed pursuant to Item 401(f) of Regulation S-K.

Member Director and Member Director Nominee Requirements and Nominations

Candidates for member directorships in a particular state are nominated by members in that state. Each member that is required to hold stock as of the record date, which is December 31 of the year prior to each election (the election record date), may nominate and vote for representatives from members in its respective state for open member directorships. FHLBank boards of directors are not permitted to nominate or elect member directors, although they may elect a director to fill a vacant member directorship.

Further, the Election Regulation provides that no director, officer, employee, attorney, or agent of the Bank, other than in a personal capacity, may support the nomination or election of a particular individual for a member directorship. In addition to the requirements applicable to all directors, each member director and each nominee for a member directorship must be an officer or director of a member that is in compliance with the minimum capital requirements established by its regulator.

Because of the foregoing requirements for member director nominations and elections, we do not know what factors our members considered in nominating candidates for member directorships or in voting to elect our member directors.

Independent Director and Independent Director Nominee Requirements and Nominations

Candidates for independent directorships are nominated by our board of directors. In addition to the requirements applicable to all directors, each independent director is required to be a bona fide resident of our district, and no independent director may serve as an officer, employee, or director of any of our members or other recipient of advances from us and may not be an officer of any FHLBank. At least two of the independent directors must be public interest directors. Public interest directors, as defined by FHFA regulations, are independent directors who have at least four years of experience representing consumer or community interests in banking services, credit needs, housing, or consumer financial protection. Pursuant to FHFA regulations, each independent director must either satisfy the requirements to be a public interest director or have knowledge or experience in one or more of the following areas: auditing and accounting, derivatives, financial management, organizational management, project development, risk-management practices, and the law.

Our members are permitted to (and we ask them to) identify candidates to be considered for addition to the nominee slate for independent directorship, but to be considered for nomination, an individual must submit an application to us. We are required to submit information about nominees for independent directorships to the FHFA for review prior to announcing such nominations. In addition, our board of directors is required by FHFA regulations to consult with the Advisory Council (a council that reviews and advises us on our AHP program) in establishing the independent director nominee slate. Before nominating any individual for an independent directorship, other than for a public interest directorship, our board of directors must determine that the nominee's knowledge or experience is commensurate with that needed to oversee a financial institution with a size and complexity that is comparable to ours.

As required by regulation, the Bank considers diversity in making independent director nominations, and the Governance Committee of the board (which has responsibility for recommending candidates for nomination for independent directorships) and the board consider this factor in each of their nomination decisions. The Election Regulation permits our directors, officers, attorneys, employees, agents, and Advisory Council to support the candidacy of the board of director nominees for independent directorships.

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In determining whom to nominate for independent directorships, the board of directors selected:

•Thomas J. Curry in 2024, to serve as a public interest director based on his prior experience serving as the Comptroller of the Currency of the United States, as a member of the Federal Deposit Insurance Corporation’s board of directors, and as Commissioner of Banks for the Commonwealth of Massachusetts; and
•Antoinette C. Lazarus in 2024, based on her significant experience in compliance, risk management, regulatory matters and accounting; valuable understanding of the fund management and insurance industries; and involvement in multiple boards of directors of charitable organizations.
•Michael Brown, Rear Admiral, United States Navy (Retired), in 2023, based on his experience in cybersecurity, including as the founder and president of a cybersecurity consultancy and extensive service with the United States government, including the United States Navy, United States Department of Homeland Security, and the Office of the Director of National Intelligence;
•Eric L. Chatman (chairman) in 2023, to serve as a public interest director based on his affordable housing experience, including through his prior role as president and executive officer of the Connecticut Housing Finance Authority and his current role as the executive vice president and chief financial officer of Housing Partnership Network; his prior FHLBank System experience as treasurer of the Federal Home Loan Bank of Des Moines; his private banking experience; and his significant capital markets experience;
•Duncan Barnard in 2022, based on his experience as a chief internal auditor at CLS Bank, a designated financial market utility, managing risk and compliance analytics groups at Accenture and PricewaterhouseCoopers, and as a partner at Ernst & Young;
•Robert Tourigny in 2022, to serve as a public interest director based on his affordable housing experience representing low- to moderate-income families and community interests, including in his current role as the executive director of NeighborWorks Southern New Hampshire; and
•E. Macey Russell in 2021, based on his experience as a partner at Choate, Halle & Stewart, LLP, advising on complex commercial litigation and representing financial institutions, banks, business, and corporations in disputes involving a variety of matters and his significant expertise in matters of diversity, equity and inclusion in the legal profession.

Further, directors Chatman, Curry and Lazarus had been independent directors of the Bank prior to their most recent nominations, and our board of directors considered their experience gained from serving on our board in selecting them for their most recent nominations.

Additional information on the backgrounds of our directors, including these independent directors, is available under — Information Regarding Current Directors.

Annual Director Elections

For the election of both member and independent directors, each member eligible to vote is entitled to cast by ballot one vote for each share of stock that it was required to hold as of the election record date, subject to the limitation that no member may cast more votes than the average number of shares of our stock that are required to be held by all members located in such member's state. Eligible members are permitted to vote all their eligible shares for one candidate for each open member directorship in the state in which the member is located and for each open independent directorship. For independent directors, unless the board of directors nominates more persons than there are independent directorships to be filled in an election, the candidates must receive at least 20 percent of the number of votes eligible to be cast in the election to be elected. If no nominee receives at least 20 percent of the eligible votes, the Election Regulation requires us to identify additional nominees and conduct additional elections until the directorship is filled.

As contemplated by the Election Regulation, no in-person meeting of the members was held in connection with the election. Information about the results of the election was reported to the members via email and on current report on Form 8-K filed with the SEC on October 25, 2024, as supplemented by a Form 8-K/A filed with the SEC on January 24, 2025.

Information Regarding Current Directors

The following table sets forth certain information regarding each of the directors currently serving on the Bank’s board.

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Table 42 - Director Information

NameDirector TypeDirector SinceCurrent Term ExpiresBoard Committees
Duncan BarnardIndependentJanuary 1, 2023December 31, 2026(a), (b), (c), (h)
Donna L. BoulangerMemberJanuary 1, 2014December 31, 2025(d), (f), (g)
Michael A. BrownIndependentJanuary 1, 2024December 31, 2027(c), (e), (h)
Caroline R. CarpenterMemberJanuary 1, 2023December 31, 2026(e), (g), (h)
Eric L. ChatmanIndependentJune 16, 2014December 31, 2027(a), (i)
Thomas J. CurryIndependentJanuary 1, 2021December 31, 2028(a), (d), (e), (f)
Antoinette C. LazarusIndependentJanuary 1, 2017December 31, 2028(a), (b), (d), (f)
Edward F. Manzi, Jr.MemberJanuary 1, 2020December 31, 2027(a), (b), (c), (g)
Kevin D. MillerMemberJanuary 1, 2023December 31, 2026(a), (b), (c), (d)
William M. ParentMemberJanuary 1, 2022December 31, 2025(a), (b), (f), (h)
David J. RotatoriMemberJanuary 1, 2022December 31, 2025(c), (g), (h)
E. Macey RussellIndependentJanuary 1, 2022December 31, 2025(a), (e), (f), (g)
Robert TourignyIndependentJanuary 1, 2023December 31, 2026(b), (d), (e)
Gregg C. TumeinskiMemberJanuary 1, 2025December 31, 2028(e), (g), (h)
John C. WitherspoonMemberJanuary 1, 2016December 31, 2027(a), (c), (d), (f)
_______________________
a.Executive Committee
b.Audit Committee
c.Finance Committee
d.Governance/Government Relations Committee
e.Housing & Community Development Committee
f.Human Resources and Compensation Committee
g.Risk Committee
h.Technology Committee
i.Chairman of the Board, ex officio member of all committees

Member Directors

The member directors currently serving on the board of directors provided the information set forth below regarding their principal occupation, business experience, and other matters.

Donna L. Boulanger, age 71, has served as chief executive officer and director (formerly trustee) of North Brookfield Savings Bank, located in North Brookfield, Massachusetts, from February 2008 through April 1, 2021, when she served as only chief executive officer and no longer president until her retirement on April 5, 2022. Since January 2022, she has also served as director and trustee, respectively, of its holding companies, TruNorth Bancorp, Inc., and TruNorth Bancorp, MHC.

Caroline R. Carpenter, age 59, has served as president and chief executive officer of National Bank of Middlebury, located in Middlebury, Vermont, since January 2015, and, prior to that, also served as its chief operating officer, executive vice president, technology manager, and information security officer. She is also a board member and executive vice president of Middlebury National Corporation, the single entity holding company of National Bank of Middlebury. Ms. Carpenter also serves on the board of Community Financial Services Group, a trust and wealth management company, which is collectively owned by National Bank of Middlebury, Woodsville Guaranty Savings Bank, and Community National Bank.

Edward F. Manzi, Jr., age 65, has served as president and chief executive officer of Fidelity Co-Operative Bank, located in central Massachusetts, since July 1997, and has served there also as chairman since August 2010. Mr. Manzi is also a certified public accountant.

Kevin D. Miller, age 58, a certified public accountant, has served as chief operating officer and chief financial officer of Profile Bank in Rochester, New Hampshire, since 2007. Prior to that, Mr. Miller served as chief financial officer of First Seacoast Bank, vice president of finance at East Boston Savings Bank, and partner at T.C. Edwards & Co., PC., an accounting firm. Mr.
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Miller also currently serves on the board of directors of the Rochester, New Hampshire, Chamber of Commerce and as a trustee of the New Hampshire Bankers Association Insurance Trust.

William M. Parent, age 63, has served as chief strategy officer of bankESB, formerly known as Easthampton Savings Bank, located in Easthampton, Massachusetts, since October 2022. Prior to that, Mr. Parent served as president, chief executive officer, and director of Envision Bank in Quincy, Massachusetts, and its parent, Randolph Bancorp, since April 2020. From June 2010 through April 2019, Mr. Parent served as president, chief executive officer, and director of Blue Hills Bank and Blue Hills Bancorp, Inc., in Norwood, Massachusetts. From April 2019 through February 2020, Mr. Parent served as director of Rockland Trust Company and Independent Bancorp, Inc., in Rockland, Massachusetts, following its acquisition of Blue Hills Bank. Mr. Parent is a non-practicing certified public accountant.

David J. Rotatori, age 53, has served as president and a director of Ion Bank in Naugatuck, Connecticut, and its parent, Ion Financial MHC, since July 2017, and also as chief executive officer since January 2019. Before his promotion to president of Ion Bank, he was chief risk officer there since September 2009, chief financial officer since June 2012, and also served as corporate secretary for several years. He also worked at Ion Bank for five years early in his career as a staff accountant and internal auditor. Mr. Rotatori’s previous experience includes senior financial roles at People’s United Bank (one year) and Webster Bank (ten years), both in Connecticut, and as a senior accountant at KPMG (three years).

Gregg C. Tumeinski, age 59, joined Beacon Mutual Insurance Company in Warwick, Rhode Island in 2021 as the chief financial officer, and now serves as the chief financial and growth officer. Mr. Tumeinski has over 25 years experience in successively more senior financial roles at New England based insurance companies, including Hanover Insurance Group and Liberty Mutual Insurance, and as an examiner for the Office of the Comptroller of the Currency of the United States.

John C. Witherspoon, (vice chairman) age 68, has served as a director of Skowhegan Savings Bank in Skowhegan, Maine, since November 2007 and served there also as president and chief executive officer from November 2007 until December 2019. Prior positions included serving as chief executive officer of the Finance Authority of Maine between 2004 and 2007, and as president and chief executive officer of United Kingfield Bank and its predecessor, Kingfield Savings Bank, from 1984 until 2004.

Independent Directors

The independent directors currently serving on the board of directors provided the following information about their principal occupation, business experience, and other matters.

Duncan Barnard, age 59, since 2018, has served as the chief internal auditor for CLS Bank, a designated financial market utility headquartered in New York, New York. Prior to his work at CLS Bank, Mr. Barnard served as managing director, finance and risk practice at Accenture, managing director, risk and compliance analytics practice at PricewaterhouseCoopers, and partner at Ernst & Young.

Michael A. Brown, age 66, Rear Admiral, United States Navy (Retired), is the founder and president of Spinnaker Security LLC, established in 2018, a cybersecurity consulting business focused on understanding, identifying, and mitigating business risks associated with cybersecurity. Prior to that role and starting in 2012, Mr. Brown served in successively more senior leadership roles at RSA Federal LLC and RSA Security LLC, computer and network security companies primarily providing identity security solutions. Prior to serving in those roles, Mr. Brown served in several cybersecurity related leadership roles for the United States Department of Homeland Security, the Office of the Director of National Intelligence, and the United States Navy.

Eric L. Chatman, (chairman) age 64, has served as the executive vice president and chief financial officer of Housing Partnership Network, a network of affordable housing and community development nonprofits, since July 2017. He founded and was president of The Chatman Group, LLC, a consulting and advisory firm focused on affordable housing and financial advisory services for non-profits, housing finance authorities, and financial institutions from 2015 to 2017. Mr. Chatman served as president and executive director of the Connecticut Housing Finance Authority from 2012 until 2015 and, in that capacity, was responsible for the policy development, strategic planning and execution of the Connecticut Housing Finance Authority affordable housing finance mission. Prior to serving in that role, Mr. Chatman served as deputy director and chief financial officer of the Iowa Finance Authority from 2008 to 2012. Mr. Chatman has also held various corporate finance, treasury, and capital markets roles, both domestic and international, including treasurer of the FHLBank of Des Moines and division manager, treasury department, at the African Development Bank.

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Thomas J. Curry, age 68, now retired, served as a partner at the law firm Nutter McClennen & Fish LLP in Boston, Massachusetts from November 2017 through March 2022. Mr. Curry served as Comptroller of the Currency of the United States from April 2012 to May 2017, as a member of the Federal Deposit Insurance Corporation’s board of directors from 2003 to May 2017, and as Commissioner of Banks for the Commonwealth of Massachusetts from 1990 to 1991 and from 1995 to 2003.

Antoinette C. Lazarus, age 61, served several roles at Ares Management Corporation, a global funds management company with offices in West Hartford, Connecticut, from 2021 to August 2024, most recently as the managing director, head of corporate compliance and previously as managing director, head of secondaries. Prior to her roles with Ares Management, she served as chief compliance and risk officer for Landmark Partners, a Simsbury, Connecticut-based funds management company from 2006 to 2021. She also served as Landmark Partners’ privacy officer and anti-money laundering officer. Ms. Lazarus formerly served as vice president/compliance for prudential financial, Inc.; fund accounting for CIGNA Retirement and Investment Services; and in multiple fund accounting, reporting, and valuation roles at Aetna Financial Services. Ms. Lazarus started her career as a fund accountant at Phoenix Equity Planning Corp. Each of her roles at Prudential, CIGNA, Aetna, and Phoenix Equity were located in Hartford, Connecticut.

E. Macey Russell, age 66, worked as a partner at the Boston law firm of Choate, Hall & Stewart since May 2002 and retired as of December 31, 2023. Mr. Russell’s practice areas included complex commercial litigation and representing financial institutions, banks, businesses, and corporations in disputes involving a variety of matters. He has a national reputation as an expert on corporate diversity, equity and inclusion, particularly in the legal profession. Previously, he was a partner at the Boston law firm Peabody & Arnold for seven years, an associate and a partner at the Boston law firm Riemer & Braunstein for nine years, and started his career as a law clerk for the Massachusetts Superior Court. Mr. Russell also served on the Board of Trustees of Suffolk University for ten years, and on the Board of Overseers of Beth Israel Deaconess Medical Center for ten years. Mr. Russell is Chairman and President of the Augustus A. White III Institute for Healthcare Equity.

Robert Tourigny, age 56, has served as the executive director of NeighborWorks Southern New Hampshire since 2005. Prior to his time at NeighborWorks Southern New Hampshire, Mr. Tourigny’s roles at both Southern Maryland Tri-County Community Action Committee and Coastal Enterprises in Maine gave him extensive experience developing affordable housing projects – both rental and homeownership – in Maine, Maryland and New Hampshire. In total, Mr. Tourigny has over 30 years of experience in affordable housing representing low- and moderate-income families and community interests.

Audit Committee Financial Expert

Our board of directors has a standing Audit Committee that satisfies the "Audit Committee" definition under Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Our board of directors' Audit Committee Charter is available in full on our website at the following location: https://www.fhlbboston.com/fhlbank-boston/governance.

The board has determined that Directors Lazarus and Manzi are the "audit committee financial experts" within the meaning of the SEC rules. Ms. Lazarus and Mr. Manzi are not auditors or accountants for us, do not perform fieldwork, and are not Bank employees. In accordance with the SEC's safe harbor relating to Audit Committee financial experts, a person designated or identified as an Audit Committee financial expert will not be deemed an "expert" for purposes of federal securities laws. In addition, such a designation or identification does not impose on any such person any duties, obligations, or liabilities that are greater than those imposed on such persons as a member of the Audit Committee and board of directors in the absence of such designation or identification and does not affect the duties, obligations, or liabilities of any other member of the Audit Committee or board of directors. See Part III — Item 13 — Certain Relationships and Related Transactions, and Director Independence for additional information regarding Ms. Lazarus's independence.

Report of the Audit Committee

The Audit Committee assists the board in fulfilling its oversight responsibilities for (1) the integrity of the Bank’s financial statements and financial reporting processes, (2) management's implementation and maintenance of effective administrative, risk management, operating, and accounting internal control systems, (3) compliance with legal and regulatory requirements, (4) assessing the qualifications, independence, and performance of the external auditors, and (5) the constitution, independence, and performance of our internal audit function. The Audit Committee appoints, compensates, retains and oversees the work of the independent registered public accounting firm. The Audit Committee has adopted, and annually reviews, a charter outlining the practices it follows.

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Management is responsible for the Bank's internal controls and the financial reporting process. PwC, our independent registered public accounting firm, is responsible for performing an independent audit of the financial statements and the effectiveness of internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). Our internal auditors are responsible for preparing an annual audit plan and conducting internal audits under the direction of the chief audit officer, who is accountable to the Audit Committee. The Audit Committee acts in an oversight role with the responsibility to monitor and oversee these processes.

The Bank is one of 11 FHLBanks that, together with the Office of Finance, comprise the FHLBank System. The Office of Finance has responsibility for the issuance of COs on behalf of the FHLBanks and for compiling a combined financial report of the FHLBanks. Accordingly, the FHLBank System has determined that it is beneficial to have a single independent registered public accounting firm responsible for the audit of the FHLBank System and each FHLBank. The FHLBanks and Office of Finance collaborate in selecting, setting the compensation of, and evaluating the independent registered public accounting firm, but the responsibility for appointing the independent registered public accounting firm for each FHLBank remains solely with the audit committee of each individual FHLBank and the Office of Finance.

PwC has been the independent auditor for the Bank and the FHLBank System since 1990. The Bank’s Audit Committee engages in rigorous evaluations each year before appointing an independent registered public accounting firm. In connection with the appointment of the Bank’s independent registered public accounting firm, the Audit Committee’s evaluation included consultation with the audit committees of the other FHLBanks and the Office of Finance. Specific considerations included:

•an analysis of the risks and benefits of re-engaging the independent auditor versus engaging a different firm, including consideration of:
◦PwC engagement audit partner, engagement quality review partner, and audit team rotation,
◦PwC’s tenure as the Bank’s and the FHLBank System’s independent auditor,
◦benefits associated with engaging a different firm as independent auditor,
◦potential disruption and risks associated with changing the Bank’s auditor; and
◦PwC’s depth of understanding of our business, operations, and accounting policies and practices;
•PwC’s historical and recent performance on the Bank’s audit, including the results of an internal survey of PwC’s service and quality;
•an analysis of PwC’s known legal risks and significant proceedings;
•external data relating to audit quality and performance, including recent PCAOB reports on PwC and its peer firms, as well as metrics indicative of audit quality; and
•the appropriateness of PwC’s fees, on both an absolute basis and as compared to its peer firms.

Audit fees represent fees for professional services provided in connection with the audit of the Bank’s annual financial statements and internal control over financial reporting and reviews of the Bank’s quarterly financial statements, regulatory filings, consents and other SEC matters.

The Audit Committee has reviewed and approved the fees paid to the independent registered public accounting firm for audit, audit related and other services. The Audit Committee has determined that PwC does not provide any non-audit services that would impair PwC’s independence.

In accordance with SEC rules, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to the Bank. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The process for selection of the Bank’s lead audit partner pursuant to this rotation policy involves a meeting between the Chair of the Audit Committee and the candidate for the role, as well as discussion by the full Audit Committee and with management. Our current engagement partner began serving in this role in 2020.

Based on its reviews discussed above, the Audit Committee recommended to the board of directors the reappointment of PwC as the Bank's independent registered public accounting firm for 2025.

The Audit Committee discussed with our internal auditors and PwC the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and PwC, with and without management present, to discuss the results of their audits, their evaluations of the Bank's internal controls, and the overall quality of the Bank's financial reporting.

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The Audit Committee has reviewed and discussed the audited financial statements with management, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant accounting judgments and estimates, and the clarity of disclosures in the financial statements. In addressing the quality of management's accounting judgments, members of the Audit Committee asked for representations and reviewed certifications prepared by the chief executive officer and chief financial officer that the audited financial statements present, in all material respects, the financial condition and results of operations, and have expressed to both management and PwC their general preference for conservative policies when a range of accounting options is available. In meeting with PwC, the Audit Committee asked them to address and discuss their responses to several questions that the Audit Committee believes are particularly relevant to its oversight. These questions include:

•Based on PwC's experience, and their knowledge of the Bank, do the financial statements present fairly, with clarity and completeness, the Bank's financial position and performance for the reporting period in accordance with GAAP and SEC disclosure requirements?
•Based on PwC's experience, and their knowledge of the Bank, has the Bank implemented internal controls and internal audit procedures that are appropriate for the Bank?

The Audit Committee believes that by focusing its discussions with PwC, it promotes a meaningful discussion that provides a basis for its oversight judgments.

The Audit Committee has discussed with the independent auditors the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee has received from PwC the written disclosures and the letter required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, and the Audit Committee has discussed with PwC their independence.

In reliance on these reviews and discussions, and the report of the independent registered public accounting firm, the Audit Committee has recommended to the board of directors, and the board of directors has approved, that the audited financial statements be included in the Bank's annual report on Form 10-K for the year ended December 31, 2024, for filing with the SEC.

As of the date of filing this annual report on Form 10-K, the members of the Audit Committee are:

Duncan Barnard, Chair
Edward F. Manzi, Jr., Vice Chair
Antoinette C. Lazarus
Kevin D. Miller
William M. Parent
Robert Tourigny
Eric L. Chatman, ex officio

Information about our Executive Officers

The following table sets forth the names, titles, and ages of our executive officers:
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Table 43 - Executive Officers
Name (1)
TitleAge
Timothy J. BarrettPresident and Chief Executive Officer66
Frank NitkiewiczExecutive Vice President, Chief Operating Officer and Chief Financial Officer63
Brian S. ChaseSenior Vice President, Chief Audit Officer58
Brian G. DonahueSenior Vice President, Controller and Chief Accounting Officer58
Ana C. DyerSenior Vice President, Chief Business Officer57
Barry F. GaleSenior Vice President, Chief Human Resources Officer65
Neil B. HiralallSenior Vice President, Chief Risk Officer58
Sean R. McRaeSenior Vice President, Chief Information Officer60
Keith R. WalshSenior Vice President, General Counsel and Corporate Secretary45
Kenneth A. WillisSenior Vice President, Housing and Community Investment59
_________________________
(1)    Each of the executive officers listed serves on our Management Committee, with the exception of Mr. Donahue.

Timothy J. Barrett has served as president and chief executive officer since December 2021. Prior to assuming that position, Mr. Barrett served as executive vice president and treasurer from January 2019 until November 2021, and senior vice president and treasurer from November 2010 until December 2018. Prior to joining the Bank, he was assistant treasurer at FMR LLC, the parent company of Fidelity Investments from September 2008 to October 2010; as treasurer and chief investment officer at Fidelity Personal Bank & Trust from August 2007 to September 2008; as managing director, global treasury at Investors Bank & Trust from September 2004 to July 2007; in various senior roles in treasury at FleetBoston Financial (including merged entities) from 1985 to 2004; and as an investment manager for Citibank, N.A. from 1981 to 1985. He currently serves as a member of the board of directors of the Office of Finance. He earned his B.A. from St. Anselm College and his M.B.A. from Rensselaer Polytechnic Institute.

Frank Nitkiewicz has served as executive vice president, chief operating officer, and chief financial officer since January 2022. Prior to assuming that position, Mr. Nitkiewicz served as executive vice president and chief financial officer since January 2006, senior vice president, chief financial officer, and treasurer from August 1999 until December 31, 2005, and senior vice president and treasurer from October 1997 to August 1999. Mr. Nitkiewicz joined us in 1991. Previously, he served as an investment officer at Connecticut National Bank from 1988 to 1991 and a retail banking officer at Sovran Bank, N.A., from 1984 to 1987. He holds a B.S. and a B.A. from the University of Maryland and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University.

Brian S. Chase has served as senior vice president and chief audit officer since January 2022, and previously as vice president and chief audit officer since June 2018. Prior to that, Mr. Chase served as vice president and director of internal audit since June 2014. Before joining us in 2014, among other roles, Mr. Chase, worked for 17 years at State Street Bank and Trust Company in successively more responsible roles within their internal audit department and seven years at Ernst & Young in successively more responsible roles as a financial auditor. Mr. Chase earned a B.S. from the University of Massachusetts Boston, and is a certified public accountant.

Brian G. Donahue has served as senior vice president, controller, and chief accounting officer since January 2013, and previously as first vice president, controller and chief accounting officer since February 2010. Prior to assuming that position, Mr. Donahue served as first vice president and controller since 2007, vice president and controller from 2004 to 2007, assistant vice president and assistant controller from 2001 to 2004, and in progressively responsible positions from 1992 to 1999, when he served as assistant controller. Mr. Donahue worked for two years as assistant vice president and division controller for State Street Bank and Trust Company from 1999 to 2001. Prior to joining us in 1992, Mr. Donahue was an associate with Price Waterhouse. Mr. Donahue earned a B.B.A. from James Madison University and an M.B.A. from Boston University, and is a certified public accountant.

Ana C. Dyer has served as senior vice president, chief business officer since January 2022, and previously as senior vice president, member services since January 2020, and first vice president and director of sales and business development since joining the Bank in 2012 from Webster Bank, where she served as senior vice president, regional manager in their business and professional banking division. Ms. Dyer’s career in financial services began in 1989 at Fleet National Bank and included
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positions at Shawmut Bank, Bank of Boston, and Bank of America prior to joining Webster Bank in 2005. Ms. Dyer earned her B.A. from Harvard University.

Barry F. Gale has served as senior vice president, chief human resources officer and director of the Bank’s office of minority and women inclusion since April 2013. Mr. Gale also joined the board of the Northeast Human Resources Association in 2019. Prior to employment with us, Mr. Gale served as senior director of human resources at Thomson Reuters, where he spent 16 years in progressively senior roles. Prior to that position, Mr. Gale served in human resources roles at Citizens Financial Group and The Colonial Group. Mr. Gale holds a B.S. in business management from the University of Massachusetts Boston.

Neil B. Hiralall has served as senior vice president and chief risk officer effective January 2025. Prior to this role he served as vice president and deputy chief risk officer since June 2024. Between January 2020 and June 2024, Mr. Hiralall served as vice president and director of market risk management and, between October 2014 and January 2020, as vice president director of asset and liability management. Prior to joining the Bank, he held several senior level treasury, risk management, audit, and compliance roles at Brown Brothers Harriman & Co., Investors Bank and Trust, Bank of New York Mellon and Fleet Boston Financial. He holds a B.S. in Physics with minors in chemistry and mathematics from Edinboro University of Pennsylvania.

Sean R. McRae has served as senior vice president and chief information officer since April 2014. Prior to employment with us, Mr. McRae worked for Thomson Reuters for 19 years in a variety of technology leadership roles, the most recent of which was serving as chief technology officer of their global emerging markets business. Prior to Thomson Reuters, Mr. McRae served as software engineer, application architect, network engineer, business analyst, and project manager at John Hancock in Boston. Mr. McRae holds a B.S. in Computer Science from Bridgewater State College.

Keith R. Walsh has served as senior vice president and general counsel since July 2022. Mr. Walsh is responsible for the legal, government relations, vendor management, and corporate secretary functions of the Bank and also serves as the Bank’s ethics officer. Mr. Walsh joined the Bank as an attorney in 2010 and has served in progressively more responsible positions since that time. Prior to his employment with the Bank, Mr. Walsh spent 5 years as an associate in the capital markets department at the Boston law firm of Brown Rudnick LLP. Mr. Walsh holds a B.A. from the University of Massachusetts Amherst and a J.D. from Boston College Law School.

Kenneth A. Willis has served as senior vice president housing and community investment since January 2020. Prior to assuming that position, Mr. Willis served as first vice president and director of our housing and community investment department since January 2006 and in successively more senior roles within our housing and community investment department since joining us in 1997. Previously, he served as a community reinvestment act loan officer with BayBank. He holds a B.A. from Eastern Nazarene College and an M.B.A. from the University of Maryland.

Code of Ethics and Business Conduct

We have adopted a Code of Ethics and Business Conduct that sets forth the guiding principles and rules of behavior by which we operate and conduct our daily business with our customers, vendors, shareholders, and with our employees. The Code of Ethics and Business Conduct applies to all directors and employees, including the chief executive officer, chief financial officer, and chief accounting officer, and all other professionals serving in a finance, accounting, treasury, or investor-relations role. The purpose of the Code of Ethics and Business Conduct is to avoid conflicts of interest and to promote honest and ethical conduct and compliance with the law, particularly as related to the maintenance of our financial books and records and the preparation of our financial statements. The Code of Ethics and Business Conduct can be found on our website (https://www.fhlbboston.com/fhlbank-boston/governance/). All future amendments to, or waivers from, the Code of Ethics and Business Conduct will be posted on our website. The information contained within or connected to our website is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this or any report filed with the SEC.

Insider Trading Policy

As a cooperative, Bank stock is not publicly traded and is solely owned by its member institutions (or, in limited instances, by former member institutions) for the purposes of capitalizing the Bank in support of members’ borrowing. Directors of the Bank include representatives of member institutions. The Bank does not sell its stock to or repurchase its stock from any individuals. Purchases, sales and/or other dispositions of the Bank’s shares are governed by regulatory requirements applicable to the Bank and by the Bank’s Capital Plan. The FHLBanks source their funding by issuing debt securities, consolidated obligations issued as bonds and discount notes, that are sold by dealers to investors in the public (for more information see Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources
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— Debt Financing — Consolidated Obligations. In addition to its Capital Plan, the Bank has adopted an Insider Trading Policy it believes is reasonably designed to promote compliance with insider trading laws, rules, regulations, and listing standards applicable to the Bank. This policy is filed as Exhibit 19.1 to this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

We attract, reward, and retain senior managers, including our president, chief operating and chief financial officer, and other most highly compensated executive officers (the named executive officers) by offering a total rewards package that includes base salary, cash incentive opportunities, qualified and nonqualified retirement plans, and certain perquisites.

For the year ended December 31, 2024, the named executive officers were:
Timothy J. BarrettPresident and Chief Executive Officer
Frank NitkiewiczExecutive Vice President, Chief Operating Officer and Chief Financial Officer
Barry F. GaleSenior Vice President, Chief Human Resources Officer and Office of Minority and Women Inclusion Director
Sean R. McRaeSenior Vice President and Chief Information Officer
Keith R. WalshSenior Vice President and General Counsel

Compensation program objectives are set forth in our Total Rewards Philosophy (defined below), which was used in determining the total rewards packages for the named executive officers for 2024. Total rewards packages were based on several factors, including, but not limited to, (i) tenure, experience, and complexity of the position, which primarily determines base salary, (ii) each named executive officer’s performance, which primarily determines increases to base salary, and (iii) needing to be competitive in the labor market for senior managers in which we compete, which primarily determines retirement plans and cash incentive opportunities. Overall, the named executive officers were awarded increases in base salary based on our Total Rewards Philosophy, effective January 1, 2024. Additionally, we adopted an executive incentive plan (an EIP) on May 30, 2024 (the 2024 EIP). Cash incentives awarded under the 2024 EIP were determined based on the criteria set forth in the 2024 EIP, subject to the Human Resources and Compensation Committee’s (the Compensation Committee) discretion to adjust the 2024 EIP awards for any relevant and unforeseen circumstances.

Compensation Committee

Pursuant to a charter approved by the board of directors, the Compensation Committee develops and recommends the compensation philosophy for the board of directors' review and approval, including policies and plans applicable to the compensation philosophy, such as compensation, benefits, and incentive plans in which the named executive officers may participate.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee has at any time been an officer or employee with us. No executive officer has served or is serving on our board of directors or the compensation committee of any entity whose executive officers served on the Compensation Committee of our board of directors.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the Compensation Committee's review and discussion, they recommended to the board of directors that the Compensation Discussion and Analysis be included in the annual report on Form 10-K for the year ending December 31, 2024.

The members of the Compensation Committee are:

Antoinette C. Lazarus, Chair
Thomas J. Curry, Vice Chair
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Donna L. Boulanger
William M. Parent
E. Macey Russell
John C. Witherspoon
Eric L. Chatman, ex officio

Shareholder Advisory Vote on Executive Compensation

We are governed and directors are elected as described under Part III — Item 10 — Directors, Executive Officers and Corporate Governance. As such, we do not engage in a proxy process and have not otherwise engaged in any activity that would require a consent solicitation of our members. Accordingly, there is no shareholder advisory vote on executive compensation in determining our compensation policies and decisions.

Objectives of our Compensation Program and What it is Designed to Reward

We are committed to providing a compensation package that enables us to attract, develop, retain, motivate, and reward highly skilled executive officers, including the named executive officers, who contribute significantly to the achievement of our mission, goals, and objectives. The FHFA reviews compensation of the named executive officers, as described under — FHFA Oversight of Executive Compensation.

In 2019, the Compensation Committee retained McLagan, a division of Aon plc’s Human Capital practice (McLagan), a compensation consulting firm specializing in the financial services industry, to assist with an updated comprehensive total rewards study. A major outcome of the study was the adoption in 2020 of an updated Total Rewards Philosophy, the principles of which are the basis for determining total compensation for the named executive officers. The Compensation Committee retained McLagan again in 2023 to refresh the information, resulting in the adoption of the supplemental executive retirement plan in 2024.

The Total Rewards Philosophy defines compensation goals, competitive market and peer groups, components and comparability of the total rewards package, performance evaluation and compensation, and responsibility for administration and oversight of compensation and benefits programs. The Compensation Committee and board of directors are responsible for periodically reviewing the Total Rewards Philosophy to ensure consistency with our overall business objectives, the competitive market, and our financial condition.

The Total Rewards Philosophy provides for a total rewards structure for employees, including the named executive officers, that is designed to attract, retain, and motivate employees while supporting business and mission objectives throughout economic cycles. The Total Rewards Philosophy is designed to deliver a total rewards program that provides more certainty and lower employment volatility for the Bank through higher fixed compensation, competitive annual incentives, and distinctive benefits reinforcing our lower overall risk appetite and emphasis on maintaining safe and sound operations.

Annual incentive award plans are designed to align payout opportunities with achievement of our financial, operational, and mission goals and limit excessive risk-taking while recognizing team results and individual contributions. The deferral of a portion of the annual incentive award for executives and senior management is designed to align with regulatory guidance, emphasize safe and sound operations, and discourage excessive risk-taking activities.

Risk and Bank Compensation Practices and Policies

Our chief risk officer and our chief human resources officer jointly engage in periodic reviews of our compensation practices and policies in an effort to ensure that such practices or policies do not result in risks that are reasonably likely to have a material adverse effect on the Bank. They report on the results of these reviews to the Compensation Committee at least annually. In developing that report, compensation policies and practices are reviewed first on a stand-alone basis, then in combination with enterprise-wide risk-management controls that constrain risk-taking, and finally in conjunction with procedural risk controls at the business department level that are intended to further mitigate risk-taking activities. In February 2025, the Compensation Committee concluded that the Bank’s Total Rewards Philosophy, including the EIPs in effect, are not reasonably likely to have a material adverse effect on the Bank based on the report and related discussions.

Additionally, under the 2024 EIP, 50 percent of the total 2024 award amount is deferred and will be paid by March 31, 2027, which deferral is intended to align management's interests with risk-management objectives. As described under — Executive Incentive Plan — Additional Conditions to Deferred Awards, the deferred awards are subject to reduction or elimination in
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certain cases including in the case of certain material revisions to our financial results or to data used to determine the total 2024 award amount, which are intended to further reduce the risk of imprudent risk-taking.

The payment of the deferred awards is subject to the final approval of the Compensation Committee, and review and, to the extent required, non-objection by the FHFA.

In addition to our internal processes, the FHFA may review the executive compensation at any time and may prohibit any such executive compensation that the FHFA determines is not reasonable and comparable for employment in other similar businesses involving similar duties and responsibilities. In the exercise of this review and determination, the FHFA has issued certain compensation principles and guidance, one of which is that executive compensation should be consistent with sound risk management and preservation of the par value of FHLBank stock. The FHFA reviews all executive compensation relative to these principles, guidance, and such other factors as the FHFA determines to be reasonable and comparable. For additional information on this oversight, see — FHFA Oversight of Executive Compensation.

Overview of the Labor Market for Senior Managers

The labor market in which we compete for senior managers, including the named executive officers, is across a broad group of organizations representing different industries. In particular, we experience a greater frequency of competition for talent with commercial banks and financial services firms with capital markets, investment, risk, and wholesale lending capabilities, and publicly traded banks in a defined asset range. We may also consider other peer groups, such as local market peers and information-technology-specific peers for roles that are not industry specific. We also recognize that a “one-size-fits-all” approach to compensation may need to be adjusted at times to attract employees who may have critical skills and to attract and retain the most qualified and highly sought-after staff. The local financial services labor market is dominated by asset-management firms that are considered labor market competitors even though they are not business competitors. As a result, we may, at times, have to expand recruiting efforts to a regional or national basis to recruit named executive officers and other senior executives with the specialized skills needed to manage the complex risks of a wholesale lending and mortgage loan investment operation. For these reasons, we must be positioned to offer comparable compensation packages to attract, retain, motivate, and reward top talent. When setting compensation levels, we also consider the cost of living in the Boston area.

Our competitive peer groups for our named executive officers include:

•The commercial banks with assets between $10 billion and $20 billion. For executive level positions, we may consider the scale and scope of the role in making a market comparison, often considering division heads of large peers as appropriate market benchmarks, rather than an overall head of a function or business area; and
•The other FHLBanks, particularly for determining mix of pay within the total rewards package due to the similarity in structure, responsibilities, mission, mix-of-pay and total rewards within a cooperative, government-sponsored-enterprise structure.

Peer groups are considered in setting the total rewards package. However, no specific target among the peer groups is selected for named executive officer compensation. Rather, the data is used generally to ensure the total rewards packages remain competitive as determined by the Compensation Committee relative to those peer groups.

The commercial banks with assets between $10 billion and $20 billion peer group serves as a relevant comparator group for competitive positioning of the total rewards package for those positions requiring financial services experience, including the named executive officers. Where this peer group does not include a sufficient number of candidates to generate a statistically valid comparison, we may consider commercial banks with assets between $20 billion and $50 billion as a secondary peer group. Both the Bank and commercial banks engage in wholesale lending and share similarities in several functional areas, particularly middle-office and support areas. The commercial bank peer group consists mostly of banks with multiple product lines/offerings and significant assets. The most significant difference between us and the commercial bank peer group is that we are focused on wholesale banking activities while the peer group generally engages in both wholesale and retail activities. The market analysis focuses on the wholesale activities and excludes retail-focused positions. We worked with McLagan to match several of the positions held by the named executive officers to comparable positions in the commercial banks with assets between $10 billion and $20 billion in the McLagan Compensation Database.

The other FHLBanks serve as one peer group for determining the proportionate mix of pay and benefits. While all of the FHLBanks share the same mission, they may differ in their relative mix of products and services and location among urban and smaller-city locations, both of which impact labor-market competition and compensation. However, due to the FHLBank System's unique cooperative structure, all FHLBanks generally rely on a similarly structured total rewards package for the
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named executive officers, including base salary, cash incentives, and benefits, since none can offer equity-based compensation opportunities such as those offered at their non-FHLBank labor-market competitors. In 2023, we participated in, and used the results of, the annual McLagan FHLBank System survey of key positions to determine whether the total rewards packages for the named executive officers, including the proportionate mix of pay and benefits, are competitive for each matched position with the addition of a supplemental executive retirement plan as discussed below in more detail.

Named executive officer positions were matched to those survey positions that represented realistic job opportunities based on scope, similarity of positions, experience, complexity, and responsibilities. Realistic job opportunities included positions for which the named executive officers would be qualified at the external firms as well as positions at the firm that we would consider when recruiting for experienced executives.

The following is a list of survey participants that were included in the McLagan Compensation Database, including the Federal Home Loan Banks. Not all participants reported positions that matched the data set for the named executive officers.

Table 44 - List of Survey Participants
BancFirst CorporationFederal Home Loan Bank of IndianapolisLive Oak Bancshares, Inc.
Banner CorporationFederal Home Loan Bank of New YorkMechanics Bank
Bell State Bank & TrustFederal Home Loan Bank of PittsburghMerchants Bancorp
Berkshire Hills Bancorp, Inc.Federal Home Loan Bank of San FranciscoNBT Bancorp Inc.
Bremer Financial CorporationFederal Home Loan Bank of TopekaNorthwest Bancshares, Inc.
Brookline Bancorp, Inc.Federal Home Loan Banks - Office of FinanceOceanFirst Bank
Central Bancompany, Inc.First BancorpOceanFirst Financial Corp.
Columbia Financial, Inc.First Busey CorporationPacific Premier Bank
Community Bank System Inc.First Commonwealth Financial CorporationProvident Financial Services
CVB Financial Corp.First Financial BancorpRenasant Corporation
Dime Community Bancshares, Inc.First Financial Bankshares, Inc.Sandy Spring Bank
Eagle Bancorp Inc. - MDFirst Foundation Inc.Seacoast Banking Corporation of Florida
Enterprise Financial Services CorpFirst Merchants CorporationServisFirst Bancshares, Inc.
FB Financial CorporationFirst United Bank – OKStellar Bancorp, Inc.
Federal Home Loan Bank of AtlantaHeartland Financial USA, Inc.TowneBank - VA
Federal Home Loan Bank of BostonHilltop Holdings Inc.TriState Capital
Federal Home Loan Bank of ChicagoHope Bancorp, Inc.Trustmark Corporation
Federal Home Loan Bank of CincinnatiIndependent Bank Corp.Veritex Holding
Federal Home Loan Bank of DallasIndependent Bank Group, Inc.Washington Trust Bank
Federal Home Loan Bank of Des MoinesInternational Bancshares CorporationWesBanco, Inc.

Data from international banks contained results from their U.S. operations only.

Elements of our Compensation Plan and Why Each Element is Selected

We compensate the named executive officers principally based on their performance, skills, experience, and tenure and the criticality of the role through a package that consists of a mix of base salary, annual and deferred cash-incentive opportunities, qualified and nonqualified retirement plans, and various other health and welfare benefits. From time to time, we will also award special cash bonuses outside of an incentive plan to compensate a named executive officer based on unusual or exemplary circumstances. Each compensation element is discussed in greater detail below. Due to our cooperative structure, we cannot offer equity-based compensation programs, so we may offer higher base salaries, in addition to cash- incentive opportunities, and certain retirement benefits to keep our compensation packages competitive relative to the market and to offset the value of compensation that labor-market competitors might offer through equity-based compensation programs. The named executive officers may also be provided with certain additional perquisites. Although we do not engage in benchmarking, the Total Rewards Philosophy provides that our total rewards package, including that for the named executive officers, should be comparable with the total rewards package for matched positions in the primary peer group, which includes commercial banks with assets between $10 billion and $20 billion and the other FHLBanks, as discussed under — Overview of the Labor Market for Senior Managers above. Historically, the Compensation Committee has set total rewards packages for each of the named executive officers so that their total rewards package of base salary, cash incentives, and retirement plans
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would be comparable with the total rewards packages at the commercial bank peer group, including base salary and incentives, and so that their total cash compensation, that is, base salary plus cash incentives, would be competitive with total cash compensation of the named executive officer's peers at other FHLBanks. The Compensation Committee has been informed by the same data in setting current total rewards packages.

How we Determine the Amount for Each Element of our Compensation Plan

The board sets annual goals and objectives for the chief executive officer to align with our strategic business plan. In general, at the end of each year, the chief executive officer provides the Compensation Committee with a self-assessment of his corporate and individual achievements. Based on the Compensation Committee's evaluation of his performance and review of competitive market data for the defined peer groups, the Compensation Committee determines and approves an appropriate total compensation package. The board of directors, as informed by a market analysis for competitive compensation developed by McLagan, determined and approved a competitive offer for Mr. Barrett as the Bank’s chief executive officer effective December 1, 2021, the date upon which he first assumed the role of president and chief executive officer, and his salary has been adjusted annually generally consistent with merit and adjustment increases granted to staff, including the other named executive officers. In the case of other named executive officers, the chief executive officer reviews individual performance and submits market data and recommendations to the Compensation Committee regarding appropriate compensation. The Compensation Committee reviews these recommendations and submits its recommendations to the full board of directors, which then reviews the recommendations and approves the compensation it considers appropriate, giving consideration to the Total Rewards Philosophy.

The Compensation Committee does not set specific, predetermined targets for the allocation of total rewards between base salary, cash incentives, and benefits, including retirement and other health and welfare plans and perquisites. Rather, the Compensation Committee considers the value and mix of the total rewards package offered to each named executive officer compared with the total rewards package for positions of comparable scope, responsibility, and complexity of position at the two defined peer groups, the incumbent's performance, experience and tenure, and internal equity.

Base Salary

Base salary adjustments for all named executive officers are considered at least annually as part of the year-end annual performance review process and more often if considered necessary by the Compensation Committee during the year, such as in recognition of a promotion or to ensure equity.

After review and nonobjection by the FHFA, the Compensation Committee awarded the named executive officers, an increase in base salary on January 22, 2024, with retroactive application to January 1, 2024. In determining the amount of the increases, the Compensation Committee considered market data from the McLagan 2023 Compensation Database - FHLBank Survey, discussed under — Overview of the Labor Market for Senior Managers above, the economic and employment environments.

Additionally, the Compensation Committee considered the recommendations of Mr. Barrett for the named executive officers based on individual performance, tenure, experience, and complexity of the named executive officer's position and internal equity. Mr. Barrett recommended, and the board of directors awarded at the recommendation of the Compensation Committee, increases in base salary for each of these named executive officers. The percentage increases in base salary were generally consistent with merit and adjustment increases granted to staff.

The following table sets forth the base salary increases:
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Table 45 - Named Executive Officer Salaries
Name and Principal PositionPre-Adjustment Annual Base SalaryPost-Adjustment Annual Base SalaryPercent Increase
Timothy J. Barrett$947,756$992,7744.75%
President and Chief Executive Officer
Frank Nitkiewicz$508,928$530,5574.25%
Executive Vice President, Chief Operating Officer and Chief Financial Officer
Barry F. Gale$341,908$359,0035.00%
Senior Vice President, Chief Human Resources Officer and Office of Minority and Women Inclusion Director
Sean R. McRae$371,199$389,7595.00%
Senior Vice President and Chief Information Officer
Keith R. Walsh$338,263$361,9417.00%
Senior Vice President and General Counsel

2024 Executive Incentive Plan

General Overview of Executive Incentive Plans

Executive incentive plans, such as the 2024 EIP, are cash incentive plans which are reviewed and may be adopted by the Compensation Committee or the board on an annual basis. While executive incentive plans are not necessarily adopted every year, in recent years we have adopted them annually. Generally, executive incentive plans are used to promote achievement of strategic objectives by aligning cash incentive opportunities for those in key leadership roles, including the named executive officers, with our financial performance and strategic priorities. These incentive opportunities are also designed to facilitate retention and commitment of key officers. Executive incentive plans generally include specific goals, such as goals based on profitability, business growth, regulatory examination results and remediation, and operational goals for those in key leadership roles, including the named executive officers.

The Compensation Committee reviews each component of the 2024 EIP's plan design, including eligible participants for Management Committee and any named executive officers determined in accordance with SEC regulations, goals, goal weighting, achievement levels, and payout opportunities for Management Committee and any named executive officers determined in accordance with SEC regulations. The Compensation Committee administers the 2024 EIP and has full power and binding authority to construe, interpret, and administer the 2024 EIP, and other EIP's, and adjust them for relevant and unforeseen circumstances. Such circumstances may include, without limitation, changes in business strategy, termination or commencement of business lines, impact of economic fluctuations, growth or consolidation of the membership base, net income above or below the level projected in the Bank’s Strategic Business Plan, or regulatory or other changes impacting us or the FHLBank System. The Compensation Committee may not make adjustments for extraordinary circumstances that include changes to goals, weights, or levels of achievement without resubmission to the FHFA.

Purpose of the 2024 EIP

The 2024 EIP was intended to:

•promote achievement of our financial plan and strategic objectives in our annual strategic business plan;
•provide a total rewards package that is competitive with other financial institutions in the labor markets in which we compete, including other Federal Home Loan Banks; and
•facilitate the retention and commitment of those in key leadership roles.

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2024 EIP Plan Design

The 2024 EIP was designed to:

•reflect our commitment to our mission of providing reliable liquidity and funding to member institutions and supporting affordable housing and community development;
•reflect a reasonable assessment of our financial situation and prospects;
•reinforce and reward our commitment to conservative, prudent, sound risk-management practices and preservation of the par value of our capital stock;
•tie a significant percentage of incentive awards to our long-term financial condition and performance; and
•recognize the importance of individual performance through metrics linked to our strategic goals and/or objectives of the participant’s principal functions and independent of the areas that they monitor.

2024 EIP Incentive Goals

The 2024 EIP's goals were derived from, or are consistent with, our strategic business plan and objectives and were generally weighted based on desired business outcomes. The goal achievement levels have generally been set so that the target achievement level is consistent with projections in our strategic business plan. For certain nonfinancial EIP goals for which there is no direct reference in the strategic business plan, the goals and goal achievement levels are established consistent with our strategic objectives and the impact of achievement of the objectives. The 2024 EIP does not contain individual performance award opportunities for the named executive officers. To mitigate unnecessary or excessive risk-taking, the 2024 EIP contains measures for overall performance that are achieved through Bank-wide collaboration of activity but cannot be individually attained or altered by participants in the 2024 EIP.

Under the 2024 EIP, each named executive officer received, in March 2025, 50 percent of the total incentive award earned as of December 31, 2024, and the remainder of the award was deferred and will be paid in March 2027, including an interest credit based on the compounded average of daily SOFR from January 1, 2025 through December 31, 2026 (the EIP Deferred Award), subject to certain qualifications as explained in Additional Conditions to Deferred Award. As described in greater detail under Determination of Awards under the 2024 EIP, the Compensation Committee maintains authority over all awards under the 2024 EIP, however, the 2024 EIP prohibits award payouts to participants that do not receive a performance rating of “meets expectations” or better.

2024 EIP Incentive Goals and Actual Achievement

The 2024 EIP included the following incentive goals for the named executive officers:

•Core return on equity: core return on equity (as such term is defined in the 2024 EIP and referred to in this report as core return on equity) means A divided by B. “A” is net income for fiscal year 2024 reported in accordance with GAAP that excludes or adjusts the timing of recognition of: (a) fee income resulting from the exercise of prepayment options on financial instruments (net of gains or losses from the unwinding of hedges) less imputed amortization of historical prepayment fee income; (b) debt retirement costs (net of gains or losses from the unwinding of hedges) less imputed amortization of historical debt retirement costs; (c) net unrealized gains and losses attributable to derivatives and hedging activities and net unrealized gains and losses on trading securities; (d) imputed amortization of premiums and accretion of discounts on investment securities classified as trading securities; and (e) interest expense on mandatorily redeemable capital stock. “B” is the sum of (a) the Bank’s average daily balance of capital stock, including mandatorily redeemable capital stock, outstanding during fiscal year 2024; and (b) the Bank’s average daily balance of retained earnings during fiscal year 2024.The difference between GAAP return on equity and this measure of core return on equity is that GAAP return on equity does not provide for the adjustments described above, and core return on equity includes shares classified as mandatorily redeemable capital stock and excludes accumulated other comprehensive income as components of equity. Achievement of this goal was subject to compliance with our market value of equity to par stock ratio and internal unfloored duration of equity limits for at least 10 of the 12 months of the year. We complied with these limits for 12 months. These limits are described under Part II — Item 7A — Quantitative and Qualitative Disclosures about Market Risk — Measurement of Market and Interest-Rate Risk and Related Policy Constraints.
•Member users of housing and community investment programs: This goal measures utilization of various types of HCI programs by members. A member user is defined as a member that enrolls (i.e., receives a commitment of funding from the HCI program to support the member’s commitment to fund a loan to its customer) one or more qualifying transactions into the JNE, HOW, LUH, or EBP, or submits a completed application for the Affordable Housing Program, in 2024. The total
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number of member users is the sum of member users in the aforementioned HCI programs, counted separately for each program. A given member will count only once per HCI program and the count of members will stop once the initial funding allocation established at the beginning of 2024 is exhausted.
•Voluntary program commitments: This goal measures the establishment and level of committed funding to the voluntary programs. For purposes of the Threshold and Target levels of performance, our voluntary programs include JNE, HOW, and LUH, and, for the Excess level of performance, in addition to achieving Target, we must develop a new voluntary lending program targeting community development financial institutions and commit 90% of allocated subsidies by year end 2024.
•Community investment advance programs: This goal measures the level of advances activity with members to fund eligible loans supporting community investments through certain advance products. We must commit the amounts shown at each level by December 31, 2024, where an advance is considered to have been committed when we have committed to a specific product, funding amount, disbursement date, maturity date, and rate (i.e., an advance has been “opened”).
•Depository member product utilization: This goal measures utilization of the Bank’s products by depository members. For each product category – advances, housing and community investment products, letters of credit, and mortgage partnership finance – the Bank will determine the number of depository members utilizing each product in 2024. The goal will be based on the sum across the four categories of the number of members utilizing each category. A given member may be counted up to four times depending on the number of product categories in which that member participates; a given member will be counted only once for each product category.
•Insurance member advances utilization: This goal measures utilization of the Bank’s various types of advances by insurance members. Achievement of the goal is determined by insurance company members’ utilization of certain advances in 2024 with each advance type accumulating a number of points to be tabulated after year end. Daily cash manager advances (i.e., overnight advances), except those for less than $100,000, receive 1 point, with each insurance company member counted only once. Advances with terms greater than 1 day but less than 30 days receive 2 points with each insurance company member counted only once. Advances with terms greater than or equal to 30 days and less than 1 year receive 3 points, with each insurance company member counted only once. Advances with terms greater than 1 year receive 4 points for each such advance opened in 2024, and there is no limit to how many times an insurance company member may be counted. For advances where the Bank holds the option to cancel, the final maturity of the advances shall be used to determine the term of the advance. For advances where the member holds the option to cancel (or floating rate advances where the member can prepay without a fee on reset dates) and (a) the first call (reset) date is less than 1 year from the open date, the first call (reset) date will determine the term of the advance and the advance will count only once or (b) the first call (reset) date is one year or longer from the open date, there is no per-member limit.
•Operational risk reduction: The purpose of this goal is to identify business workflows with operational risks and develop plans to mitigate such risks through system or process improvements including automation where appropriate. Identification of business workflows will be based on discussion with business owners regarding the likelihood of adverse events arising from human error or ineffective systems and processes, and the benefits and costs of risk mitigation. The Threshold level of performance also requires the achievement of certain regulatory goals during 2024.
•Diversity, equity, and inclusion leadership alignment: Each plan participant must have an approved and documented experience or business result in either the internal or external dimension of the Bank’s annual strategic plan. Externally, the plan participant must increase the visibility of the Bank as an employer of choice for diverse talent or business partners. Internally, the plan participant must actively engage a Bank business resource group or a strategic initiative aligned with the diversity objectives related to capital markets, housing and community investment, workforce or supplier.

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Table 46 - 2024 EIP Goals and Achievement
GoalWeightingThresholdTargetExcessAchievement
Core return on equity, subject to risk limits30%
5.62 percent (1)
6.89 percent (1)
8.16 percent (1)
Between target and excess (2)
Member users of HCI programs10%179223268Between target and excess
Voluntary program commitments10%Launch current voluntary programs by April 30, 2024, and commit 90% of allocated subsidies to current programsThreshold, and commit 97% of allocated subsidies to current programsTarget, and launch new voluntary program targeting CDFIs and commit 90% of that program’s allocated subsidiesExcess
Community investment advance programs10%$321 million$535 million$749 millionBetween threshold and target
Depository member product utilization10%314348383Excess
Insurance member advances utilization5%8095109Excess
Operational risk reduction15%Operational Risk Committee to recommend development of risk mitigation plans for 8 business workflows by April 30, 2024.Threshold, Bank management to develop risk mitigation plans for 8 business workflows and implement 2 plans by December 31, 2024.Target, and implement 2 additional risk mitigation plans by December 31, 2024.Target
Diversity leadership alignment10%All EIP participants (100%) will have submitted documentation, and received approval for their identified internal or external experience(s) or business results; including, a business-aligned statement and tentative experience completion date.Threshold, and complete all experiences and provide supporting documentation by December 15, 2024.Target, and at least 50% of eligible participants have completed two or more experiences impacting our Bank’s DEI Strategic Plan by December 15, 2024.Excess
___________________________
(1)These performance levels were adjusted from the amounts originally established in the 2024 EIP. The 2024 EIP provides that the originally established performance levels were to be adjusted up or down by 0.9 basis points for every basis point by which the average daily federal funds rate deviated from the 4.55 percent assumed in our strategic business plan. In 2024, the average daily federal funds rate deviation was 59 basis points, resulting in an increase of 53 basis points to each performance level.
(2)For awards under the 2024 EIP’s core return on equity goal, the Compensation Committee exercised its discretion to interpret the 2024 EIP and adjust for any relevant and unforeseen circumstances as permitted under the 2024 EIP, as described under General Overview of Executive Incentive Plans. The Compensation Committee excluded expenses related to the MPF Rate Buydown – a new voluntary program – and other unbudgeted voluntary contributions to AHP programs, reduced core net income by the imputed statutory AHP expense reduction associated with the unbudgeted voluntary contribution to AHP programs, and excluded from core net income amounts attributed to a correction of an immaterial 2023 accounting error that would have, if included, increased 2024 core net income.

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Incentive Opportunities under the 2024 EIP

Incentive opportunities under the 2024 EIP are based on each named executive officer's base salary at December 31, 2024 (referred to as 2024 incentive salaries).

At the conclusion of 2024, individual awards were calculated based on goal achievement as of December 31, 2024. Participants received 50 percent of such award in a cash payment in March 2025, following non-objection by the FHFA and approval of the Compensation Committee, and the remainder is to be paid as the Deferred Award in March 2027. Table 47 sets forth the total incentive opportunities available under the 2024 EIP, including both the payment made in March 2024 and the amount deferred until March 2027, expressed as percentages of the named executive officers' 2024 incentive salaries:

Table 47 - Total Incentive Opportunity
Incentive Opportunity
ThresholdTargetExcess
President50.0%75.0%100.0%
Chief Operating Officer & Chief Financial Officer36.0%60.0%84.0%
All Other Named Executive Officers30.0%50.0%70.0%

Determination of Awards under the 2024 EIP

Awards for the goals under the 2024 EIP were based on goal achievement determined objectively at the conclusion of the year. If the result for the goal is less than the threshold level of achievement, the award for that goal is zero absent an act of discretion.

For the 2024 EIP, the levels of achievement are detailed in Table 46, with one goal achieving between threshold and target, one goal achieving target, two goals achieving between target and excess, and the remaining four goals achieving at or above excess.

In administering the 2024 EIP, as with prior EIPs, the Compensation Committee determined that participants would receive an interpolated award for having exceeded threshold levels for the 2024 EIP. In such instances, the award for each goal would be calculated according to the following formula:
Award for Each Goal=Goal WeightXIncentive Opportunity for Level of Achievement
or Interpolated Level of Achievement		X2024
Incentive Salary

Our staff calculated the named executive officers' awards under the 2024 EIP goals, in accordance with year-end results, as adjusted by the Compensation Committee, and the foregoing formulas. The Compensation Committee discussed recommendations from Mr. Barrett and adopted the recommendations and staff calculations.

Based on those calculations and recommendations, the combined incentive awards under the 2024 EIP were calculated, by goal, as follows:

Table 48 - Total 2024 EIP Awards as Calculated by Goal
ParticipantCore Return on EquityMember Users of HCI ProgramsVoluntary Program CommitmentsCommunity Investment Advance ProgramsDepository Member Product UtilizationInsurance Member Advances UtilizationOperational Risk ReductionDiversity Leadership AlignmentTotal Award
Mr. Barrett$246,826 $74,766 $94,776 $53,699 $94,776 $47,388 $106,623 $94,776 $813,630 
Mr. Nitkiewicz108,918 32,435 42,750 21,575 42,750 21,375 45,804 42,750 358,357 
Mr. Gale60,977 18,158 23,934 12,079 23,934 11,967 25,643 23,934 200,626 
Mr. McRae66,202 19,715 25,984 13,113 25,984 12,992 27,840 25,984 217,814 
Mr. Walsh60,329 17,966 23,678 11,950 23,678 11,839 25,370 23,678 198,488 

The named executive officers received 50 percent of the total 2024 EIP award (i.e., 50 percent of the “total award” in Table 48) in a cash payment in March 2025, following approval of the Compensation Committee and non-objection by the FHFA. The
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remainder of the total award (i.e., the “deferred amount” in Table 48) was deferred and will be paid in March 2027, in an amount equal to the Deferred Award, subject to certain forfeiture provisions as explained in Additional Conditions to Deferred Awards.

Additional Conditions to Deferred Awards

Deferred Awards are subject to the following conditions:

•Participants must be employed by us on December 31, 2026, to receive the Deferred Awards, although participants that terminate employment by reason of death or disability or who are eligible to retire prior to that date may receive payment of the award in certain instances, as detailed in the 2024 EIP.
•Subject to the discretion of the Compensation Committee the Deferred Awards may be reduced (but not to a number that is less than zero) for some or all participants, as applicable, if, during calendar years 2025 and/or 2026, any of the following occurs such that if it had occurred prior to the year-end 2024 calculations, it would have negatively impacted the goal results and reduced the associated payout calculation:
▪operational errors or omissions result in material revisions to our 2024 financial results, information submitted to the FHFA, or data used to determine the total award at year-end 2024;
▪significant information to the SEC, Office of Finance, and/or FHFA is submitted materially beyond any deadline or applicable grace period, other than late submissions that are caused by acts of God or other events beyond the reasonable control of the participants; or
▪we fail to make sufficient progress, as determined by the FHFA, in the timely remediation of examination and other supervisory findings relevant to the goal results or payout calculation.
•Payment of the Deferred Awards is subject to the final approval of the Compensation Committee and review and non- objection by the FHFA (to the extent required by the FHFA).

Retirement and Deferred Compensation Plans

We offer participation in qualified and nonqualified retirement plans to the named executive officers as key elements of our total rewards package. The benefits received under these plans are intended to enhance the competitiveness of our total compensation and benefits relative to the market by complementing the named executive officers' base salary and cash incentive opportunities. We currently maintain three retirement plans, in which the named executive officers participate, including:

•Pentegra Defined Contribution Plan for Financial Institutions (the Pentegra Defined Contribution Plan), a 401(k) plan, under which we match employee contributions for all eligible employees;
•Thrift Benefit Equalization Plan (the Thrift BEP), a nonqualified, unfunded defined contribution plan with a deferred compensation feature, which is available to the named executive officers, directors, and such other personnel as determined by the board of directors; and
•Supplemental Executive Retirement Plan (SERP). The Bank adopted a SERP on June 7, 2024, to be effective as of January 1, 2024. The SERP is a nonqualified, unfunded defined contribution plan for the Bank's participating executives as designated by the board of directors.

We have implemented changes to our retirement and deferred compensation plans that the Compensation Committee believes will continue to keep our total rewards package competitive, particularly compared with labor market competitors.

On January 1, 2024, future benefit accruals ceased for all participating employees, including the named executive officers, under the Pentegra Defined Benefit Plan for Financial Institutions (the Pentegra Defined Benefit Plan) and the Pension Benefit Equalization Plan (the Pension BEP). Further, on June 27, 2024, the Bank completed an acceptance agreement with Midland National Life Insurance Company pursuant to which we transferred to them the future benefit obligations and annuity administration for participants in the Pentegra Defined Benefit Plan. As such, we are no longer a party to the Pentegra Defined Benefit Plan. For additional information see Part IV — Item 15 — Exhibits, Financial Statements Schedules.

As of January 1, 2024, the Bank began making non-elective contributions to the Pentegra Defined Contribution Plan for all employees, including the named executive officers, intended to partially offset the effects of freezing, and ultimately transferring, the Pentegra Defined Benefit Plan. The Bank contributes an amount equal to six percent of the eligible employee’s base salary to the plan.

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As of January 1, 2024, the Bank began making non-elective contributions to the Thrift BEP for all eligible executive participants, intended to mitigate the effects of freezing, and ultimately transferring, the Pentegra Defined Benefit Plan. For each executive participant in the Thrift BEP eligible for non-elective contributions in a plan year, the Bank contributes an amount equal to (a) six percent (6%) of the eligible executive’s compensation and incentive compensation, prior to reduction for any elective deferrals under the Thrift BEP, determined without regard to limitations of the Internal Revenue Code, minus (b) the non-elective, non-matching Bank contribution applicable to that executive under the terms of the Pentegra Defined Contribution Plan with respect to the same period. Additional information regarding these plans can be found with the Nonqualified Deferred Compensation table below.

In 2024, the Bank began making non-elective contributions to the SERP for all eligible executive participants as of January 1, 2024. For each executive participant in the SERP eligible for non-elective contributions in a plan year, the Bank contributes an amount equal to eight percent of the eligible executive’s compensation and incentive compensation, prior to reduction for any elective deferrals under Thrift BEP, determined without regard to limitations of the Internal Revenue Code. The SERP is designed to mitigate the effect to the Bank’s Total Rewards package resulting from the freeze of the Bank's qualified and nonqualified defined benefit retirement plans as of January 1, 2024.

All benefits payable under the SERP and Thrift BEP are paid solely out of our general assets, or from assets set aside in rabbi trusts subject to the claims of our creditors in the event of our insolvency. Additional information regarding these plans can be found with the Nonqualified Deferred Compensation table below.

Perquisites

Perquisites for the named executive officers may include supplemental life insurance (Mr. Nitkiewicz only), travel memberships and subscriptions, spouse travel for certain business events, parking, or a 100 percent mass transportation subsidy. Mr. Barrett is also eligible to use a Bank-owned or -leased vehicle and a reserved parking space convenient to the Bank’s headquarters. The Compensation Committee believes that the perquisites offered to the named executive officers are reasonable and necessary for the total compensation package to remain competitive in recruiting and retaining them.

Equity Compensation

Our stock cannot be owned by individuals, and can only be purchased and sold between a member and the Bank at par. Therefore, equity-based compensation is not an element of the Bank’s compensation program.

Potential Payments upon Termination or Change in Control

Employment Agreement with Mr. Barrett

We entered into an employment agreement with Mr. Barrett, effective as of December 1, 2021 (the Employment Agreement). The board of directors determined that having the employment agreement in place would be an effective tool to recruit and retain Mr. Barrett as the president and chief executive officer. The Employment Agreement had an initial term of three years and subsequently renews for one-year periods unless either party elects to not renew. Under the Employment Agreement, Mr. Barrett is provided access to a Bank-owned or -leased vehicle at a cost not to exceed $900 per month and a reserved parking space at a location convenient to the Bank’s headquarters. Through 2024, the Bank leased a vehicle for Mr. Barrett’s use, with such lease including an approximately $16,500 down payment, plus taxes and fees, and $865 monthly payments. In January 2025, the Bank purchased the leased vehicle for Mr. Barrett's continued use. Also, under the Employment Agreement, Mr. Barrett is entitled to participate in all incentive, savings, and retirement plans and programs available to senior executives at the Bank. Also, under the Employment Agreement, Mr. Barrett’s employment may be terminated by the Bank with or without “cause”, as therein defined, or by Mr. Barrett with or without “good reason” as therein defined with severance payable to Mr. Barrett upon termination by the Bank without “cause” or resignation by Mr. Barrett with “good reason.” These severance benefits for Mr. Barrett are discussed below under Post-termination Payments.

Employment Status and Severance Policy

Pursuant to the FHLBank Act, our employees, including the named executive officers as of December 31, 2024, are "at will" employees. Each may resign his or her employment at any time, and we may terminate his or her employment at any time for any reason or no reason, with or without cause, and with or without notice. Under our severance policy, all regular full- and part-time employees who work at least 1,000 hours per year whose employment is terminated involuntarily for reasons other than "cause," (as determined by us at our sole discretion), are provided with severance packages reflecting their status in the
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organization and tenure. Severance packages for employees leaving by mutual agreement or terminated for cause is at our sole discretion, provided that such severance shall not exceed that paid to employees terminated involuntarily for reasons other than cause. The severance policy does not constitute a contractual relationship between the Bank and the named executive officers, and we reserve the right to modify, revoke, suspend, terminate, or change the severance policy at any time without notice.

To receive benefits under the severance policy, individuals must agree to execute our standard release of claims agreement. In addition, and at our sole discretion, we may provide outplacement and/or such other services as may assist in ensuring a smooth career transition. Payments under the severance policy are discussed below under Post-termination Payments.

Executive Change in Control Severance Plan

The Bank maintains an Executive Change in Control Severance Plan (Executive Severance Plan). The purpose of the Executive Severance Plan is to provide stability to the Bank in the event of a change in control and to facilitate hiring and retention of senior management by providing them with certain protections and benefits in the event of a qualifying termination following a change in control of the Bank. Outside of a change in control period (as defined in the Executive Severance Plan), we have the right to revise, modify or terminate the plan in whole or in part at any time without the consent of any participant. During a change in control period (or such longer period until all payments and benefits, if any, which become due under the plan have been paid), however, any revision, modification, or termination that would impact benefits to a participant would require the consent of that participant. The Executive Severance Plan is discussed below under Post-termination Payments.

FHFA Oversight of Executive Compensation

The FHFA provides certain oversight of FHLBank executive officer compensation. Section 1113 of the Housing and Economic Recovery Act requires that the Director of the FHFA prohibit an FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. In connection with this responsibility, the FHFA has issued final rules on executive compensation and golden parachute payments, which provide for oversight of such compensation and payments. In addition to those rules, the FHFA has issued an advisory bulletin on principles for FHLBank executive compensation together with other guidance and certain protocols for the review of proposed FHLBank compensation actions. We await express non-objection from the FHFA to any proposed award of compensation to our named executive officers prior to making any such award. The FHFA could issue additional rules, advisory bulletins, review protocols, and/or additional guidance that could further impact named executive officer compensation.

Compensation Tables

The following table and accompanying footnotes set forth all compensation attributed to our named executive officers for the years ended December 31, 2024, 2023, and 2022, which includes deferred amounts.

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Table 49 - Summary Compensation for 2024, 2023 and 2022
Name and Principal PositionYear
Salary(1)
Bonus(2)
Non-equity
Incentive Plan
Compensation Short-Term(3)(4)
Non-equity
Incentive Plan
Compensation Long-Term
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings(5)(6)
All Other
Compensation (7)
Total
Timothy J. Barrett2024 $955,046 $— $952,276 $— $7,000 $344,306 $2,258,628 
President and Chief Executive Officer2023 913,500 — 894,917 — 1,304,000 79,771 3,192,188 
2022 870,000 — 603,200 113,577 336,000 86,835 2,009,612 
Frank Nitkiewicz2024 512,843 — 417,821 — — 177,023 1,107,687 
Executive Vice President, Chief Operating Officer and Chief Financial Officer2023 490,533 — 409,767 — 439,000 53,117 1,392,417 
2022 454,198 — 258,711 122,084 — 48,081 883,074 
Barry F. Gale2024 344,538 — 234,704 — — 107,416 686,658 
Senior Vice President, Chief Human Resources Officer and Office of Minority and Women Inclusion Director2023 327,969 711 233,901 — 223,000 29,181 814,762 
2022 312,351 — 148,263 83,957 — 27,556 572,127 
Sean R. McRae2024 374,054 709 254,990 — — 117,161 746,914 
Senior Vice President and Chief Information Officer2023 357,782 — 256,098 — 196,000 31,994 841,874 
2022 340,745 — 161,740 94,257 — 30,614 627,356 
Keith R. Walsh2024 340,865 — 215,565 — — 93,351 649,781 
Senior Vice President and General Counsel
_______________________
(1)Amounts shown are not reduced to reflect the named executive officers' elections, if any, to defer receipt of salary into the Pentegra Defined Contribution Plan, the Thrift BEP. Amounts reflect adjustments to annual base salaries resulting from our biweekly payroll schedule in which employees, including the named executive officers, earn additional days of salary if the actual number of business days in the year exceeds 260.
(2)In 2024, Mr. McRae received an additional bonus of $709 as a cash award for 10 years of service. In 2023, Mr. Gale received an additional bonus of $711 as a cash award for 10 years of service. The amount of these service awards is the same as would have been paid to any employee who completed the same number of years of service.
(3)The amounts reflect the total awards paid or deferred under the respective year’s EIP for services performed during the years ended December 31, 2024, 2023, and 2022, respectively, with 50 percent of that award paid in March 2025, March 2024, and March 2023, respectively, and the remainder to be paid in March 2027, March 2026, and March 2025 in an amount equal to that year’s Deferred Award, subject to satisfaction of certain qualifiers detailed in Additional Conditions to Deferred Awards. The amounts for 2024 also reflect interest for any vested Deferred Awards under the 2022 EIP, which was adjusted to reflect unbudgeted voluntary contributions to AHP programs, similar to the 2024 EIP achievement levels.
(4)In accordance with FHFA guidance, maximum total incentive opportunity, inclusive of annual and deferred awards, to be paid in a plan year cannot exceed 100% of the plan year’s base salary.
(5)The amounts shown reflect the actuarial increase/decrease in the present value of the named executive officer's benefits under all pension plans established by us determined using interest-rate and mortality-rate assumptions consistent with those used in our financial statements. No amount of above market earnings on nonqualified deferred compensation is reported because above market rates are not possible under the Thrift BEP and SERP, the only such plans that we offer. On January 1, 2024, future benefit accruals ceased for all employees under the Pentegra Defined Benefit Plan, a funded, tax-qualified, noncontributory plan that provided retirement benefits for all eligible employees including the named executive officers, and on June 27, 2024, the Bank transferred liability of the Pentegra Defined Benefit Plan to Midland National Life Insurance Company. Additionally, as of January 1, 2024, further benefit accruals ceased for all employees under the
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Pension BEP, a nonqualified, unfunded defined benefit plan covering certain senior officers, as defined in the plan, which includes the named executive officers and other personnel as determined by the board of directors.
(6)The change in pension values under the Pentegra Defined Benefit Plan and Pension BEP for all named executive officers, except Mr. Barrett decreased in 2024, for Mr. Nitkiewicz by $220,000, Mr. Gale by $34,000, Mr. McRae by $57,000, and Mr. Walsh by $74,000. Similar decreases in 2022 were for Mr. Nitkiewicz $1,927,000, Mr. Gale $136,000, and Mr. McRae $278,000. In accordance with SEC guidance, the amounts reported in the table are $0.
(7)See Table 50 - Other Compensation for amounts, which include our match on employee contributions to the Thrift BEP and the Pentegra Defined Contribution Plan, our non-elective contribution to the SERP, insurance premiums paid by us with respect to supplemental life insurance and perquisites.

Table 50 - Other Compensation
NameYear
Contributions
to Defined
Contribution
Plans(1)
Insurance
Premiums
Perquisites(2)
Total
Timothy J. Barrett2024$326,616 $— $17,690 $344,306 
202379,771 — — 79,771 
202269,258 — 17,577 86,835 
Frank Nitkiewicz2024167,262 9,761 — 177,023 
202344,560 8,557 — 53,117 
202240,438 7,643 — 48,081 
Barry F. Gale2024107,416 — — 107,416 
202329,181 — — 29,181 
202227,556 — — 27,556 
Sean R. McRae2024117,161 — — 117,161 
202331,994 — — 31,994 
202230,614 — — 30,614 
Keith R. Walsh202493,351 — — 93,351 
_______________________
(1)    Amounts include our contributions to the Pentegra Defined Contribution Plan, Thrift BEP and the SERP. Contributions to the Thrift BEP are also shown in Table 53 - Nonqualified Deferred Compensation below. There were no contributions, earnings, or account balances related to the SERP until after December 31, 2024, so these amounts are not included in Table 53 – Nonqualified Deferred Compensation below.
The Pentegra Defined Contribution Plan, a 401(k) plan, excludes hourly, flex staff, and short-term employees from participation, but includes all other employees. Employees may elect to defer one percent to 50 percent of their plan salary, as defined in the plan document. We make contributions based on the amount the employee contributes, up to the first 3 percent of plan salary, multiplied by the following factors:
•    100 percent after six months of service and during the second and third years of employment.
•    150 percent during the fourth and fifth years of employment.
•    200 percent following completion of five or more years of employment.
In addition to the matching contribution, we contribute six percent of an employee’s base salary to the Pentegra Defined Contribution Plan. Participant deferrals are limited on an annual basis by Internal Revenue Code (IRC) rules. For 2024, the maximum elective deferral amount was $23,000 (or $30,500 per year for participants who attain or exceed age 50 in 2024), and the maximum matching contribution under the terms of the Pentegra Defined Contribution Plan was $20,700 (3 percent multiplied by two multiplied by the $345,000 IRC compensation limit).
A description of the Thrift BEP and SERP follows Table 53 - Nonqualified Deferred Compensation.
See Retirement and Deferred Compensation Plans above for a description of changes we have made to the Pentegra Defined Contribution Plan and the Thrift BEP.
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(2)    Amounts for Mr. Barrett include the following perquisites: personal use of a Bank-leased vehicle, parking, and spousal travel expenses.

The following table shows the potential payouts for our non-equity incentive plan awards under the 2024 EIP, for our named executive officers:

Table 51 - Grants of Plan-Based Awards for Fiscal Year 2024
Estimated Possible Payouts Under Non-equity Incentive Plan Awards (1)
Name2024 EIP AwardPayout DateThresholdTargetExcess
Mr. BarrettYear-end AwardMarch 2025$236,939 $355,409 $473,878 
Deferred AmountAfter December 31, 2026236,939 355,409 473,878 
Mr. NitkiewiczYear-end AwardMarch 202591,607 152,678 213,750 
Deferred AmountAfter December 31, 202691,607 152,678 213,750 
Mr. GaleYear-end AwardMarch 202551,286 85,477 119,668 
Deferred AmountAfter December 31, 202651,286 85,477 119,668 
Mr. McRaeYear-end AwardMarch 202555,680 92,800 129,920 
Deferred AmountAfter December 31, 202655,680 92,800 129,920 
Mr. WalshYear-end AwardMarch 202550,739 84,566 118,392 
Deferred AmountAfter December 31, 202650,739 84,566 118,392 
______________________
(1)    The estimated payouts for the Year-end Award and Deferred Amount each represent 50 percent of the total awards under the 2024 EIP that could have been earned by the respective named executive officer for 2024. The actual amounts awarded are reflected in Table 49 - Summary Compensation for 2024, 2023 and 2022. See Executive Incentive Plan above for further discussion of performance goals and plan payouts.

Retirement Plans

Table 52 - Pension Benefits
NamePlan Name
No. of Years of Credited Service(1)
Present Value of Accumulated Benefit(2)
Payments During Year Ended December 31, 2024
Timothy J. BarrettPentegra Defined Benefit Plan12.17 $1,027,000 $— 
Pension BEP13.17 2,783,000 — 
Frank NitkiewiczPentegra Defined Benefit Plan31.83 2,525,000 — 
Pension BEP32.83 3,756,000 — 
Barry F. GalePentegra Defined Benefit Plan9.67 783,000 — 
Pension BEP10.67 529,000 — 
Sean R. McRaePentegra Defined Benefit Plan8.67 530,000 — 
Pension BEP9.67 582,000 — 
Keith R. WalshPentegra Defined Benefit Plan12.08 286,000 — 
Pension BEP13.08 139,000 — 
_______________________
(1)Equals number of years of credited service as of December 31, 2023.
(2)    On January 1, 2024, future benefit accruals under the Pension BEP ceased for all employees, including the named executive officers.

The Pentegra Defined Benefit Plan provided retirement benefits for eligible employees, including the named executive officers. As discussed in — Retirement and Deferred Compensation Plans, on January 1, 2024, future benefit accruals under the plan ceased for all employees, including the named executive officers. The Pentegra Defined Benefit Plan excludes hourly paid employees, flex staff, and short-term employees from participation. Participants are 20 percent vested in their retirement benefit after the completion of two years of employment and vest at an additional 20 percent per year thereafter until they are fully vested after the completion of six years of employment. Participants who have reached age 65 are automatically 100 percent
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vested, regardless of completed years of employment. All of the named executive officers were participants in the Pentegra Defined Benefit Plan and are 100 percent vested in their benefits pursuant to the plan's provisions.

Benefits under the Pentegra Defined Benefit Plan are based on the participant's years of service and earnings, defined as base salary excluding the participant's voluntary contribution to the Thrift BEP, subject to the applicable U.S. IRC limits on annual earnings. In general, participants' benefits are calculated as 2.00 percent multiplied by the participant's years of benefit service multiplied by the high three-year average salary. Annual benefits provided under the plan are subject to IRC limits, which vary by age and benefit option selected. The regular form of benefit is a straight life annuity with a 12 times initial death benefit feature. Lump sum and other additional payout options are also available. Participants are eligible for a lump sum option beginning at age 45. Benefits are payable in the event of retirement, death, disability, or termination of employment if vested. Normal retirement under the plan is age 65, but a participant may elect early retirement as early as age 45. However, if a participant elects early retirement, the normal retirement benefit is reduced by an early retirement factor based on the participant's age when beginning early retirement. If the sum of the participant's age and vesting service at the time of termination of employment is at least 70, that is, the "Rule of 70," the benefit is reduced by an early retirement factor of one and a half percent per year for each year that payments commence before age 65. If age and vesting service do not equal at least 70, the benefit is reduced by a higher early retirement factor.

The amount of pension benefits payable from the Pension BEP to a named executive officer is the amount that would be payable to the executive under the Pentegra Defined Benefit Plan:

•ignoring the limits on benefit levels imposed by the IRC (including the limit on annual compensation discussed above);
•including in the definition of salary any amounts deferred by a participant under the Thrift BEP in the year deferred and any incentive compensation in the year paid;
•recognizing the participant's full tenure with us or any other employer participating in the Pentegra Defined Benefit Plan from initial date of employment to the date of membership in the Pentegra Defined Benefit Plan, for each named executive officer who was a participant before January 1, 2009, and for all other participants, recognizing only the participant's years of service with us from initial date of employment with us;
•applying an increased benefit accrual rate of 2.375 percent of the participant's highest three-year average salary, multiplied by the participant's total benefit service, for those whose most recent date of hire by the Bank is prior to January 9, 2006, and who have continuously been an “Executive Officer” (as such term is defined by the plan) since January 1, 2008, and, for all other participants, applying the same accrual rate and average salary as the participant is eligible to receive under the Pentegra Defined Benefit Plan; and
•reducing the result by the participant's actual accrued benefit from the Pentegra Defined Benefit Plan.

As discussed in — Retirement and Deferred Compensation Plans, further benefit accruals under both the Pentegra Defined Benefit Plan and the Pension BEP ceased on January 1, 2024, for all employees, including the named executive officers. Total benefits payable under both the Pentegra Defined Benefit Plan and the Pension BEP are subject to an overall maximum annual benefit amount not to exceed a specified percentage of high three-year average salary as applicable as follows: Mr. Barrett, 80 percent as president; Mr. Nitkiewicz, 70 percent as executive vice president; and Mr. Gale, Mr. McRae, and Mr. Walsh 65 percent as senior vice presidents. Our only named executive officer that reached the maximum annual benefit amount prior to these plans being frozen on January 1, 2024, is Mr. Nitkiewicz. All benefits payable under the Pension BEP are paid solely from either our general assets or from assets held in a rabbi trust subject to the claims of our creditors in the event of the Bank's insolvency. The Pension BEP requires that we contribute at least annually to any rabbi trust so established an amount to fund participant benefits on a plan termination basis and anticipated administrative, trust and investment advisory expenses that may be paid by the trust over the next 12 months. Retirement benefits from the Pentegra Defined Benefit Plan and the Pension BEP are not subject to any offset provision for Social Security benefits. See — Retirement and Deferred Compensation Plans for a description of changes we are making to the Pentegra Defined Benefit Plan and the Pension BEP.

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Nonqualified Deferred Compensation

Table 53 - Nonqualified Deferred Compensation
Name
Executive
Contributions in Year Ended
December 31,
2024(1)
Our
Contributions
in Year Ended
December 31, 2024(2)
Aggregate Earnings
in Year Ended
December 31, 2024		Aggregate
Withdrawals/
Distributions		Aggregate Balance
at December 31,
2024
Timothy J. Barrett$48,482 $152,530 $76,182 $— $810,047 
Frank Nitkiewicz32,205 60,719 213,025 — 1,380,421 
Barry F. Gale20,018 26,968 27,347 — 277,004 
Sean R. McRae18,154 35,272 41,880 — 404,436 
Keith R. Walsh36,887 16,198 12,863 — 126,562 
_______________________
(1)Amounts are also reported as salary in Table 49 - Summary Compensation for 2024, 2023 and 2022.
(2)Amounts are also reported as contributions to defined contribution plans in Table 50 - Other Compensation.

Thrift BEP participants may elect to defer receipt of up to 100 percent of base salary and/or incentive compensation into the Thrift BEP. We match participant contributions based on the amount the employee contributes, typically, up to the first 3 percent of compensation beginning with the initial date of membership in the Thrift BEP, and then according to the same schedule as the matching under the Pentegra Defined Contribution Plan after the first year of service. Our matching contribution is immediately vested at 100 percent, as in the Pentegra Defined Contribution Plan. Participants may defer their contributions into one or more investment funds as elected by the participant.

Participants may withdraw contributions under either plan's hardship provisions and may also begin to receive distributions while still employed through scheduled distribution accounts.

The Thrift BEP and the SERP provide participants an opportunity to defer taxation on income and to make up for benefits that would have been provided under the Pentegra Defined Contribution Plan except for IRC limitations on annual contributions under 401(k) plans and mitigate the impact of the loss of the Pentegra Defined Benefit Plan. The Thrift BEP also provides participants with an opportunity for incentive compensation to be deferred and matched. The Compensation Committee and board of directors approve participation in the Thrift BEP and the SERP. All of the named executive officers are current participants. All benefits payable under the Thrift BEP and the SERP are paid solely from our general assets or from assets held in a rabbi trust subject to the claims of our creditors in the event of the Bank's insolvency. The Thrift BEP requires us to contribute at least quarterly to any rabbi trust established for the Thrift BEP an amount to fund participant benefits on a plan termination basis. A rabbi trust was established for the Thrift BEP effective as of January 1, 2010. The SERP requires us to annually, by March 31st of the following year, contribute to any rabbi trust established or used for the SERP an amount to fund participant benefits, with such a rabbi trust being established for the SERP effective as of January 1, 2024.

Post-termination Payments

The following is a discussion of the policies and arrangements to which a named executive officer becomes subject upon certain termination events, with or without a change in control of the Bank. During 2024, all named executive officers were covered by the Bank’s severance policy and the Executive Severance Plan. In addition, Mr. Barrett is covered by an employment agreement. The severance policy, Executive Severance Plan and Mr. Barrett’s employment agreement are also discussed above in “Potential Payments upon Termination or Change in Control.” The Bank’s EIPs provide for payment to executives who are employed as of December 31 of the EIP year or, subject to recommendation by our president and chief executive officer and review and approval by the Compensation Committee and non-objection by the FHFA, whose employment has terminated prior to December 31 of the EIP year for death, disability or retirement. The terms cause, change in control, good reason, disability, retirement, and qualifying termination are defined in the respective policy, plan or agreement, as applicable.

Severance Policy

As chief executive officer, Mr. Barrett is eligible for 12 months of base pay under the severance policy. As executive officers, Mr. Nitkiewicz, Mr. Gale, Mr. McRae, and Mr. Walsh are eligible for a minimum of six months and a maximum of 12 months of base pay under the severance policy, depending on their tenure of employment. Severance payable to the executives in connection with a change in control is discussed in the Executive Severance Plan section below. All severance packages under
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the severance policy for executive officers, including the named executive officers, must have the approval of the chief executive officer and the Compensation Committee, and may also require the non-objection of the FHFA, prior to making any award under the severance policy.

Under our severance policy and based on status in the organization and tenure, for Mr. Nitkiewicz and Mr. Walsh the payment amount is equal to approximately twelve months' base salary, for Mr. Gale the payment is equal to approximately eleven months' base salary, and for Mr. McRae the payment is equal to approximately ten months’ base salary, all based on annual salary in effect on December 31, 2024.

Employment Agreement with Mr. Barrett

Under the terms of the Employment Agreement with Mr. Barrett, in the event that the Bank terminates Mr. Barrett’s employment for any reason other than “cause” or “disability” as both are defined in the Employment Agreement, or upon Mr. Barrett’s termination of his employment for “good reason” as defined in the Employment Agreement, we have agreed to pay Mr. Barrett (a) one year of salary continuation paid pursuant to the Bank’s normal payroll schedule, (b) a pro rata payment of the short-term and deferred incentive opportunity at the “President” tier under the executive incentive plan in effect in the year of termination, calculated and payable under such plan as if he had met all employment-related requirements for payment as a retiree, (c) a payment of then-unpaid deferred incentive awards under prior executive incentive plans, calculated and payable under such plans at the time he would have received payment if he had remained employed by the Bank, and (d) certain healthcare replacement costs for a period of twelve months and other amounts required to be paid or provided under any other Bank plan, program, policy or practice or contract or agreement. As a condition to payment, Mr. Barrett must agree to execute a general release of claims. Any payments to Mr. Barrett under the employment agreement are in lieu of any severance payments that would otherwise be payable to him and may also require the approval of the FHFA.

Under the Employment Agreement, “cause” is defined as Mr. Barrett’s (a) failure to perform substantially his duties; (b) engaging in illegal or willful misconduct that is injurious to the Bank; (c) material violation of law or regulation applicable to the Bank or violation of the Bank’s written policies or guidelines; (d) engaging in any activity that results in a written request from the FHFA (or any other regulatory agency) requesting the Bank terminate Mr. Barrett’s employment; (e) indictment or conviction of, plea of guilty or nolo contendere, in connection with a felony or any type of crime involving fraud, theft, misappropriation, embezzlement, dishonesty, breach of trust, money laundering, or any form of moral turpitude; (f) receipt of written notice under 12 U.S.C. Section 4636a seeking removal or suspension of Mr. Barrett; (g) breach of fiduciary duty; (h) refusal to comply with a lawful directive from the board of directors; or (i) any material breach of the Employment Agreement.

Under the Employment Agreement, “good reason” is defined as, without the consent of Mr. Barrett, (a) a material diminution in salary; (b) a material diminution in title or authority; (c) relocation of the Bank’s headquarters more than 50 miles from its current location; or (d) the Bank’s material breach of the Employment Agreement.

Executive Severance Plan

We maintain an Executive Severance Plan that provides certain payments and benefits in the event of a qualifying termination following a change in control. The Executive Severance Plan applies to employees or officers who are designated by the Bank’s board of directors as participants and who execute a participation agreement in which the participants agrees to certain protective covenants including a non-solicitation agreement. The Bank’s board of directors designated Mr. Barrett, Mr. Nitkiewicz, Mr. Gale, Mr. McRae, and Mr. Walsh in addition to certain other executive officers, as participants in the Executive Severance Plan and these officers all executed participation agreements. If a participant is eligible for severance benefits under the Executive Severance Plan and also for similar benefits under any other Bank plan, program, arrangement or agreement, the severance benefits under the Executive Severance Plan will be reduced on a dollar-for-dollar basis for the severance benefits available under such other plan, program, arrangement or agreement.

Under the terms of the Executive Severance Plan, if there is a qualifying termination during the period beginning on the earliest of 180 days prior to the date a definitive agreement or order for a change in control has been entered into, or the effective date of a change in control as prescribed by the FHFA, and ending 24 months following the effective date of the change in control, the participant becomes entitled to certain severance payments and benefits. The Executive Severance Plan defines a qualifying termination as a termination of the participant’s employment with the Bank, (i) by the Bank, other than for cause; or (ii) by the participant, for good reason but does not include a termination resulting from the participant’s death, disability or retirement.

The severance payments and benefits to which the participant would be entitled include:

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•Mr. Barrett would receive a cash payment equal to 2.99 times the sum of (i) the greater of his annual base salary determined at the time of the qualifying termination or 180 days prior to the change in control, and (ii) target incentive awards for the year in which the qualifying termination of employment occurs.
•The other named executive officers participating in the Executive Severance Plan would receive a cash payment equal to 2.00 times the sum of (i) the greater of their annual base salary determined at the time of the qualifying termination or 180 days prior to the change in control, and (ii) their target incentive awards for the year in which the qualifying termination of employment occurs.
•The named executive officers participating in the Executive Severance Plan would receive a lump sum cash payment equal to the amount that would have been payable pursuant to their annual incentive compensation award for the year in which the date of a qualifying termination occurs based on actual Bank performance, prorated based on the number of days the participant was employed that year.
•Participants would receive a lump sum cash payment for outplacement assistance in the amount of $25,000 for Mr. Barrett and $15,000 for the other named executive officers.
•Mr. Barrett would receive a lump sum cash payment equivalent to the Bank’s cost to maintain his health insurance coverage for 24 months, and the other named executive officers participating in the Executive Severance Plan would each receive a lump sum cash payment equivalent to the Bank’s cost to maintain their health insurance coverage for 18 months.

The payments described above are payable in a lump sum within 60 days following the participant’s employment termination date, except the prorated incentive compensation award, which is payable at the time such incentive compensation awards are paid to other senior executives, but no later than March 15 of the year following the executive’s qualifying termination. Any amounts that constitute non-qualified deferred compensation subject to Section 409A of the IRC are payable on the 75th day after the participant’s qualifying termination.

All payments and benefits are conditioned upon the executive having delivered an irrevocable general release of claims against the Bank before payment occurs. In addition, all payments and benefits remain subject to the Bank’s compliance with any applicable statutory and regulatory requirements relating to the payment of amounts under the Executive Severance Plan.

If the aggregate amount of pay and benefits payable to an executive under the Executive Severance Plan would constitute a “parachute payment” subject to excise tax under Section 4999 of the IRC, their aggregate pay and benefits will be reduced to the extent necessary to avoid being subject to the excise tax imposed by Section 4999, unless payment of the unreduced benefit would provide the participant with a higher net after-tax benefit after payment of such excise tax.

Executive Incentive Plan

Under the 2024, 2023, and 2022 Executive Incentive Plans, the named executive officers must be employed by the Bank on December 31 of the EIP’s year in order to be paid such award. Subject to recommendation of our president and chief executive officer, approval of the Compensation Committee, and FHFA review, if required, if a named executive officer’s employment had terminated in 2024 for death or disability or after becoming retirement-eligible and providing a minimum of six months' advance notice to the Bank, such officer may be paid: (i) a pro-rata portion of the 2024 award if they completed six months of service during 2024, and (ii) the deferred amount under the 2022 and 2023 EIPs and any pro rata deferred award under 2024 EIP, with such awards to be paid at the same time they would have been paid if the executive’s employment had not terminated.

Potential Payments Upon Termination

The table below shows amounts triggered upon the termination events identified below for the named executive officers assuming a termination of employment and, as applicable, a change in control as of the close of business on December 31, 2024, and does not include amounts that are not payable or otherwise forfeited upon a for cause termination or certain non- retirement terminations. In these circumstances, other than legally required amounts such as accrued salary, no additional amounts would be payable and rights to incentive or deferred compensation would be forfeited. The amounts listed below also do not include payments from the Thrift BEP, the SERP or the Pension BEP. Amounts payable from the Pension BEP may be found in Table 52 - Pension Benefits. Account balances for the Thrift BEP may be found in Table 53 - Nonqualified Deferred Compensation.

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Table 54 - Cash Payments on Termination
  Severance
Incentive Compensation(4)
All Other Compensation(5)
Total Post
Termination
Payment & Benefit Value
Timothy J. Barrett    
Bank initiated (not for cause) termination of employee without a change in control(1)
$947,756 $1,702,906 $23,334 $2,673,996 
Bank initiated (not for cause) termination of employee or good reason termination by employee due to change in control(2)(3)
4,959,133 1,702,906 71,668 6,733,707 
Retirement
— 1,702,906 — 1,702,906 
Death or Disability— 1,702,906 — 1,702,906 
Frank Nitkiewicz
Bank initiated (not for cause) termination of employee without a change in control(1)
508,928 746,651 — 1,255,579 
Bank initiated (not for cause) termination of employee or good reason termination by employee due to change in control(3)
1,628,570 746,651 50,001 2,425,222 
Retirement
— 746,651 — 746,651 
Death or Disability— 746,651 — 746,651 
Barry F. Gale
Bank initiated (not for cause) termination of employee without a change in control(1)
321,191 419,976 — 741,167 
Bank initiated (not for cause) termination of employee or good reason termination by employee due to change in control
1,025,723 419,976 50,001 1,495,700 
Retirement
— 419,976 — 419,976 
Death or Disability— 419,976 — 419,976 
Sean R. McRae
Bank initiated (not for cause) termination of employee without a change in control(1)
320,467 457,103 — 777,570 
Bank initiated (not for cause) termination of employee or good reason termination by employee due to change in control(3)
1,113,596 457,103 59,603 1,630,302 
Retirement
— 457,103 — 457,103 
Death or Disability— 457,103 — 457,103 
Keith R. Walsh
Bank initiated (not for cause) termination of employee without a change in control(1)
338,263 99,244 — 437,507 
Bank initiated (not for cause) termination of employee or good reason termination by employee due to change in control(3)
864,019 99,244 51,694 1,014,957 
Retirement
— 99,244 — 99,244 
Death or Disability— 362,670 — 362,670 
_______________________
(1)    Under our severance policy and based on status in the organization and tenure for Mr. Barrett, Mr. Nitkiewicz and Mr. Walsh the “Severance” amount payable is equal to 12 months' base salary, for Mr. Gale the amount payable is equal to approximately 11 months' base salary, and for Mr. McRae the amount payable is equal to approximately 10 months’ base salary, all based on annual salary in effect on December 31, 2024.
(2)    The aggregate amount due to Mr. Barrett under his Employment Agreement and the Executive Severance Plan and to Mr. Walsh under the Executive Severance Plan, assuming a December 31, 2024 termination, would have been subject to the change in control excise tax under Section 4999 of the Code. The amount actually payable to Mr. Barrett would not have been limited to the 280G safe harbor level, as doing so would not have resulted in a higher after-tax payment. No tax gross-up payments would apply.
(3)    “Severance” payments for involuntary termination without cause due to a change in control or for a resignation for good reason due to a change in control that are made under our Executive Severance Plan are in lieu of, not in addition to, the severance benefit payments under our severance policy or, for Mr. Barrett, his employment agreement. Amounts shown for “Severance” payable under the Executive Severance Plan are a multiple, 2.99 for Mr. Barrett and 2.00 for the other named executive officers, of the total of (i) base salary in effect on December 31, 2024 and (ii) target incentive awards under our
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2024 EIP. Mr. Nitkiewicz, Mr. Gale, and Mr. McRae would not have been subject to the change in control excise tax under Section 4999 of the IRC. In no event would tax gross-up payments apply.
(4)    Because Mr. Barrett, Mr. Nitkiewicz, Mr. Gale, and Mr. McRae were retirement-eligible as of December 31, 2024, amounts shown for incentive compensation payable to them under each of the applicable termination scenarios in the table includes such officers’ total incentive award earned as of December 31, 2024, the deferred award payable under the 2022 EIP including interest earned, and the deferred award payable under the 2023 EIP including estimated interest. All of such awards are also included in the row entitled “Death and Disability”. However, because Mr. Walsh was not retirement-eligible as of December 31, 2024, he would not have been entitled to any deferred amounts under the 2024, 2023 and 2022 EIPs, but would be entitled to 2024 incentive compensation earned as of December 31, 2024, upon a Bank- initiated (not for cause) termination without a change in control, a Bank-initiated (not for cause) termination or good reason termination by employee due to change in control or his retirement.
(5)    “All Other Compensation” includes the following amounts payable under the Executive Severance Plan to named executive officers: (i) a payment to each officer equivalent to what it would have cost the Bank to maintain such officer’s health insurance coverage for a number of months, 24 months for Mr. Barrett and 18 months for the other named executive officers, and (ii) a payment for outplacement services of $25,000 for Mr. Barrett and $15,000 for the other named executive officers.

Pay Ratio

For the year ended December 31, 2024, the ratio of the annual total compensation of our chief executive officer to the annual total compensation of our median employee (the Median Employee, identified in the manner described below) is 14:1. To determine this ratio, total compensation of the Median Employee for 2024 was calculated in the same manner as total compensation of our chief executive officer as of December 31, 2024 as presented in Table 49 - Summary Compensation for 2024, 2023, and 2022. For 2024, this includes the entire award under the 2024 EIP, although 50 percent of that award is deferred and will not be paid until March 2027, respectively.

For 2024, the total annual compensation of the Median Employee was $160,559 and the total annual compensation of the chief executive officer was $2,258,628.

The Median Employee is the employee whose compensation is the median of the annual total compensation of all our employees other than the chief executive officer. We identified the Median Employee by computing for each of the full-time and part-time employees who were employed by the Bank on October 1, 2024, excluding the chief executive officer, the sum of the 2024 salary of each employee as of October 1, 2024 and (ii) the 2023 incentive compensation paid to that employee in March 2024, and ranking the sums for all such employees (a list of 211 employees as of October 1, 2024) from lowest to highest. The Bank identified the Median Employee using this compensation measure, which was applied consistently to all our employees included in the calculation.

For both the Median Employee and chief executive officer, 2024 compensation includes, among other things, amounts attributable to the employer match on employee contributions to the Pentegra Defined Contribution Plan (401(k) plan), which varies based on an employee's contributions to the 401(k) plan and an employee's tenure at the Bank.

Director Compensation

In 2024, we paid members of the board of directors fees for each board and committee meeting that they attended and a quarterly retainer fee. FHFA regulations permit the payment of reasonable director compensation, and such determination of reasonableness of compensation is subject to the FHFA's oversight. We are a cooperative and our capital stock may only be held by current and former members, so we do not provide compensation to our directors in the form of stock or stock options. The 2025 and 2024 Director Compensation Policies provide payments for attendance at board and committee meetings and retainers paid in arrears at the end of each quarter. The policies provide for maximums on total director compensation and potential reduction based on attendance and performance.

The amounts to be paid or paid to the members of the board of directors for attendance at board and committee meetings and for quarterly retainers for the years ended December 31, 2025 and 2024, along with the annual maximum compensation amounts are detailed in the following table:

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Table 55 - Director Compensation
 
2025(1)
2024
Fee per board meeting:
Chair of the board$12,970 $12,970 
Vice chair of the board and committee chairs10,710 10,710 
All other board members9,580 9,580 
Fee per committee meeting2,820 2,820 
Fee for telephonic attendance1,690 1,690 
Quarterly Retainer Fees
Chair of the board12,675 12,675 
Vice chair of the board and committee chairs11,075 11,075 
All other board members9,775 9,775 
Annual maximum compensation amounts:
Chair of the board155,000 155,000 
Vice chair of the board and committee chairs130,000 130,000 
All other board members120,000 120,000 
_______________________
(1)    On December 23, 2024, the board of directors accepted retaining the 2024 compensation levels for 2025.

The Bank will also pay or reimburse directors for expenses related to the directors’ attendance at board meetings.

The aggregate amounts earned or paid to individual members of the board of directors for attendance at board and committee meetings and quarterly retainer fees during 2024 are detailed in the following table:

Table 56 - 2024 Director Compensation
 Fees Earned or
Paid in Cash
Duncan Barnard$130,000 
Donna L. Boulanger130,000 
Michael A. Brown120,000 
Caroline R. Carpenter120,000 
Eric L. Chatman, Chairman in 2024155,000 
Thomas J. Curry130,000 
Dwight M. Davidsen130,000 
Antoinette C. Lazarus130,000 
Edward F. Manzi, Jr.130,000 
Kevin D. Miller120,000 
William M. Parent130,000 
David J. Rotatori120,000 
E. Macey Russell130,000 
Robert Tourigny120,000 
John C. Witherspoon, Vice Chair in 2024130,000 
$1,925,000 

Directors may elect to defer the receipt of fees (including all compensation payable under the Director Compensation Policy) pursuant to the Thrift BEP, although there is no Bank-matching contribution for such deferred fees. For additional information on the Thrift BEP, see — Retirement and Deferred Compensation Plans above. FHFA regulations permit the payment or
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reimbursement of reasonable expenses incurred by directors in performing their duties, and in accordance with those regulations, we have adopted a policy governing such payment and reimbursement of expenses. Such paid and reimbursed board of director expenses aggregated to $172 thousand for the year ended December 31, 2024.

Reduction in Compensation Based on Attendance and Performance

The board may vote to reduce or eliminate a director’s final quarterly retainer payment if (i) the director has not attended at least 75 percent of all regular and special meetings of the Board and the committees on which the director served during the year, or (ii) the board determines the director has consistently demonstrated a lack of engagement and participation in meetings attended.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

We are a cooperative, our members or former members own all of our outstanding capital stock, and our directors are elected by and a majority are from our membership. Each member is eligible to vote for the open member directorships in the state in which its principal place of business is located and for each open independent directorship. See Part III — Item 10 — Directors, Executive Officers and Corporate Governance for additional information on the election of our directors. Membership is voluntary, and members must give notice of their intent to withdraw from membership. Members that withdraw from membership may not be readmitted to membership for five years.

We do not offer any compensation plan under which our equity securities are authorized for issuance. Members, former members, and successors to former members, including affiliated institutions under common control of a single holding company, holding five percent or more of our outstanding capital stock as of February 28, 2025, are noted in Table 57.

Table 57 - Stockholders Holding Five Percent or More of Outstanding Capital Stock
(dollars in thousands)
Member NameAddressCapital
Stock		Percent of Total
Capital Stock
State Street Bank and Trust CompanyOne Congress Street, Boston, MA 02114$477,600 21.61 %

Additionally, due to the fact that a majority of our board of directors is elected from our membership, these member directors serve as officers or directors of members that own our capital stock. Table 58 provides capital stock outstanding as of February 28, 2025, to members whose officers or directors serve as our directors.

Table 58 - Capital Stock Outstanding to Members whose Officers or Directors serve on our Board of Directors
(dollars in thousands)
Member NameCity, StateCapital
Stock		Percent of Total
Capital Stock
bankESBEasthampton, MA$4,602 0.21 %
Ion BankNaugatuck, CT1,166 0.05 
Skowhegan Savings BankSkowhegan, ME965 0.04 
North Brookfield Savings BankNorth Brookfield, MA898 0.04 
Fidelity Co-Operative BankFitchburg, MA850 0.04 
National Bank of MiddleburyMiddlebury, VT472 0.02 
Profile BankRochester, NH238 0.01 
The Beacon Mutual Insurance CompanyWarwick, RI231 0.01 
Total stock ownership by members whose officers or directors serve as directors of the Bank$9,422 0.42 %

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

We have a cooperative ownership structure. As such, capital stock ownership in the Bank is a prerequisite to transacting any member business with us. Our members and certain former members or their successors own all of our stock, the majority of
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our directors are elected by and from the membership, and we conduct our advances and mortgage loan business almost exclusively with members. Grants under the AHP and AHP advances are also made in partnership or in connection with our members. Therefore, in the normal course of business, we extend credit and offer services and AHP benefits to members whose officers and directors may serve as our directors, as well as to entities that hold five percent or more of our capital stock. It is our policy that extensions of credit, all other Bank products and services, and AHP benefits are offered on terms and conditions that are no more favorable to such members than the terms and conditions of comparable transactions with other members.

In addition, we may purchase short-term investments, federal funds, and MBS from, and enter into interest-rate-exchange agreements with, members or their affiliates whose officers or directors serve as directors of the Bank, as well as from members or their affiliates who hold five percent or more of our capital stock. All such purchase transactions are effected at the then-current market rate and all MBS are purchased through securities brokers or dealers, also at the then-current market rate.

For the year ended December 31, 2024, the review and approval of transactions with related persons was governed by our Conflict of Interest Policy for Bank Directors (the Conflict Policy), our Code of Ethics and Business Conduct, and our Related Persons Transaction Policy, each of which are in writing. Under the Conflict Policy, each director is required to disclose to the board of directors all actual or potential conflicts of interest, including any personal financial interest that he or she has, as well as such interests of any immediate family member or business associate of the director known to the director, in any matter to be considered by the board of directors or in which another person does, or proposes to do, business with the Bank. Following such disclosure, the board is empowered to determine whether an actual conflict exists. In the event the board determines the existence of a conflict with respect to any matter, the affected director is required to be recused from all further considerations relating to that matter. The Conflict Policy is administered by the Governance/Government Relations Committee of the board of directors.

The Code of Ethics and Business Conduct requires that all directors and executive officers (as well as all other employees) avoid conflicts of interest and the appearance of conflicts of interest. In particular, subject to limited exceptions for interests arising through ownership of mutual funds and certain financial interests acquired prior to employment by the Bank, no employee may have a financial interest in a member or its holding company, or a financial relationship with any of our members that is not transacted in the ordinary course of the member's business or, in the case of an extension of credit, involves more than the normal risk of repayment or of loss to the member. Employees are required to disclose annually all financial interests and non-ordinary-course financial relationships with members. These disclosures are reviewed by our ethics officer, who is principally responsible for enforcing the Code of Ethics and Business Conduct on a day-to-day basis. The ethics officer is charged with attempting to resolve any apparent conflict involving an employee other than our president and chief executive officer and, if an apparent conflict has not been resolved within 60 days, to report it to our president and chief executive officer for resolution. The ethics officer is charged with reporting any apparent conflict involving a director or our president and chief executive officer to the Governance Committee of the board of directors for resolution. Our ethics officer is Keith R. Walsh, senior vice president, general counsel and corporate secretary of the Bank.

The Related Persons Transaction Policy provides for the board of directors' Governance Committee’s review of certain transactions not in the ordinary course of our business that would be with related persons to determine whether such transactions would be in the best interests, or not be inconsistent with the best interests, of the Bank and our members.

Director Independence

General

The board of directors is required to evaluate and report on the independence of the directors of the Bank under two distinct director independence standards. First, FHFA regulations establish independence criteria for directors who serve as members of the board of directors' Audit Committee. Second, SEC rules require that our board of directors apply the independence criteria of a national securities exchange or automated quotation system in assessing the independence of our directors. Rule 10A-3 promulgated under the Exchange Act sets forth additional independence criteria of directors serving on the Audit Committee.

As of the date of this report, our board of directors is constituted of eight member directors and seven independent directors, as discussed in Part III — Item 10 — Directors, Executive Officers and Corporate Governance. None of our directors is an "inside" director. That is, none of our directors is a Bank employee or officer. Further, our directors are prohibited from personally owning stock or stock options in the Bank, as our stock may only be held by our members, former members, or their successors in interest. Each of the member directors, however, is an officer, director, or trustee of an institution that is a member of the Bank that is encouraged to engage in transactions with us on a regular basis, and some of the independent directors may also engage in transactions either directly or indirectly with us from time to time in the ordinary course of the Bank's business.

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FHFA Regulations Regarding Independence

The FHFA regulations on director independence standards prohibit an individual from serving as a member of the board of directors' Audit Committee if he or she has one or more disqualifying relationships with us or our management that would interfere with the exercise of that individual's independent judgment. Disqualifying relationships considered by the board are: employment with the Bank at any time during the last five years; acceptance of compensation from us other than for service as a director; being a consultant, advisor, promoter, underwriter, or legal counsel for the Bank at any time within the last five years; and being an immediate family member of an individual who is or who has been within the past five years, a Bank executive officer. The board assesses the independence of each director who serves on the Audit Committee under the FHFA's regulations on these independence standards. As of March 14, 2025, all of our directors serving on the board of directors' Audit Committee were independent under these criteria.

SEC Rule Regarding Independence

SEC rules require our board of directors to adopt a standard of independence to evaluate the independence of our directors. Pursuant thereto, the board adopted the independence standards of the New York Stock Exchange (the NYSE) to determine which of our directors are independent, which members of its Audit Committee are not independent, and whether the board of directors' Audit Committee financial expert is independent.

After applying the NYSE independence standards, the board determined that, as of March 14, 2025, all of our independent (that is, nonmember) directors are independent. Based upon the fact that each member director is an officer or director of an institution that is a member of the Bank (and thus is an equity holder in the Bank), that each such institution routinely engages in transactions with us, and that such transactions occur frequently and are encouraged, the board of directors has determined that for the present time it would conclude that none of the member directors meets the independence criteria under the NYSE independence standards.

It is possible that under a strict reading of the NYSE objective criteria for independence (particularly the criterion regarding the amount of business conducted with us by the director's institution), a member director could meet the independence standard on a particular day. However, because the amount of business conducted by a member director's institution may change frequently, and because we generally desire to increase the amount of business we conduct with each member, the directors deemed it inappropriate to draw distinctions among the member directors based upon the amount of business conducted with us by any director's institution at a specific time.

The board of directors has a standing Audit Committee and a standing Compensation Committee. For the reasons noted above, the board of directors determined that none of the current member directors on these committees, including Directors Boulanger, Manzi, Miller, Parent, and Witherspoon, are independent under the NYSE standards for these committees. The board determined that all of the independent directors on these committees, including Directors Barnard, Curry, Lazarus, Russell, and Tourigny are independent under the NYSE independence standards for these committees.

The board of directors also determined that Directors Lazarus and Manzi are the "Audit Committee financial experts" within the meaning of the SEC rules, and further determined that as of March 14, 2025, Director Lazarus is independent under NYSE standards. As stated above, the board of directors determined that each director on the Audit Committee is independent under the FHFA's regulations applicable to the board of directors' Audit Committee. In addition, the board of directors also assessed the independence of the members of its Audit Committee under Rule 10A-3. In order to be considered independent under Rule 10A-3, a member of the Audit Committee may not, other than in his or her capacity as a member of the board or any other board committee (i) accept any consulting, advisory, or other compensation from us or (ii) be an affiliated person of the Bank. As of March 14, 2025, all members of our Audit Committee were independent under these criteria.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the aggregate fees billed by PwC for professional services rendered in connection with the audit of our financial statements for 2024 and 2023, as well as the fees billed by PwC for audit-related and other services rendered by PwC to us during 2024 and 2023.

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Table 59 - Principal Accounting Fees and Services
(dollars in thousands)
 Year Ended December 31,
 20242023
Audit fees(1)
$1,089 $1,090 
Audit-related fees(2)
77 71 
All other fees2 3 
Tax fees— — 
Total$1,168 $1,164 
_______________________
(1)Audit fees consist of fees incurred in connection with the audit of our financial statements, including audit of internal control over financial reporting, review of quarterly or annual management's discussion and analysis, and review of financial information filed with the SEC.
(2)Audit-related fees consist of fees related to accounting research and consultations, operations reviews of new products and supporting processes, and fees related to participation in and presentations at conferences.

The Audit Committee selects our independent registered public accounting firm and preapproves all audit services to be provided by it to us. The Audit Committee also reviews and preapproves all audit-related and non-audit-related services rendered by the independent registered public accounting firm in accordance with the Audit Committee's charter. In its review of these services and related fees and terms, the Audit Committee considers, among other things, the possible effect of the performance of such services on the independence of our independent registered public accounting firm.
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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
a) Financial Statements
Our financial statements are set forth under Part II — Item 8 — Financial Statements of this report on Form 10-K.

b) Financial Statement Schedule
None.

c) Exhibits
NumberExhibit DescriptionReference
3.1Restated Organization Certificate of the Federal Home Loan Bank of Boston
3.2By-laws of the Federal Home Loan Bank of Boston
4.1Amended and Restated Capital Plan of the Federal Home Loan Bank of Boston
4.2Description of Capital Stock
10.1The Federal Home Loan Bank of Boston Pension Benefit Equalization Plan effective January 1, 2009, as amended on April 15, 2009 *
10.1.1First Amendment to the Federal Home Loan Bank of Boston Pension Benefit Equalization Plan effective September 1, 2009 *
10.1.2Second Amendment to the Federal Home Loan Bank of Boston Pension Benefit Equalization Plan effective December 21, 2012 *
10.1.3Third Amendment to the Federal Home Loan Bank of Boston Pension Benefit Equalization Plan effective June 30, 2014 *
10.1.4Fourth Amendment to the Federal Home Loan Bank of Boston Pension Benefit Equalization Plan effective January 1, 2021 *
10.2.1The Federal Home Loan Bank of Boston Thrift Benefit Equalization Plan (as amended and restated effective January 1, 2017) *
10.2.2First Amendment to the Federal Home Loan Bank of Boston Thrift Benefit Equalization Plan effective January 1, 2021 *
10.3Acceptance Agreement with Midland National Life Insurance Company.
10.4.1The Federal Home Loan Bank of Boston 2023 Executive Incentive Plan * ∝
10.4.2The Federal Home Loan Bank of Boston 2024 Executive Incentive Plan *
10.5.1MPF Consolidated Interbank Agreement dated as of July 22, 2016
10.5.2Addendum to the MPF Consolidated Interbank Agreement dated August 25, 2017
10.6Executive Change in Control Severance Plan, effective November 7, 2018 *
10.7.1Lease between the Federal Home Loan Bank of Boston and BP Prucenter Acquisition LLC, dated October 26, 2010
10.7.2First Amendment to Lease Between Federal Home Loan Bank of Boston and BP Prucenter Acquisition LLC, dated August 8, 2022
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10.8Amended and Restated Federal Home Loan Banks P&I Funding and Contingency Plan Agreement, effective as of January 1, 2017, by and among the Office of Finance and each of the Federal Home Loan Banks
10.9.1The Federal Home Loan Bank of Boston 2024 Director Compensation Policy * ∝
10.9.2The Federal Home Loan Bank of Boston 2025 Director Compensation Policy * ∝
10.10Joint Capital Enhancement Agreement, among the Federal Home Loan Banks as amended August 5, 2011
10.11Severance Policy, as adopted March 23, 2012 as amended on December 8, 2023 *
10.12The Federal Home Loan Bank of Boston Split-Dollar Insurance Termination Agreement between Frank Nitkiewicz and the Federal Home Loan Bank of Boston dated May 24, 2005 *
10.13Employment Agreement between Federal Home Loan Bank of Boston and Timothy J. Barrett, dated October 21, 2021 *
10.14Supplemental Executive Retirement Plan, dated June 7, 2024 *
19.1Insider Trading Policy, dated October 25, 2024
31.1Certification of the president and chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1Certification of the president and chief executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2Certification of the chief financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance DocumentThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema DocumentFiled within this Form 10-K
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentFiled within this Form 10-K
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentFiled within this Form 10-K
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentFiled within this Form 10-K
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentFiled within this Form 10-K
104The cover page of the Bank’s Annual report on Form 10-K, formatted in Inline XBRLIncluded within the exhibit 101 attachments
* Management contract or compensatory plan.
∝ Portions of this exhibit have been omitted.

ITEM 16. FORM 10-K SUMMARY

Not applicable
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DateFEDERAL HOME LOAN BANK OF BOSTON (Registrant)
March 14, 2025By:/s/Timothy J. Barrett
Timothy J. Barrett
President and Chief Executive Officer
March 14, 2025By:/s/Frank Nitkiewicz
 
Frank Nitkiewicz
Executive Vice President, Chief Operating Officer and Chief Financial Officer
March 14, 2025By:/s/Brian G. Donahue
 
Brian G. Donahue
Senior Vice President, Controller and Chief Accounting Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

March 14, 2025By:/s/Duncan Barnard
  
Duncan Barnard
Director
March 14, 2025By:/s/Donna L. Boulanger
  
Donna L. Boulanger
Director
March 14, 2025By:/s/Michael A. Brown
Michael A. Brown
Director
March 14, 2025By:/s/Caroline R. Carpenter
  
Caroline R. Carpenter
Director
March 14, 2025By:/s/Eric L. Chatman
Eric L. Chatman
Director
March 14, 2025By:/s/Thomas J. Curry
Thomas J. Curry
Director
March 14, 2025By:/s/Antoinette C. Lazarus
Antoinette C. Lazarus
Director
March 14, 2025By:/s/Edward F. Manzi, Jr.
  
Edward F. Manzi, Jr.
Director
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March 14, 2025By:/s/Kevin D. Miller
Kevin D. Miller
Director
March 14, 2025By:/s/William M. Parent
William M. Parent
Director
March 14, 2025By:/s/David J. Rotatori
David J. Rotatori
Director
March 14, 2025By:/s/E. Macey Russell
  
E. Macey Russell
Director
March 14, 2025By:/s/Robert Tourigny
Robert Tourigny
Director
March 14, 2025By:/s/Gregg C. Tumeinski
Gregg C. Tumeinski
Director
March 14, 2025By:/s/John C. Witherspoon
John C. Witherspoon
Director

173