Federal Home Loan Bank of Boston

11/12/2024 | Press release | Distributed by Public on 11/12/2024 10:35

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

fhlbbost-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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, Boston MA 02199
(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 class Trading Symbol(s) Name of each exchange on which registered
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 filer x
Smaller reporting company
☐
Emerging growth company ☐
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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
Shares outstanding as of October 31, 2024
(in thousands)
Class B Stock, par value $ 100 21,181
1
FEDERAL HOME LOAN BANK OF BOSTON
Form 10-Q
Table of Contents
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements (unaudited)
3
Statements of Condition
3
Statements of Operations
4
Statements of Comprehensive Income (Loss)
5
Statements of Capital
6
Statements of Cash Flows
7
Notes to Financial Statements
9
Note 1 - Basis of Presentation
9
Note 2 - Investments
9
Note 3 - Advances
13
Note 4 - Mortgage Loans Held for Portfolio
15
Note 5 - Derivatives and Hedging Activities
18
Note 6 - Deposits
23
Note 7 - Consolidated Obligations
24
Note 8 - Affordable Housing Program
25
Note 9 - Capital
26
Note 10 - Accumulated Other Comprehensive Loss
27
Note 11 - Fair Value
28
Note 12 - Commitments and Contingencies
33
Note 13 - Transactions with Shareholders
34
Note 14 - Subsequent Events
35
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
60
Item 4.
Controls and Procedures
64
PART II.
OTHER INFORMATION
65
Item 1.
Legal Proceedings
65
Item 1A.
Risk Factors
65
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
65
Item 3.
Defaults Upon Senior Securities
65
Item 4.
Mine Safety Disclosures
65
Item 5.
Other Information
65
Item 6.
Exhibits
66
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CONDITION
(dollars and shares in thousands, except par value)
(unaudited)
September 30, 2024 December 31, 2023
ASSETS
Cash and due from banks $ 50,242 $ 53,412
Interest-bearing deposits 1,809,628 1,643,587
Securities purchased under agreements to resell 2,750,000 1,600,000
Federal funds sold 4,585,000 2,500,000
Investment securities:
Trading securities 1,496 1,395
Available-for-sale securities (amortized cost of $17,203,037 and $15,684,997 at September 30, 2024 and December 31, 2023, respectively)
16,925,261 15,343,745
Held-to-maturity securities (a) 66,439 78,905
Total investment securities 16,993,196 15,424,045
Advances 42,006,806 41,958,583
Mortgage loans held for portfolio, net of allowance for credit losses of $2,200 and $2,000 at September 30, 2024 and December 31, 2023, respectively
3,543,560 3,059,331
Accrued interest receivable 223,195 185,709
Derivative assets, net 355,423 383,073
Other assets 79,791 334,534
Total Assets $ 72,396,841 $ 67,142,274
LIABILITIES
Deposits
Interest-bearing $ 728,197 $ 896,005
Non-interest-bearing 37,634 26,874
Total deposits 765,831 922,879
Consolidated obligations (COs):
Bonds 52,338,590 40,248,743
Discount notes 14,941,067 22,000,546
Total consolidated obligations 67,279,657 62,249,289
Mandatorily redeemable capital stock 5,086 6,083
Accrued interest payable 361,110 269,517
Affordable Housing Program (AHP) payable 97,381 87,164
Derivative liabilities, net 6,844 3,017
Other liabilities 73,574 65,711
Total liabilities 68,589,483 63,603,660
Commitments and contingencies (Note 12)
CAPITAL
Capital stock - Class B - putable ($100 par value), 21,615 shares and 20,425 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
2,161,471 2,042,453
Retained earnings:
Unrestricted 1,380,713 1,339,546
Restricted 492,833 451,154
Total retained earnings 1,873,546 1,790,700
Accumulated other comprehensive loss (227,659) (294,539)
Total capital 3,807,358 3,538,614
Total Liabilities and Capital $ 72,396,841 $ 67,142,274
_______________________________________
(a) Fair values of held-to-maturity securities were $66,475 and $78,478 at September 30, 2024, and December 31, 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)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2024 2023 2024 2023
INTEREST INCOME
Advances $ 535,200 $ 486,508 $ 1,615,872 $ 1,587,597
Prepayment fees on advances, net 320 336 427 784
Interest-bearing deposits 34,893 38,562 108,505 106,064
Securities purchased under agreements to resell 18,108 28,450 50,291 86,655
Federal funds sold 53,249 57,936 156,389 148,781
Investment securities:
Trading securities 18 18 55 53
Available-for-sale securities 234,545 214,392 707,504 590,767
Held-to-maturity securities 970 1,123 3,183 3,311
Total investment securities 235,533 215,533 710,742 594,131
Mortgage loans held for portfolio 34,570 24,004 94,281 66,904
Other - 174 - 605
Total interest income 911,873 851,503 2,736,507 2,591,521
INTEREST EXPENSE
Consolidated obligations:
Bonds 567,157 477,389 1,609,188 1,349,479
Discount notes 245,922 258,516 791,065 920,041
Total consolidated obligations 813,079 735,905 2,400,253 2,269,520
Deposits 8,805 11,348 27,909 25,785
Mandatorily redeemable capital stock 107 120 340 416
Other borrowings 95 1 121 123
Total interest expense 822,086 747,374 2,428,623 2,295,844
NET INTEREST INCOME 89,787 104,129 307,884 295,677
(Reduction of) provision for credit losses (4) (8) 196 85
NET INTEREST INCOME AFTER (REDUCTION OF) PROVISION FOR CREDIT LOSSES 89,791 104,137 307,688 295,592
OTHER INCOME (LOSS)
Service fees 3,269 3,418 9,326 10,626
Other, net 2,214 (1,351) 1,977 (555)
Total other income 5,483 2,067 11,303 10,071
OTHER EXPENSE
Compensation and benefits 11,894 11,102 36,529 33,060
Other operating expenses 7,758 7,577 22,119 21,454
Federal Housing Finance Agency (the FHFA) 1,189 1,653 3,568 4,958
Office of Finance 1,177 1,112 3,384 3,180
AHP voluntary contribution 507 - 1,852 2,000
Discretionary housing and community investment programs 4,567 6,105 16,673 9,357
Other 1,093 790 3,278 2,917
Total other expense 28,185 28,339 87,403 76,926
INCOME BEFORE ASSESSMENTS 67,089 77,865 231,588 228,737
AHP assessments 6,720 7,798 23,193 22,915
NET INCOME $ 60,369 $ 70,067 $ 208,395 $ 205,822
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)
(unaudited)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2024 2023 2024 2023
Net income $ 60,369 $ 70,067 $ 208,395 $ 205,822
Other comprehensive income:
Net unrealized gains (losses) on available-for-sale securities 61,005 (58,738) 63,476 (48,534)
Net unrealized (losses) gains relating to hedging activities (20,081) 24,080 3,631 28,871
Pension and postretirement benefits (76) (122) (227) (377)
Total other comprehensive income (loss) 40,848 (34,780) 66,880 (20,040)
Comprehensive income $ 101,217 $ 35,287 $ 275,275 $ 185,782
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CAPITAL
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023
(dollars and shares in thousands)
(unaudited)
Capital Stock Class B - Putable Retained Earnings Accumulated Other Comprehensive Loss
Shares Par Value Unrestricted Restricted Total Total
Capital
BALANCE, JUNE 30, 2023 20,060 $ 2,006,046 $ 1,328,645 $ 426,846 $ 1,755,491 $ (291,685) $ 3,469,852
Comprehensive income 56,053 14,014 70,067 (34,780) 35,287
Proceeds from issuance of capital stock 13,662 1,366,171 1,366,171
Repurchase of capital stock (13,633) (1,363,343) (1,363,343)
Stock reclassified to mandatorily redeemable capital stock (18) (1,815) (1,815)
Cash dividends on capital stock (46,363) (46,363) (46,363)
BALANCE, SEPTEMBER 30, 2023 20,071 $ 2,007,059 $ 1,338,335 $ 440,860 $ 1,779,195 $ (326,465) $ 3,459,789
BALANCE, JUNE 30, 2024 20,943 $ 2,094,276 $ 1,375,438 $ 480,759 $ 1,856,197 $ (268,507) $ 3,681,966
Comprehensive income (loss) 48,295 12,074 60,369 40,848 101,217
Proceeds from issuance of capital stock 8,249 824,902 824,902
Repurchase of capital stock (7,577) (757,707) (757,707)
Cash dividends on capital stock (43,020) (43,020) (43,020)
BALANCE, SEPTEMBER 30, 2024 21,615 $ 2,161,471 $ 1,380,713 $ 492,833 $ 1,873,546 $ (227,659) $ 3,807,358
BALANCE, DECEMBER 31, 2022 20,312 $ 2,031,178 $ 1,290,873 $ 399,695 $ 1,690,568 $ (306,425) $ 3,415,321
Comprehensive income 164,657 41,165 205,822 (20,040) 185,782
Proceeds from issuance of capital stock 41,289 4,128,863 4,128,863
Repurchase of capital stock (41,509) (4,150,886) (4,150,886)
Stock reclassified to mandatorily redeemable capital stock (21) (2,096) (2,096)
Cash dividends on capital stock (117,195) (117,195) (117,195)
BALANCE, SEPTEMBER 30, 2023 20,071 $ 2,007,059 $ 1,338,335 $ 440,860 $ 1,779,195 $ (326,465) $ 3,459,789
BALANCE, DECEMBER 31, 2023 20,425 $ 2,042,453 $ 1,339,546 $ 451,154 $ 1,790,700 $ (294,539) $ 3,538,614
Comprehensive income 166,716 41,679 208,395 66,880 275,275
Proceeds from issuance of capital stock 22,273 2,227,360 2,227,360
Repurchase of capital stock (21,083) (2,108,342) (2,108,342)
Cash dividends on capital stock (125,549) (125,549) (125,549)
BALANCE, SEPTEMBER 30, 2024 21,615 $ 2,161,471 $ 1,380,713 $ 492,833 $ 1,873,546 $ (227,659) $ 3,807,358
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)
(unaudited)
For the Nine Months Ended September 30,
2024 2023
OPERATING ACTIVITIES
Net income $ 208,395 $ 205,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (453) 19,589
Provision for credit losses 196 85
Net change in derivatives and hedging activities (332,788) 123,290
Other adjustments, net 4,023 5,969
Net change in:
Market value of trading securities (100) (37)
Accrued interest receivable (37,486) (28,469)
Other assets 5,724 2,392
Accrued interest payable 91,599 140,876
Other liabilities 17,009 12,025
Total adjustments (252,276) 275,720
Net cash (used in) provided by operating activities (43,881) 481,542
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits 196,119 (58,730)
Securities purchased under agreements to resell (1,150,000) (500,000)
Federal funds sold (2,085,000) 266,000
Advances to members 79,358 1,415,643
Available-for-sale securities:
Proceeds 644,808 271,641
Purchases (1,626,434) (820,961)
Held-to-maturity securities:
Proceeds 12,179 15,898
Mortgage loans held for portfolio:
Proceeds 209,719 177,549
Purchases (697,647) (364,048)
Other investing activities, net (1,458) (7,832)
Net cash (used in) provided by investing activities (4,418,356) 395,160
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FEDERAL HOME LOAN BANK OF BOSTON
STATEMENTS OF CASH FLOWS - (Continued)
(dollars in thousands)
(unaudited)
For the Nine Months Ended September 30,
2024 2023
FINANCING ACTIVITIES
Net change in deposits (156,435) 506,842
Net payments on derivatives with a financing element (2,389) 36,070
Net proceeds from issuance of consolidated obligations:
Discount notes 73,404,472 109,089,082
Discount notes transferred from other FHLBanks 614,234 -
Bonds 28,278,786 25,246,360
Bonds transferred from other FHLBanks 5,804,945 -
Payments for maturing and retiring consolidated obligations:
Discount notes (80,481,393) (115,783,630)
Discount notes transferred to other FHLBanks (612,816) -
Bonds (22,382,775) (19,514,435)
Payment of financing lease (34) (162)
Proceeds from issuance of capital stock 2,227,360 4,128,863
Payments for repurchase of capital stock (2,108,342) (4,150,886)
Payments for redemption of mandatorily redeemable capital stock (997) (6,243)
Cash dividends paid (125,549) (117,195)
Net cash provided by (used in) financing activities 4,459,067 (565,334)
Net (decrease) increase in cash and due from banks (3,170) 311,368
Cash and due from banks at beginning of the period 53,412 7,593
Cash and due from banks at end of the period $ 50,242 $ 318,961
Supplemental disclosures:
Interest paid $ 2,322,900 $ 2,166,889
AHP payments $ 14,132 $ 13,442
Noncash transfers of mortgage loans held for portfolio to other assets $ 265 $ 392
Noncash lease liabilities arising from obtaining right-of-use assets $ - $ 26,314
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 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information. In the opinion of management, all adjustments considered necessary have been included. All such adjustments consist of normal recurring accruals. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year ending December 31, 2024. These interim financial statements do not include all the information and footnotes required by GAAP for complete annual financial statements and accordingly should be read in conjunction with the Federal Home Loan Bank of Boston's audited financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the SEC) on March 15, 2024 (the 2023 Annual Report). Unless otherwise indicated or 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.
Note 2 - 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 short-term 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 September 30, 2024, and December 31, 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. 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 September 30, 2024, and December 31, 2023.
Federal funds sold are unsecured loans that are transacted on an overnight term or short-term basis. Federal Housing Finance Agency (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 September 30, 2024, and December 31, 2023, have been repaid according to the contractual terms. No allowance for credit losses was recorded for these assets at September 30, 2024, and December 31, 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 2.1 - Trading Securities by Major Security Type
(dollars in thousands)
September 30, 2024 December 31, 2023
Corporate bonds $ 1,496 $ 1,395
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For the nine months ended September 30, 2024 and 2023, net gains on trading securities held at period end were $100 thousand and $37 thousand, respectively.
We do not participate in speculative trading practices and typically hold these investments for longer periods of time.
Available-for-sale Securities
Table 2.2 - Available-for-Sale Securities by Major Security Type
(dollars in thousands)
September 30, 2024
Amounts Recorded in Accumulated Other Comprehensive Income
Amortized
Cost (1)
Unrealized
Gains 		Unrealized
Losses 		Fair
Value
U.S. Treasury obligations $ 5,856,446 $ 363 $ (12,677) $ 5,844,132
State housing-finance-agency obligations (HFA securities) 21,460 9 (78) 21,391
Supranational institutions 347,068 17 (3,419) 343,666
U.S. government-owned corporations 253,228 - (15,594) 237,634
GSE 104,044 - (3,828) 100,216
6,582,246 389 (35,596) 6,547,039
Mortgage-backed securities (MBS)
U.S. government guaranteed - single-family 207,989 372 (1,918) 206,443
U.S. government guaranteed - multifamily 512,346 - (40,852) 471,494
GSE - single-family 2,117,517 5,726 (38,789) 2,084,454
GSE - multifamily 7,782,939 8,050 (175,158) 7,615,831
10,620,791 14,148 (256,717) 10,378,222
Total $ 17,203,037 $ 14,537 $ (292,313) $ 16,925,261
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 securities 22,430 - (625) 21,805
Supranational institutions 350,282 3 (3,910) 346,375
U.S. government-owned corporations 252,585 - (17,394) 235,191
GSE 104,015 - (4,594) 99,421
6,413,469 125 (46,350) 6,367,244
MBS
U.S. government guaranteed - single-family 16,854 - (2,421) 14,433
U.S. government guaranteed - multifamily 521,203 - (43,527) 477,676
GSE - single-family 954,298 1,665 (51,507) 904,456
GSE - multifamily 7,779,173 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 receivableof $39.1 million and $46.7 million at September 30, 2024, and December 31, 2023, respectively.
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Table 2.3 - Available-for-Sale Securities in a Continuous Unrealized Loss Position
(dollars in thousands)
September 30, 2024
Continuous Unrealized Loss Less than 12 Months Continuous Unrealized Loss 12 Months or More Total
Fair
Value 		Unrealized
Losses 		Fair
Value 		Unrealized
Losses 		Fair
Value 		Unrealized
Losses
U.S. Treasury obligations $ 1,189,830 $ (815) $ 3,193,324 $ (11,862) $ 4,383,154 $ (12,677)
HFA securities - - 13,742 (78) 13,742 (78)
Supranational institutions - - 331,252 (3,419) 331,252 (3,419)
U.S. government-owned corporations - - 237,634 (15,594) 237,634 (15,594)
GSE - - 100,216 (3,828) 100,216 (3,828)
1,189,830 (815) 3,876,168 (34,781) 5,065,998 (35,596)
MBS
U.S. government guaranteed - single-family - - 13,527 (1,918) 13,527 (1,918)
U.S. government guaranteed - multifamily - - 471,494 (40,852) 471,494 (40,852)
GSE - single-family 177,641 (88) 540,481 (38,701) 718,122 (38,789)
GSE - multifamily 313,431 (1,172) 5,302,715 (173,986) 5,616,146 (175,158)
491,072 (1,260) 6,328,217 (255,457) 6,819,289 (256,717)
Total $ 1,680,902 $ (2,075) $ 10,204,385 $ (290,238) $ 11,885,287 $ (292,313)
December 31, 2023
Continuous Unrealized Loss Less than 12 Months Continuous Unrealized Loss 12 Months or More Total
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 institutions 82,354 (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-family 55,457 (117) 616,857 (51,390) 672,314 (51,507)
GSE - multifamily 1,238,598 (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)
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Table 2.4 - Available-for-Sale Securities by Contractual Maturity
(dollars in thousands)
September 30, 2024 December 31, 2023
Year of Maturity Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
Due in one year or less $ 1,246,798 $ 1,247,046 $ 13,820 $ 13,210
Due after one year through five years 5,017,493 5,001,325 6,082,462 6,058,571
Due after five years through 10 years - - - -
Due after 10 years 317,955 298,668 317,187 295,463
6,582,246 6,547,039 6,413,469 6,367,244
MBS (1)
10,620,791 10,378,222 9,271,528 8,976,501
Total $ 17,203,037 $ 16,925,261 $ 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 2.5 - Held-to-Maturity Securities by Major Security Type
(dollars in thousands)
September 30, 2024
Amortized Cost(1)
Gross Unrecognized Holding Gains Gross Unrecognized Holding Losses Fair Value
MBS
U.S. government guaranteed - single-family $ 2,861 $ 16 $ - $ 2,877
GSE - single-family 63,578 561 (541) 63,598
Total $ 66,439 $ 577 $ (541) $ 66,475
December 31, 2023
Amortized Cost(1)
Gross Unrecognized Holding Gains Gross Unrecognized Holding Losses Fair Value
MBS
U.S. government guaranteed - single-family $ 3,123 $ 19 $ - $ 3,142
GSE - single-family 75,782 366 (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 receivableof $389 thousand and $399 thousand at September 30, 2024, and December 31, 2023, respectively.
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 September 30, 2024, and December 31, 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.
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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 September 30, 2024, and December 31, 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 September 30, 2024, and December 31, 2023.
Note 3 - Advances
General Terms. At both September 30, 2024, and December 31, 2023, we had advances outstanding with interest rates ranging from 0.00 percent to 6.23 percent.
Table 3.1 - Advances Outstanding by Year of Contractual Maturity
(dollars in thousands)
September 30, 2024 December 31, 2023
Amount Weighted
Average
Rate 		Amount Weighted
Average
Rate
Overdrawn demand-deposit accounts $ 5,013 5.23 % $ 5,909 5.76 %
Due in one year or less 25,315,411 4.91 21,829,742 5.25
Due after one year through two years 5,509,786 4.35 9,069,939 4.53
Due after two years through three years 3,373,686 4.21 3,306,934 4.02
Due after three years through four years 3,330,861 3.54 2,295,317 4.37
Due after four years through five years 2,509,574 3.97 3,905,361 3.52
Due after five years through fifteen years 1,898,815 3.42 1,601,794 3.26
Thereafter 44,152 1.74 51,660 1.72
Total par value 41,987,298 4.55 % 42,066,656 4.71 %
Discounts (36,556) (37,289)
Fair value of bifurcated derivatives (1)
- 790
Fair value hedging adjustments 56,064 (71,574)
Total (2)
$ 42,006,806 $ 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 receivableof $156.4 million and $115.0 million at September 30, 2024, and December 31, 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.
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Table 3.2 - Advances Outstanding by Year of Contractual Maturity or Next Call Date
(dollars in thousands)
September 30, 2024 December 31, 2023
Overdrawn demand-deposit accounts $ 5,013 $ 5,909
Due in one year or less 27,073,306 26,546,662
Due after one year through two years 4,617,222 5,272,439
Due after two years through three years 2,789,655 2,989,434
Due after three years through four years 3,296,937 1,711,697
Due after four years through five years 2,356,311 3,887,061
Due after five years through fifteen years 1,804,702 1,601,794
Thereafter 44,152 51,660
Total par value $ 41,987,298 $ 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.
Table 3.3 - Advances Outstanding by Year of Contractual Maturity or Next Put Date
(dollars in thousands)
September 30, 2024 December 31, 2023
Overdrawn demand-deposit accounts $ 5,013 $ 5,909
Due in one year or less 32,220,332 27,338,812
Due after one year through two years 4,144,986 8,472,939
Due after two years through three years 1,960,065 1,996,364
Due after three years through four years 2,074,861 1,447,317
Due after four years through five years 700,574 1,955,361
Due after five years through fifteen years 837,315 798,294
Thereafter 44,152 51,660
Total par value $ 41,987,298 $ 42,066,656
Table 3.4 - Advances by Current Interest Rate Terms
(dollars in thousands)
September 30, 2024 December 31, 2023
Fixed-rate $ 35,332,343 $ 36,330,552
Variable-rate 6,654,955 5,736,104
Total par value $ 41,987,298 $ 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. For additional information on credit risk exposure and security terms see Part II - Item 8 - Financial Statements and Supplementary Data - Note 6 - Advances in the 2023 Annual Report.
The Bank's decision to lend is based principally on our analysis of each borrower's financial condition and outlook, though we consider the types and level of collateral as additional factors. At September 30, 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.
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We continue to evaluate and make changes to our collateral guidelines based on market conditions. At September 30, 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 nine months ended September 30, 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 September 30, 2024, and December 31, 2023.
Note 4 - Mortgage Loans Held for Portfolio
We invest in mortgage loans through the Mortgage Partnership Finance® (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.
Table 4.1 - Mortgage Loans Held for Portfolio
(dollars in thousands)
September 30, 2024 December 31, 2023
Real estate
Fixed-rate 15-year single-family mortgages
$ 165,130 $ 192,104
Fixed-rate 20- and 30-year single-family mortgages
3,338,564 2,831,319
Premiums
44,700 39,990
Discounts
(3,153) (2,222)
Deferred derivative gains, net
519 140
Total mortgage loans held for portfolio(1)
3,545,760 3,061,331
Less: allowance for credit losses (2,200) (2,000)
Total mortgage loans, net of allowance for credit losses $ 3,543,560 $ 3,059,331
________________________
(1) Excludes accrued interest receivableof $22.2 million and $17.8 million at September 30, 2024, and December 31, 2023, respectively.
Table 4.2 - Mortgage Loans Held for Portfolio by Collateral/Guarantee Type
(dollars in thousands)
September 30, 2024 December 31, 2023
Conventional mortgage loans $ 3,366,023 $ 2,877,109
Government mortgage loans 137,671 146,314
Total par value $ 3,503,694 $ 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. For additional information on credit enhancements see Part II - Item 8 - Financial Statements and Supplementary Data - Note 7 - Mortgage Loans Held for Portfolio - Credit-Enhancements in the 2023 Annual Report.
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 4.3 and 4.4 present the payment status for conventional mortgage loans and other delinquency statistics for all mortgage loans at September 30, 2024, and December 31, 2023.
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Table 4.3 - Credit Quality Indicator for Conventional Mortgage Loans
(dollars in thousands)
September 30, 2024
Year of Origination
Payment Status at Amortized Cost(1)
Prior to 2020 2020 to 2024 Total
Past due 30-59 days delinquent $ 12,728 $ 7,509 $ 20,237
Past due 60-89 days delinquent 3,395 1,769 5,164
Past due 90 days or more delinquent 5,179 1,131 6,310
Total past due 21,302 10,409 31,711
Total current loans 1,324,869 2,049,094 3,373,963
Total conventional mortgage loans $ 1,346,171 $ 2,059,503 $ 3,405,674
December 31, 2023
Year of Origination
Payment Status at Amortized Cost(1)
Prior to 2019 2019 to 2023 Total
Past due 30-59 days delinquent $ 9,392 $ 5,630 $ 15,022
Past due 60-89 days delinquent 3,068 1,694 4,762
Past due 90 days or more delinquent 6,841 889 7,730
Total past due 19,301 8,213 27,514
Total current loans 1,169,734 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 4.4 - Other Delinquency Statistics of Mortgage Loans
(dollars in thousands)
September 30, 2024
Amortized Cost in Conventional Mortgage Loans Amortized Cost in Government Mortgage Loans Total
In process of foreclosure (1)
$ 1,016 $ 925 $ 1,941
Serious delinquency rate (2)
0.19 % 1.39 % 0.23 %
Past due 90 days or more still accruing interest $ - $ 1,945 $ 1,945
Loans on nonaccrual status (3)
$ 6,445 $ - $ 6,445
December 31, 2023
Amortized Cost in Conventional Mortgage Loans Amortized Cost in Government Mortgage Loans Total
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 September 30, 2024, and December 31, 2023, $3.4 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 4.5 presents a roll forward of the allowance for credit losses on conventional mortgage loans for the three and nine months ended September 30, 2024 and 2023.
Table 4.5 - Allowance for Credit Losses on Conventional Mortgage Loans
(dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2024 2023 2024 2023
Allowance for credit losses (1)
Balance, beginning of period $ 2,200 $ 2,000 $ 2,000 $ 1,900
Net recoveries 4 8 4 15
(Reduction of) provision for credit losses (4) (8) 196 85
Balance, end of period $ 2,200 $ 2,000 $ 2,200 $ 2,000
_________________________
(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).
The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable insurance or guaranty with respect to defaulted government-guaranteed mortgage loans. 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 September 30, 2024, and December 31, 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.
"Mortgage Partnership Finance," "MPF," "eMPF" and "MPF Xtra" are registered trademarks of the Federal Home Loan Bank of Chicago.
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Note 5 - Derivatives and Hedging Activities
Table 5.1 - Fair Value of Derivative Instruments
(dollars in thousands)
September 30, 2024 December 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 $ 50,587,956 $ 86,842 $ (685,517) $ 51,587,480 $ 77,093 $ (1,009,217)
Forward-start interest-rate swaps 941,000 1,094 (1,550) 1,391,000 254 (170)
Total derivatives designated as hedging instruments 51,528,956 87,936 (687,067) 52,978,480 77,347 (1,009,387)
Derivatives not designated as hedging instruments
Interest-rate swaps 1,641,043 - (236) 90,000 - (729)
Mortgage-delivery commitments(1)
69,710 108 (155) 29,995 290 -
Total derivatives not designated as hedging instruments 1,710,753 108 (391) 119,995 290 (729)
Total notional amount of derivatives $ 53,239,709 $ 53,098,475
Total derivatives before netting and collateral adjustments 88,044 (687,458) 77,637 (1,010,116)
Netting adjustments and cash collateral, including related accrued interest (2)
267,379 680,614 305,436 1,007,099
Derivative assets and derivative liabilities $ 355,423 $ (6,844) $ 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 $952.4 million and $1.3 billion at September 30, 2024, and December 31, 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 $4.4 million and $3.8 million at September 30, 2024, and December 31, 2023.
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.
Tables 5.2 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 5.2 - Net Gains (Losses) on Fair Value Hedging Relationships
(dollars in thousands)
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For the Three Months Ended September 30, 2024
Advances Available-for-sale Securities CO Bonds
Total interest income (expense) presented on the statements of operations $ 535,200 $ 234,545 $ (567,157)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$ (212,219) $ (381,278) $ 358,310
Hedged items
208,913 375,947 (358,256)
Net changes in fair value before price alignment interest (3,306) (5,331) 54
Price alignment interest(1)
(2,204) (10,679) 416
Net interest settlements on derivatives(2)(3)
56,387 122,394 (151,214)
Net gains (losses) on qualifying hedging relationships 50,877 106,384 (150,744)
Amortization/accretion of discontinued hedging relationships (166) - (847)
Net gains (losses) on derivatives and hedging activities recorded in net interest income $ 50,711 $ 106,384 $ (151,591)
For the Three Months Ended September 30, 2023
Advances Available-for-sale Securities CO Bonds
Total interest income (expense) presented on the statements of operations $ 486,508 $ 214,392 $ (477,389)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$ 32,714 $ 144,001 $ (2,046)
Hedged items
(32,778) (144,300) 3,198
Net changes in fair value before price alignment interest (64) (299) 1,152
Price alignment interest(1)
(2,771) (15,008) 332
Net interest settlements on derivatives(2)(3)
53,399 125,784 (170,493)
Net gains (losses) on qualifying hedging relationships 50,564 110,477 (169,009)
Amortization/accretion of discontinued hedging relationships (366) - (1,463)
Net gains (losses) on derivatives and hedging activities recorded in net interest income $ 50,198 $ 110,477 $ (170,472)
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For the Nine Months Ended September 30, 2024
Advances Available-for-sale Securities CO Bonds
Total interest income (expense) presented on the statements of operations $ 1,615,872 $ 707,504 $ (1,609,188)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$ (104,427) $ (280,496) $ 396,862
Hedged items
103,489 278,177 (397,515)
Net changes in fair value before price alignment interest (938) (2,319) (653)
Price alignment interest(1)
(4,075) (40,184) 1,302
Net interest settlements on derivatives(2)(3)
172,692 371,440 (470,450)
Net gains (losses) on qualifying hedging relationships 167,679 328,937 (469,801)
Amortization/accretion of discontinued hedging relationships (813) - (3,550)
Net gains (losses) on derivatives and hedging activities recorded in net interest income $ 166,866 $ 328,937 $ (473,351)
For the Nine Months Ended September 30, 2023
Advances Available-for-sale Securities CO Bonds
Total interest income (expense) presented on the statements of operations $ 1,587,597 $ 590,767 $ (1,349,479)
Gains (losses) on fair value hedging relationships
Changes in fair value:
Derivatives
$ 52,677 $ 120,049 $ 79,608
Hedged items
(52,407) (123,228) (78,646)
Net changes in fair value before price alignment interest 270 (3,179) 962
Price alignment interest(1)
(6,354) (35,365) 872
Net interest settlements on derivatives(2)(3)
125,370 337,838 (468,235)
Net gains (losses) on qualifying hedging relationships 119,286 299,294 (466,401)
Amortization/accretion of discontinued hedging relationships (1,349) - (621)
Net gains (losses) on derivatives and hedging activities recorded in net interest income $ 117,937 $ 299,294 $ (467,022)
_______________________
(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 5.3 presents the net gains (losses) on qualifying cash flow hedging relationships.
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Table 5.3 - Net (Losses) Gains on Cash Flow Hedging Relationships
(dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2024 2023 2024 2023
Forward-start interest rate swaps - CO Bonds
Gains (losses) reclassified from accumulated other comprehensive loss into interest expense $ 1,314 $ (1,130) $ (39) $ (3,374)
(Losses) gains recognized in other comprehensive income (18,767) 22,950 3,592 25,497
For the nine months ended September 30, 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 September 30, 2024, the maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted transactions is seven years.
As of September 30, 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 $8.5 million.
Table 5.4 - Cumulative Basis Adjustments for Fair-Value Hedges
(dollars in thousands)
September 30, 2024
Line Item in Statement of Condition
Amortized Cost of Hedged Asset/ Liability(1)
Basis Adjustments for Active Hedging Relationships Included in Amortized Cost Basis Adjustments for Discontinued Hedging Relationships Included in Amortized Cost Cumulative Amount of Fair Value Hedging Basis Adjustments
Advances $ 14,612,292 $ 51,014 $ 5,050 $ 56,064
Available-for-sale securities 11,184,356 608,767 - 608,767
Consolidated obligation bonds 23,599,942 (496,541) 35,153 (461,388)
_______________________
(1) Includes only the amortized cost of hedged items in 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 5.5 - Impact of Variation Margin for Cleared Derivatives on the Statement of Cash Flows
(dollars in thousands)
Increase (decrease) on Cash Flow Statement
For the Nine Months Ended September 30,
2024 2023
Operating activity - net change in derivatives and hedging activities $ (310,209) $ 400,260
Financing activity - net receipts on derivatives with a financing element 1,619 50,123
Total variation margin (paid) received on cleared derivatives $ (308,590) $ 450,383
Managing Credit Risk on Derivatives. We enter into derivatives that we clear (cleared derivatives) with a derivatives clearing organization (DCO), our counterparty for such derivatives. We also enter into derivatives that are not cleared (uncleared derivatives) under master-netting 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.
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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 September 30, 2024, was $631.2 million for which we had delivered collateral with a post-haircut value of $632.1 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 5.6 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 September 30, 2024.
Table 5.6 - Post Haircut Value of Incremental Collateral to be Delivered as of September 30, 2024
(dollars in thousands)
Ratings Downgrade(1)
From To Incremental Collateral
AA+ AA or AA- $ -
AA- A+, A or A- -
A- below A- 69,734
_______________________
(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.
Table 5.7 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 September 30, 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.
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Table 5.7 - Netting of Derivative Assets and Derivative Liabilities
(dollars in thousands)
September 30, 2024
Derivative Instruments Meeting Netting Requirements
Gross Recognized Amount Gross Amounts of Netting Adjustments and Cash Collateral Derivative Instruments Not Meeting Netting Requirements Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared $ 50,281 $ (42,958) $ 7,323
Cleared 37,655 310,337 347,992
Mortgage delivery commitments $ 108 108
Total $ 355,423
Derivative Liabilities
Interest-rate swaps
Uncleared $ (677,371) $ 670,682 $ (6,689)
Cleared (9,931) 9,931 -
Mortgage delivery commitments $ (155) (155)
Total $ (6,844)
December 31, 2023
Derivative Instruments Meeting Netting Requirements
Gross Recognized Amount Gross Amounts of Netting Adjustments and Cash Collateral Derivative Instruments Not Meeting Netting Requirements Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Interest-rate swaps
Uncleared $ 72,517 $ (69,838) $ 2,679
Cleared 4,830 375,274 380,104
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)
Note 6 - 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 to the owners of the mortgage loans, which we classify as "other" in the following table.
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Table 6.1 - Deposits
(dollars in thousands)
September 30, 2024 December 31, 2023
Interest-bearing
Demand and overnight $ 728,197 $ 896,005
Noninterest-bearing
Other 37,634 26,874
Total deposits $ 765,831 $ 922,879
None of the deposits are federally insured.
Note 7 - Consolidated Obligations
CO Bonds. CO bonds for which we have received issuance proceeds and are primarily liable were as follows:
Table 7.1 - CO Bonds Outstanding by Contractual Maturity
(dollars in thousands)
September 30, 2024 December 31, 2023
Amount
Weighted
Average
Rate (1)
Amount
Weighted
Average
Rate (1)
Due in one year or less $ 32,036,475 4.31 % $ 17,841,615 4.27 %
Due after one year through two years 8,169,250 2.36 7,476,350 2.86
Due after two years through three years 4,123,300 2.92 7,014,955 1.76
Due after three years through four years 3,326,480 3.22 2,854,250 2.94
Due after four years through five years 1,884,515 3.87 2,712,400 2.94
Thereafter 3,247,820 3.38 3,193,305 2.95
Total par value 52,787,840 3.76 % 41,092,875 3.30 %
Premiums 25,831 32,419
Discounts (13,693) (14,451)
Hedging adjustments (461,388) (862,100)
Total $ 52,338,590 $ 40,248,743
_______________________
(1) The CO bonds' weighted-average rate excludes concession fees.
Table 7.2 - CO Bonds Outstanding by Early Redemption Feature
(dollars in thousands)
September 30, 2024 December 31, 2023
Noncallable and nonputable $ 33,537,640 $ 18,882,235
Callable 19,250,200 22,210,640
Total par value $ 52,787,840 $ 41,092,875
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Table 7.3 - CO Bonds Outstanding by Contractual Maturity or Next Call Date
(dollars in thousands)
September 30, 2024 December 31, 2023
Due in one year or less $ 43,735,675 $ 30,900,615
Due after one year through two years 3,789,250 4,203,850
Due after two years through three years 1,441,100 2,487,955
Due after three years through four years 1,606,480 852,750
Due after four years through five years 789,515 1,171,400
Thereafter 1,425,820 1,476,305
Total par value $ 52,787,840 $ 41,092,875
Table 7.4 - CO Bonds by Interest Rate-Payment Type
(dollars in thousands)
September 30, 2024 December 31, 2023
Fixed-rate $ 31,437,840 $ 32,454,235
Simple variable-rate 16,253,000 3,012,500
Step-up (1)
5,097,000 5,626,140
Total par value $ 52,787,840 $ 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 7.5 - CO Discount Notes Outstanding
(dollars in thousands)
Book Value Par Value
Weighted Average
Rate (1)
September 30, 2024 $ 14,941,067 $ 15,030,861 5.11 %
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 8 - Affordable Housing Program
Table 8.1 - AHP Liability
(dollars in thousands)
September 30, 2024 December 31, 2023
Balance at beginning of year $ 87,164 $ 76,622
AHP expense for the period 23,193 28,648
AHP voluntary contribution 1,852 2,000
AHP direct grant disbursements (14,132) (16,144)
AHP subsidy for AHP advance disbursements (998) (3,965)
Return of previously disbursed grants and subsidies 302 3
Balance at end of period $ 97,381 $ 87,164
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Note 9 - 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.
Table 9.1 - Regulatory Capital Requirements
(dollars in thousands)
September 30, 2024 December 31, 2023
Required Actual Required Actual
Risk-based capital $ 589,241 $ 4,040,103 $ 628,052 $ 3,839,236
Regulatory capital $ 2,895,874 $ 4,040,103 $ 2,685,691 $ 3,839,236
Capital-to-asset ratio 4.0 % 5.6 % 4.0 % 5.7 %
Leverage capital $ 3,619,842 $ 6,060,155 $ 3,357,114 $ 5,758,854
Leverage capital-to-assets ratio 5.0 % 8.4 % 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.
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Mandatorily Redeemable Capital Stock.
Table 9.2 - Mandatorily Redeemable Capital Stock by Expiry of Redemption Notice Period
(dollars in thousands)
September 30, 2024 December 31, 2023
Past redemption date (1)
$ 2,669 $ 2,778
Due in one year or less 435 -
Due after one year through two years 689 435
Due after two years through three years 960 689
Due after three years through four years 333 960
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 stock will not be redeemed until the activity is no longer outstanding.
Restricted Retained Earnings.At September 30, 2024, our restricted retained earnings contribution requirement totaled $643.6 million. At September 30, 2024, and December 31, 2023, restricted retained earnings totaled $492.8 million and $451.2 million, respectively. These restricted retained earnings are not available to pay dividends.
Note 10 - Accumulated Other Comprehensive Income (Loss)
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Table 10.1 - Accumulated Other Comprehensive Income (Loss)
(dollars in thousands)
Net Unrealized Gain (Loss) on Available-for-sale Securities Net Unrealized Gain (Loss) Relating to Hedging Activities Pension and Postretirement Benefits Total Accumulated Other Comprehensive Gain (Loss)
Balance, June 30, 2023 $ (340,077) $ 47,273 $ 1,119 $ (291,685)
Other comprehensive (loss) income before reclassifications:
Net unrealized (losses) gains (58,738) 22,950 - (35,788)
Net actuarial loss - - (122) (122)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
- 1,130 - 1,130
Other comprehensive (loss) income (58,738) 24,080 (122) (34,780)
Balance, September 30, 2023 $ (398,815) $ 71,353 $ 997 $ (326,465)
Balance, June 30, 2024 $ (338,781) $ 69,676 $ 598 $ (268,507)
Other comprehensive (loss) income before reclassifications:
Net unrealized gains (losses) 61,005 (18,767) - 42,238
Net actuarial loss - - (76) (76)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
- (1,314) - (1,314)
Other comprehensive income (loss) 61,005 (20,081) (76) 40,848
Balance, September 30, 2024 $ (277,776) $ 49,595 $ 522 $ (227,659)
Balance, December 31, 2022 $ (350,281) $ 42,482 $ 1,374 $ (306,425)
Other comprehensive (loss) income before reclassifications:
Net unrealized (losses) gains (48,534) 25,497 - (23,037)
Net actuarial loss - - (377) (377)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
- 3,374 - 3,374
Other comprehensive (loss) income (48,534) 28,871 (377) (20,040)
Balance, September 30, 2023 $ (398,815) $ 71,353 $ 997 $ (326,465)
Balance, December 31, 2023 $ (341,252) $ 45,964 $ 749 $ (294,539)
Other comprehensive income (loss) before reclassifications:
Net unrealized gains 63,476 3,592 - 67,068
Net actuarial loss - - (227) (227)
Reclassifications from other comprehensive income to net income
Amortization - hedging activities (1)
- 39 - 39
Other comprehensive income (loss) 63,476 3,631 (227) 66,880
Balance, September 30, 2024 $ (277,776) $ 49,595 $ 522 $ (227,659)
_______________________
(1) Recorded in CO bond interest expense.
Note 11 - Fair Values
A fair-value hierarchy is used to prioritize the inputs of valuation techniques used to measure fair value. A description of the application of the fair-value hierarchy, valuation techniques, and significant inputs is disclosed in Part II - Item 8 - Financial Statements and Supplementary Data - Note 15 - Fair Values in the 2023 Annual Report. There have been no material changes in the fair-value hierarchy classification of financial assets and liabilities, valuation techniques, or significant inputs during the three months ended September 30, 2024.
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Table 11.1 presents the carrying value, fair value, and fair value hierarchy of our financial assets and liabilities at September 30, 2024, and December 31, 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 11.2 for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.
Table 11.1 - Fair Value Summary
(dollars in thousands)
September 30, 2024
Carrying
Value 		Total Fair Value Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral(2)
Financial instruments
Assets:
Cash and due from banks $ 50,242 $ 50,242 $ 50,242 $ - $ - $ -
Interest-bearing deposits 1,809,628 1,809,628 1,809,628 - - -
Securities purchased under agreements to resell 2,750,000 2,750,001 - 2,750,001 - -
Federal funds sold 4,585,000 4,584,997 - 4,584,997 - -
Trading securities(1)
1,496 1,496 - 1,496 - -
Available-for-sale securities(1)
16,925,261 16,925,261 - 16,903,870 21,391 -
Held-to-maturity securities 66,439 66,475 - 66,475 - -
Advances 42,006,806 41,988,285 - 41,988,285 - -
Mortgage loans, net 3,543,560 3,354,085 - 3,341,656 12,429 -
Accrued interest receivable 223,195 223,195 - 223,195 - -
Derivative assets(1)
355,423 355,423 - 88,044 - 267,379
Other assets (1)
32,874 32,874 16,489 16,385 - -
Liabilities:
Deposits (765,831) (765,807) - (765,807) - -
COs:
Bonds (52,338,590) (52,205,575) - (52,205,575) - -
Discount notes (14,941,067) (14,946,443) - (14,946,443) - -
Mandatorily redeemable capital stock (5,086) (5,086) (5,086) - - -
Accrued interest payable (361,110) (361,110) - (361,110) - -
Derivative liabilities(1)
(6,844) (6,844) - (687,458) - 680,614
Other:
Commitments to extend credit for advances - (267) - (267) - -
Standby letters of credit (1,526) (1,526) - (1,526) - -
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December 31, 2023
Carrying
Value 		Total Fair
Value 		Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral(2)
Financial instruments
Assets:
Cash and due from banks $ 53,412 $ 53,412 $ 53,412 $ - $ - $ -
Interest-bearing deposits 1,643,587 1,643,587 1,643,587 - - -
Securities purchased under agreements to resell 1,600,000 1,599,996 - 1,599,996 - -
Federal funds sold 2,500,000 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 securities 78,905 78,478 - 78,478 - -
Advances 41,958,583 41,834,762 - 41,834,762 - -
Mortgage loans, net 3,059,331 2,796,000 - 2,781,976 14,024 -
Accrued interest receivable 185,709 185,709 - 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.
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Fair Value Measured on a Recurring and Nonrecurring Basis.
Table 11.2 - Fair Value of Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis
(dollars in thousands)
September 30, 2024
Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral (1)
Total
Assets:
Carried at fair value on a recurring basis
Trading securities:
Corporate bonds $ - $ 1,496 $ - $ - $ 1,496
Available-for-sale securities:
U.S. Treasury obligations - 5,844,132 - - 5,844,132
HFA securities - - 21,391 - 21,391
Supranational institutions - 343,666 - - 343,666
U.S. government-owned corporations - 237,634 - - 237,634
GSE - 100,216 - - 100,216
U.S. government guaranteed - single-family MBS - 206,443 - - 206,443
U.S. government guaranteed - multifamily MBS - 471,494 - - 471,494
GSE - single-family MBS - 2,084,454 - - 2,084,454
GSE - multifamily MBS - 7,615,831 - - 7,615,831
Total available-for-sale securities - 16,903,870 21,391 - 16,925,261
Derivative assets:
Interest-rate-exchange agreements - 87,936 - 267,379 355,315
Mortgage delivery commitments - 108 - - 108
Total derivative assets - 88,044 - 267,379 355,423
Other assets 16,489 16,385 - - 32,874
Total assets carried at fair value on a recurring basis $ 16,489 $ 17,009,795 $ 21,391 $ 267,379 $ 17,315,054
Liabilities:
Carried at fair value on a recurring basis
Derivative liabilities
Interest-rate-exchange agreements $ - $ (687,303) $ - $ 680,614 $ (6,689)
Mortgage delivery commitments - (155) - - (155)
Total liabilities carried at fair value on a recurring basis $ - $ (687,458) $ - $ 680,614 $ (6,844)
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December 31, 2023
Level 1 Level 2 Level 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 assets 13,724 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 11.3 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 three and nine months ended September 30, 2024 and 2023.
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Table 11.3 - Roll Forward of Level 3 Available-for-Sale HFA Securities
(dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2024 2023 2024 2023
Balance at beginning of period $ 21,174 $ 32,391 $ 21,805 $ 32,774
Total gains included in other comprehensive income
Net unrealized gains 217 298 556 825
Sales, maturities, and settlements
Settlements - - (970) (910)
Balance at end of period $ 21,391 $ 32,689 $ 21,391 $ 32,689
Total amount of unrealized gains for the period included in other comprehensive income relating to securities held at period end $ 217 $ 298 $ 556 $ 825
Note 12 - 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 September 30, 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 September 30, 2024, and December 31, 2023. The par amounts of other FHLBanks' outstanding COs for which we are jointly and severally liable totaled $1.1 trillion at both September 30, 2024, and December 31, 2023. See Note 7 - Consolidated Obligationsfor additional information.
Off-Balance-Sheet Commitments
Table 12.1 - Off-Balance Sheet Commitments(1)
(dollars in thousands)
September 30, 2024 December 31, 2023
Expire within one year Expire after one year Total Expire within one year Expire after one year Total
Standby letters of credit outstanding (2)
$ 8,460,340 $ 314,262 $ 8,774,602 $ 8,217,388 $ 207,677 $ 8,425,065
Commitments for unused lines of credit - advances (3)
1,102,651 - 1,102,651 1,113,354 - 1,113,354
Commitments to make additional advances 21,350 12,263 33,613 13,170 20,463 33,633
Commitments to invest in mortgage loans 69,710 - 69,710 29,995 - 29,995
Unsettled CO bonds, at par 98,000 - 98,000 131,500 - 131,500
Unsettled CO discount notes, at par - - - 61,008 - 61,008
__________________________
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(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.
(2) The amount of standby letters of credit outstanding excludes commitments to issue standby letters of credit. At September 30, 2024, and December 31, 2023, commitments to issue standby letters of credit that expire within one year totaled $47.9 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. At September 30, 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 $1.5 million and $1.3 million at September 30, 2024, and December 31, 2023, respectively.
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 5 - Derivatives and Hedging Activitiesfor 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.
Note 13 - Transactions with Shareholders
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 13.1 - 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
September 30, 2024
State Street Bank and Trust Company $ 335,000 15.5 % $ 6,000,000 14.3 % $ 39,102 25.0 %
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 13.2 - 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
September 30, 2024 $ 49,352 2.3 % $ 677,825 1.6 % $ 869 0.6 %
December 31, 2023 201,250 9.8 4,485,824 10.7 5,953 5.2
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Note 14 - Subsequent Events
On October 25, 2024, the board of directors declared a cash dividend at an annualized rate of 8.36 percent based on daily average capital stock balances outstanding during the third quarter of 2024. The dividend, including dividends classified as interest on mandatorily redeemable capital stock, amounted to $43.0 million and was paid on November 4, 2024.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Index to Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
35
Executive Summary
36
Economic Conditions
37
Selected Financial Data
38
Results of Operations
40
Financial Condition
46
Liquidity and Capital Resources
53
Critical Accounting Estimates
58
Legislative and Regulatory Developments
59
Forward-Looking Statements
This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are "forward-looking statements." These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our minimum retained earnings target, or the interest-rate environment in which we do business; statements of management's plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, "anticipates," "believes," "continued," "expects," "plans," "intends," "may," "could," "estimates," "assumes," "should," "will," "likely," or their negatives or other variations of these terms. We caution that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Part I - Item 1A - Risk Factors in the 2023 Annual Report and Part II - Item 1A - Risk Factorsof this report and the risks set forth below. Actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements.
These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
•the effects of economic, financial, credit, and market conditions on our financial and regulatory condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, employment rates, interest rates, interest-rate spreads, interest-rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, members' deposit flows, liquidity needs, and loan demand; changes in the general economy, including changes resulting from U.S. fiscal and monetary policy, 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, or other developments that affect the Bank, its members, counterparties, investors in the consolidated obligations of the FHLBanks, 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, changes to applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, 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;
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•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.
The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim financial statements and notes, which begin on page three, and the 2023 Annual Report.
EXECUTIVE SUMMARY
Net income for the three months ended September 30, 2024, was $60.4 million, compared with net income of $70.1 million for the same period of 2023. The decrease was primarily the result of a decrease in net interest income after reduction of credit losses of $14.3 million, offset by an increase in other income of $3.4 million.
Net interest income after provision for credit losses for the three months ended September 30, 2024, was $89.8 million, compared with $104.1 million for the same period in 2023. The $14.3 million decrease in net interest income after provision for credit losses was primarily driven by a $13.5 million increase in mortgage backed security net amortization, and a $9.4 million unfavorable variance in net unrealized gains and losses on fair value hedge ineffectiveness, both attributable to a decrease in intermediate- and long-term interest rates during the quarter ended September 30, 2024, compared to an increase in intermediate- and long-term interest rates during the same period in 2023. The decrease in net interest income after provision for credit losses was partially offset by increases of $3.4 billion, $2.5 billion, and $572.9 million in our average advances, MBS, and mortgage loan portfolios, respectively.
Total assets increased $5.3 billion to $72.4 billion over the nine months ended September 30, 2024. At September 30, 2024, investment securities and short-term money-market investments totaled $26.1 billion, an increase of $5.0 billion from December 31, 2023, comprised primarily of a $3.4 billion increase in short-term investments and a $1.4 billion increase in MBS. Mortgage loans totaled $3.5 billion, an increase of $484.2 million from December 31, 2023, and advances totaled $42.0 billion at September 30, 2024, an increase of $48.2 million from December 31, 2023.
Our retained earnings grew to $1.9 billion at September 30, 2024, an increase of $82.8 million from December 31, 2023, equaling 2.6 percent of total assets at September 30, 2024. We continue to satisfy all regulatory capital requirements as of September 30, 2024.
On October 25, 2024, our board of directors declared a cash dividend that was equivalent to an annual yield of 8.36 percent on the average daily balance of capital stock outstanding during the third quarter of 2024. The yield is equivalent to the approximate daily average of the Secured Overnight Financing Rate (SOFR) for the third 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.
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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 three months ended September 30, 2024.
Net Interest Margin and Spread
Net interest spread was 0.19 percent for the three months ended September 30, 2024, a decrease of eight basis points from the same period in 2023, and net interest margin was 0.52 percent, a decrease of 13 basis points from the three months ended September 30, 2023. The decrease in net interest spread and margin was primarily attributable to the substantial decrease in intermediate- and long-term interest rates resulting in an increase of net MBS premium amortization and an unfavorable variance in net unrealized gains and losses on fair value hedge ineffectiveness, as described above.
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 three and nine months ended September 30, 2024, resulted in an accrual of $6.7 million and $23.2 million, respectively, to the AHP pool of funds that will be available to members in 2025.
We have certain discretionary subsidized advance and grant programs for our members, including our Jobs for New England (JNE), Housing Our Workforce (HOW), and Lift Up Homeownership programs. For additional information on these three programs, see Item 1 - Business - Targeted Housing and Community Investment Programs in the 2023 Annual Report. Additionally, in 2024, the Bank launched two new pilot programs: the MPF Permanent Rate Buydown product, which enables our participating financial institutions that utilize the MPF Program to reduce interest rates paid by income-eligible borrowers by up to 2 percentage points, and the CDFI Advance, which is a subsidized advance program for our members targeting certified, non-depository community development financial institutions (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.
Discretionary housing and community investment program expenses are shown in the table below, by program.
Table 1 - Voluntary Housing and Community Investment Program Subsidy Expenses
(dollars in thousands)
Program
For the Three Months Ended September 30, 2024 For the Nine Months Ended September 30, 2024
Lift Up Homeownership program $ 1,550 $ 5,000
JNE program 1,288 5,000
MPF permanent rate buy-down program 1,264 1,264
AHP voluntary contributions 507 1,853
CDFI advance program 409 409
HOW program 56 5,000
Total $ 5,074 $ 18,526
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 Legislative and Regulatory Developments. Such developments affect the way we conduct business and could impact how we satisfy our mission as well as the value of membership in the Bank.
ECONOMIC CONDITIONS
Economic Environment
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Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024. This expansion was driven mainly by consumer spending, exports, and federal government spending. The increase in consumer spending reflected spending increases on both services and goods.
Employment remained steady with job gains averaging 148,000 per month in the third quarter of 2024. In October 2024, employment increased by 12,000 and the unemployment rate was 4.1 percent. The unemployment rate for the New England region in September 2024 was 3.5 percent, ranging from 2.2 percent in Vermont to 4.6 percent in Rhode Island.
In September 2024, the Consumer Price Index (CPI) increased 0.2 percent from the preceding month, representing a year-over- year increase of 2.4 percent. CPI was driven mainly by the cost of food and shelter. The FHFA reported that housing prices rose 4.2 percent across the U.S. from August 2023 to August 2024. Over the same period, housing prices in New England rose 5.9 percent.
Interest-Rate Environment
On September 18, 2024, the FOMC lowered the target range for the federal funds rate to 475 and 500 basis points, and on November 7, 2024, lowered the target range for the federal funds by another 25 basis points to 450 and 475 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 third 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. At the end of September 2024, 2-, 5- and 10-year Treasury rates were lower than overnight and 3-month rates.
Table 2 - Key Interest Rates(1)
Three Month Daily Average Nine Month Daily Average Ending Rate
September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 September 30, 2024 December 31, 2023
SOFR 5.28% 5.24% 5.30% 4.90% 4.96% 5.38%
Federal funds effective rate 5.27% 5.26% 5.31% 4.93% 4.83% 5.33%
3-month U.S. Treasury yield 5.12% 5.42% 5.29% 5.08% 4.62% 5.33%
2-year U.S. Treasury yield 4.06% 4.93% 4.46% 4.53% 3.64% 4.25%
5-year U.S. Treasury yield 3.81% 4.31% 4.13% 3.94% 3.56% 3.85%
10-year U.S. Treasury yield 3.95% 4.14% 4.18% 3.79% 3.78% 3.88%
________________
(1) Source: Bloomberg
SELECTED FINANCIAL DATA
The following financial highlights for the statement of condition and statement of operations for December 31, 2023, have been derived from our audited financial statements. Financial highlights for the quarter-ends have been derived from our unaudited financial statements.
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Table 3 - Selected Financial Data
(dollars in thousands)
September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023
Statement of Condition
Total assets $ 72,396,841 $ 68,769,378 $ 66,030,276 $ 67,142,274 $ 62,747,403
Investments(1)
26,137,824 22,436,579 22,263,743 21,167,632 18,736,546
Advances 42,006,806 42,294,369 39,905,499 41,958,583 40,130,845
Mortgage loans held for portfolio, net(2)
3,543,560 3,345,541 3,146,391 3,059,331 2,940,189
Deposits and other borrowings 765,831 891,137 921,774 922,879 1,150,506
Consolidated obligations:
Bonds
52,338,590 42,651,455 41,023,055 40,248,743 37,363,959
Discount notes
14,941,067 21,040,550 20,055,973 22,000,546 20,337,099
Total consolidated obligations
67,279,657 63,692,005 61,079,028 62,249,289 57,701,058
Mandatorily redeemable capital stock 5,086 5,085 6,083 6,083 6,143
Class B capital stock outstanding-putable(3)
2,161,471 2,094,276 1,983,103 2,042,453 2,007,059
Unrestricted retained earnings 1,380,713 1,375,438 1,360,373 1,339,546 1,338,335
Restricted retained earnings 492,833 480,759 466,723 451,154 440,860
Total retained earnings 1,873,546 1,856,197 1,827,096 1,790,700 1,779,195
Accumulated other comprehensive loss (227,659) (268,507) (242,912) (294,539) (326,465)
Total capital 3,807,358 3,681,966 3,567,287 3,538,614 3,459,789
Results of Operations
Net interest income after provision for credit losses $ 89,791 $ 108,655 $ 109,242 $ 79,640 $ 104,137
Other income, net 5,483 3,212 2,608 4,733 2,067
Other expense 28,185 33,878 25,340 27,170 28,339
AHP assessments 6,720 7,809 8,664 5,733 7,798
Net income $ 60,369 $ 70,180 $ 77,846 $ 51,470 $ 70,067
Other Information
Dividends declared $ 43,020 $ 41,079 $ 41,450 $ 39,965 $ 46,363
Dividend payout ratio 71.26 % 58.53 % 53.25 % 77.65 % 66.17 %
Weighted-average dividend rate(4)
8.41 8.40 8.40 8.31 8.04
Return on average equity(5)
6.57 7.75 8.94 6.03 8.27
Return on average assets 0.34 0.40 0.47 0.31 0.43
Net interest margin(6)
0.52 0.63 0.67 0.49 0.65
Average equity to average assets 5.22 5.16 5.22 5.10 5.16
Total regulatory capital ratio(7)
5.58 5.75 5.78 5.72 6.04
_______________________
(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 at September 30, 2024, $2.2 million at June 30, 2024, $2.6 million at March 31, 2024, and $2.0 million for each of the periods ending December 31, 2023, and September 30, 2023, respectively.
(3)Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions.
(4)Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends.
(5)Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income and total retained earnings.
(6)Net interest margin is net interest income before provision for credit losses as a percentage of average earning assets.
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(7)Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets. See Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 9 - Capital.
RESULTS OF OPERATIONS
Third Quarter of 2024 Compared with the Third Quarter of 2023
Net income decreased $9.7 million to $60.4 million for the three months ended September 30, 2024, from $70.1 million for the same period in 2023. The primary reasons for the decrease are discussed under Executive Summary.
Nine Months Ended September 30, 2024, Compared with the Nine Months Ended September 30, 2023
Net income increased $2.6 million to $208.4 million for the nine months ended September 30, 2024, from $205.8 million for the same period in 2023. The increase in net income was primarily due to an increase of $12.1 million in net interest income after provision for credit losses partially offset by an $7.3 million increase in expenses related to our discretionary housing and community investment programs, and a $3.5 million increase in compensation and benefits expense.
Net interest income after provision for credit losses for the nine months ended September 30, 2024, was $307.7 million, compared with $295.6 million for 2023. The $12.1 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 nine months ended September 30, 2024, compared to the corresponding prior year period as well as increases of $2.1 billion and $476.3 million in our average mortgage-backed securities portfolio and average mortgage loan portfolio, respectively, moderated by a $2.6 billion decline in our average advances portfolio and a $1.4 billion decline in average short-term money-market investments. In addition, there was a $2.0 million unfavorable variance in net unrealized gains and losses on fair value hedge ineffectiveness attributable to a greater decrease in intermediate-term interest rates during the nine months ended September 30, 2024, compared to the same period in 2023. Net interest spread was 0.25 percent for the nine months ended September 30, 2024, an increase of two basis points from the same period in 2023, and net interest margin was 0.60 percent, an increase of three basis points from the same period in 2023.
Table 4 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.
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Table 4 - Net Interest Spread and Margin
(dollars in thousands)
For the Three Months Ended September 30,
2024 2023
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Assets
Advances $ 40,444,505 $ 535,520 5.27 % $ 37,006,521 $ 486,844 5.22 %
Interest-bearing deposits 2,584,853 34,893 5.37 2,862,953 38,562 5.34
Securities purchased under agreements to resell 1,353,261 18,108 5.32 2,099,457 28,450 5.38
Federal funds sold 3,990,446 53,249 5.31 4,296,815 57,936 5.35
Investment securities(2)
17,137,942 235,533 5.47 14,694,866 215,533 5.82
Mortgage loans(2)(3)
3,453,744 34,570 3.98 2,880,881 24,004 3.31
Other earning assets - - - 13,044 174 5.29
Total interest-earning assets 68,964,751 911,873 5.26 63,854,537 851,503 5.29
Other non-interest-earning assets 1,296,156 1,656,594
Fair-value adjustments on investment securities (310,746) (350,835)
Total assets $ 69,950,161 $ 911,873 5.19 % $ 65,160,296 $ 851,503 5.18 %
Liabilities and capital
Consolidated obligations
Discount notes $ 18,464,088 $ 245,922 5.30 % $ 19,522,486 $ 258,516 5.25 %
Bonds 45,208,790 567,157 4.99 38,590,167 477,389 4.91
Other interest-bearing liabilities 791,514 9,007 4.53 979,806 11,469 4.64
Total interest-bearing liabilities 64,464,392 822,086 5.07 59,092,459 747,374 5.02
Other non-interest-bearing liabilities 1,837,853 2,705,524
Total capital 3,647,916 3,362,313
Total liabilities and capital $ 69,950,161 $ 822,086 4.68 % $ 65,160,296 $ 747,374 4.55 %
Net interest income $ 89,787 $ 104,129
Net interest spread 0.19 % 0.27 %
Net interest margin 0.52 % 0.65 %
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For the Nine Months Ended September 30,
2024 2023
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Assets
Advances $ 40,484,484 $ 1,616,299 5.33 % $ 43,123,887 $ 1,588,381 4.92 %
Interest-bearing deposits 2,678,183 108,505 5.41 2,836,512 106,064 5.00
Securities purchased under agreements to resell 1,246,792 50,291 5.39 2,332,432 86,655 4.97
Federal funds sold 3,880,430 156,389 5.38 4,002,986 148,781 4.97
Investment securities(2)
16,450,063 710,742 5.77 14,545,388 594,131 5.46
Mortgage loans(2)(3)
3,268,114 94,281 3.85 2,791,780 66,904 3.20
Other earning assets - - - 16,117 605 5.02
Total interest-earning assets 68,008,066 2,736,507 5.37 69,649,102 2,591,521 4.97
Other non-interest-earning assets 1,457,307 1,581,814
Fair-value adjustments on investment securities (326,006) (336,678)
Total assets $ 69,139,367 $ 2,736,507 5.29 % $ 70,894,238 $ 2,591,521 4.89 %
Liabilities and capital
Consolidated obligations
Discount notes $ 19,782,547 $ 791,065 5.34 % $ 25,212,597 $ 920,041 4.88 %
Bonds 42,812,929 1,609,188 5.02 38,775,657 1,349,479 4.65
Other interest-bearing liabilities 812,639 28,370 4.66 828,541 26,324 4.25
Total interest-bearing liabilities 63,408,115 2,428,623 5.12 64,816,795 2,295,844 4.74
Other non-interest-bearing liabilities 2,137,072 2,523,755
Total capital 3,594,180 3,553,688
Total liabilities and capital $ 69,139,367 $ 2,428,623 4.69 % $ 70,894,238 $ 2,295,844 4.33 %
Net interest income $ 307,884 $ 295,677
Net interest spread 0.25 % 0.23 %
Net interest margin 0.60 % 0.57 %
_________________________
(1) Yields are annualized.
(2) Average balances are reflected at amortized cost.
(3) Nonaccrual loans are included in the average balances used to determine average yield.
Rate and Volume Analysis
Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 5 summarizes changes in interest income and interest expense for the three and nine months ended September 30, 2024 and 2023. 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 5 - Rate and Volume Analysis
(dollars in thousands)
For the Three Months Ended
September 30, 2024 vs. 2023 		For the Nine Months Ended
September 30, 2024 vs. 2023
Increase (Decrease) due to Increase (Decrease) due to
Volume Rate Total Volume Rate Total
Interest income
Advances $ 45,503 $ 3,173 $ 48,676 $ (100,658) $ 128,576 $ 27,918
Interest-bearing deposits (3,754) 85 (3,669) (6,118) 8,559 2,441
Securities purchased under agreements to resell (9,989) (353) (10,342) (43,253) 6,889 (36,364)
Federal funds sold (4,094) (593) (4,687) (4,657) 12,265 7,608
Investment securities 34,196 (14,196) 20,000 80,918 35,693 116,611
Mortgage loans 5,251 5,315 10,566 12,475 14,902 27,377
Other earning assets (87) (87) (174) (303) (302) (605)
Total interest income 67,026 (6,656) 60,370 (61,596) 206,582 144,986
Interest expense
Consolidated obligations
Discount notes (14,089) 1,495 (12,594) (211,290) 82,314 (128,976)
Bonds 82,944 6,824 89,768 146,862 112,847 259,709
Other interest-bearing liabilities (2,150) (312) (2,462) (513) 2,559 2,046
Total interest expense 66,705 8,007 74,712 (64,941) 197,720 132,779
Change in net interest income $ 321 $ (14,663) $ (14,342) $ 3,345 $ 8,862 $ 12,207
Average Balance of Advances
The average balance of total advances decreased $2.6 billion, or 6.1 percent, for the nine months ended September 30, 2024, compared with the same period in 2023 during which depository members' demand for advances was elevated. 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 $1.4 billion, or 15.0 percent, for the nine months ended September 30, 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 nine months ended September 30, 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 4.97 percent during the nine months ended September 30, 2023, to 5.38 percent during the nine months ended September 30, 2024, while average yields on securities purchased under agreements to resell increased from 4.97 percent for the nine months ended September 30, 2023, to 5.39 percent for the nine months ended September 30, 2024. These investments are used for liquidity management.
Average investment-securities balances increased $1.9 billion, or 13.1 percent for the nine months ended September 30, 2024, compared with the same period in 2023. The increase was primarily the result of a $2.1 billion increase in average MBS.
Average Balance of COs
Average CO balances decreased $1.4 billion, or 2.2 percent, for the nine months ended September 30, 2024, compared with the same period in 2023, resulting from our decreased funding needs principally due to the decrease in our average advances balances. This decrease consisted of a $5.4 billion decline in CO discount notes partially offset by a $4.0 billion increase in CO bonds.
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The average balance of CO discount notes represented approximately 31.6 percent of total average COs for the nine months ended September 30, 2024, compared with 39.4 percent of total average COs for the nine months ended September 30, 2023. The average balance of CO bonds represented 68.4 percent and 60.6 percent of total average COs outstanding during the nine months ended September 30, 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 6 provides a summary of the impact of derivatives and hedging activities on our earnings.
Table 6 - Effect of Derivative and Hedging Activities
(dollars in thousands)
For the Three Months Ended September 30, 2024
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (166) $ - $ (63) $ 467 $ - $ 238
(Losses) gains on designated fair-value hedges (3,306) (5,331) - 54 - (8,583)
Net interest settlements (2)
56,387 122,394 - (151,214) - 27,567
Price alignment interest (3)
(2,204) (10,679) - 416 - (12,467)
Total net interest income 50,711 106,384 (63) (150,277) - 6,755
Net gains (losses) on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting - - - - 767 767
Mortgage delivery commitments - - 485 - - 485
Price alignment amount (3)
- - - - (197) (197)
Net gains on derivatives and hedging activities - - 485 - 570 1,055
Total net effect of derivatives and hedging activities $ 50,711 $ 106,384 $ 422 $ (150,277) $ 570 $ 7,810
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For the Three Months Ended September 30, 2023
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (366) $ - $ (36) $ (2,593) $ (2,995)
(Losses) gains on designated fair-value hedges (64) (299) - 1,152 789
Net interest settlements (2)
53,399 125,784 - (170,493) 8,690
Price alignment interest (3)
(2,771) (15,008) - 332 (17,447)
Total net interest income 50,198 110,477 (36) (171,602) (10,963)
Net losses on derivatives and hedging activities
Mortgage delivery commitments - - (731) - (731)
Net losses on derivatives and hedging activities - - (731) - (731)
Total net effect of derivatives and hedging activities $ 50,198 $ 110,477 $ (767) $ (171,602) $ (11,694)
For the Nine Months Ended September 30, 2024
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (813) $ - $ (34) $ (3,589) $ - $ (4,436)
Losses on designated fair-value hedges (938) (2,319) - (653) - (3,910)
Net interest settlements (2)
172,692 371,440 - (470,450) - 73,682
Price alignment interest (3)
(4,075) (40,184) - 1,302 - (42,957)
Total net interest income 166,866 328,937 (34) (473,390) - 22,379
Net gains on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting 15 - - - 648 663
Mortgage delivery commitments - - 76 - - 76
Price alignment interest (3)
- - - - (149) (149)
Net gains on derivatives and hedging activities 15 - 76 - 499 590
Total net effect of derivatives and hedging activities $ 166,881 $ 328,937 $ 42 $ (473,390) $ 499 $ 22,969
For the Nine Months Ended September 30, 2023
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (1,349) $ - $ (182) $ (3,995) $ (5,526)
Gains (losses) on designated fair-value hedges 270 (3,179) - 962 (1,947)
Net interest settlements (2)
125,370 337,838 - (468,235) (5,027)
Price alignment interest (3)
(6,354) (35,365) - 872 (40,847)
Total net interest income 117,937 299,294 (182) (470,396) (53,347)
Net losses on derivatives and hedging activities
Mortgage delivery commitments - - (1,080) - (1,080)
Net losses on derivatives and hedging activities - - (1,080) - (1,080)
Total net effect of derivatives and hedging activities $ 117,937 $ 299,294 $ (1,262) $ (470,396) $ (54,427)
________________________
(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.
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(3) Relates to derivatives for which variation margin payments are characterized as daily settled contracts.
FINANCIAL CONDITION
Advances
At September 30, 2024, the advances portfolio totaled $42.0 billion, an increase of $48.2 million from $42.0 billion at December 31, 2023.
Table 7 - Advances Outstanding by Product Type
(dollars in thousands)
September 30, 2024 December 31, 2023
Par Value Percent of Total Par Value Percent of Total
Fixed-rate advances
Long-term $ 12,590,599 30.0 % $ 11,550,277 27.5 %
Short-term 10,324,573 24.6 11,725,587 27.9
Putable 7,476,920 17.8 5,896,570 14.0
Callable 2,500,000 6.0 2,500,000 5.9
Overnight 1,432,596 3.4 3,599,404 8.6
Amortizing 1,007,655 2.4 1,058,714 2.5
35,332,343 84.2 36,330,552 86.4
Variable-rate advances
Simple variable (1)
6,634,942 15.8 5,650,195 13.4
Putable 15,000 - 80,000 0.2
All other variable-rate indexed advances 5,013 - 5,909 -
6,654,955 15.8 5,736,104 13.6
Total par value $ 41,987,298 100.0 % $ 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 I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 3 - Advancesfor disclosures relating to redemption terms of advances.
Advances Credit Risk
We manage credit risk on advances by monitoring the financial condition of our borrowers and by holding sufficient collateral to protect the Bank from credit losses. The Bank has an internal credit rating methodology that estimates each borrower's credit risk utilizing call report data and other quantitative factors as well as qualitative considerations including, but not limited to, regulatory examination reports. Based on its rating, we assign each member and non-member housing associate to a credit category (one through four) to allow the Bank to leverage risk mitigation strategies across groups of similarly rated members. Each credit category reflects increasing limitations on borrowing capacity and terms to maturity, as well as our increasing level of control over the collateral pledged by the borrower.
•Credit category one (Credit Category-1), a borrower is generally in 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.
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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.
For additional information on our management of credit risk on our advances, see Part II - Item 7 - Management Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Advances - Advances Credit Risk in our 2023 Annual Report.
The following table presents a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank's borrowers as of September 30, 2024.
Table 8 - Credit Outstanding and Collateral Borrowing Capacity by Credit Category
(dollars in thousands)
September 30, 2024
Borrowers with Credit Outstanding
Number
Credit Outstanding(1)
Collateral Borrowing Capacity(2)
Borrower Credit Category Total Used
Member borrowers(3)
Credit Category-1 293 $ 49,941,679 $ 148,606,461 33.6 %
Credit Category-2 38 1,546,703 3,429,195 45.1
Credit Category-3 8 541,261 654,042 82.8
Credit Category-4 - - - -
Nonmember borrowers(4)
Former members 7 69,879 142,684 49.0
Housing associates 4 33,656 36,857 91.3
Total 350 $ 52,133,178 $ 152,869,239 34.1 %
_______________________
(1) Includes advances, 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.
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.
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.
We have not recorded any allowance for credit losses on advances as of September 30, 2024, and December 31, 2023, for the reasons discussed in Part 1 - Item 1 - Financial Statements - Notes to the Financial Statements - Note 3 - Advances.
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Table 9 - Top Five Advance-Borrowing Institutions
(dollars in thousands)
September 30, 2024
Name Par Value of Advances Percent of Total Par Value of Advances
Weighted-Average Rate (1)
State Street Bank and Trust Company $ 6,000,000 14.3 % 5.37 %
Webster Bank, N.A. 3,110,205 7.4 5.12
Massachusetts Mutual Life Insurance Company 2,100,000 5.0 1.78
Hingham Institution for Savings 1,530,500 3.6 4.46
Institution for Savings in Newburyport and its Vicinity 1,411,479 3.4 3.82
Total of top five advance-borrowing institutions $ 14,152,184 33.7 %
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 Company 2,500,000 6.0 5.27
Webster Bank, N.A. 2,360,018 5.6 5.52
Massachusetts Mutual Life Insurance Company 2,100,000 5.0 1.78
Hingham Institution for Savings 1,692,675 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 September 30, 2024, investment securities and short-term money-market instruments totaled $26.1 billion, an increase of $5.0 billion from $21.2 billion at December 31, 2023.
Short-term money-market investments increased $3.4 billion to $9.1 billion at September 30, 2024, compared with December 31, 2023. The increase was attributable to increases of $2.1 billion in federal funds sold, $1.2 billion in securities purchased under agreements to resell, and $166.0 million in interest bearing deposits.
Investment securities increased $1.6 billion to $17.0 billion at September 30, 2024, compared with $15.4 billion at December 31, 2023. The increase was primarily due to the $1.2 billion increase in the par value of MBS.
Investments Credit Risk
We are subject to credit risk on unsecured investments consisting primarily of short-term (meaning one year or less to maturity) money-market instruments issued by high-quality financial institutions and long-term (original maturity greater than one year) debentures issued or guaranteed by U.S. agencies, U.S government-owned corporations, GSEs, and supranational institutions.
We place short-term funds with large, high-quality financial institutions that must be rated in at least the third-highest internal rating category on a rating scale of FHFA1 through FHFA7, reflecting progressively lower credit quality. The internal rating categories of FHFA1 through FHFA4 are considered to be investment quality. As of September 30, 2024, all of these placements either expired within one day or were payable upon demand. See Part 1 - Item 1 - Business - Business Lines - Investments in the 2023 Annual Report for additional information.
In addition to these unsecured investments, we also make secured investments in the form of securities purchased under agreements to resell secured by U.S. Treasury, U.S. government guaranteed, or agency obligations, with current terms to maturity up to 95 days and in MBS and HFA securities that are directly or indirectly supported by underlying mortgage loans.
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We actively monitor our investment credit exposures and the credit quality of our counterparties, including assessments of each counterparty's financial performance, capital adequacy, sovereign support, and collateral quality and performance, as well as related market signals such as equity prices and credit default swap spreads. We may reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities.
Table 10 - Credit Ratings of Investments at Carrying Value
(dollars in thousands)
As of September 30, 2024
Long-Term Credit Rating
Investment Category Triple-A Double-A Single-A Unrated
Money-market instruments: (1)
Interest-bearing deposits $ - $ 150 $ 1,809,478 $ -
Securities purchased under agreements to resell - - 2,750,000 -
Federal funds sold - 950,000 3,635,000 -
Total money-market instruments - 950,150 8,194,478 -
Investment securities:(2)
Non-MBS:
U.S. Treasury obligations - 5,844,132 - -
Corporate bonds - - - 1,496
U.S. government-owned corporations - 237,634 - -
GSE - 100,216 - -
Supranational institutions 343,666 - - -
HFA securities 17,194 4,197 - -
Total non-MBS 360,860 6,186,179 - 1,496
MBS:
U.S. government guaranteed - single-family - 209,304 - -
U.S. government guaranteed - multifamily - 471,494 - -
GSE - single-family - 2,148,032 - -
GSE - multifamily - 7,615,831 - -
Total MBS - 10,444,661 - -
Total investment securities 360,860 16,630,840 - 1,496
Total investments $ 360,860 $ 17,580,990 $ 8,194,478 $ 1,496
_______________________
(1) The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of September 30, 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.
FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. See Part 1 - Item 1 - Business - Business Lines - Investments in the 2023 Annual Report for additional information. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, the product of which is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that
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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.
Table 11 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value
(dollars in thousands)
Carrying Value
September 30, 2024 December 31, 2023
Federal funds sold $ 4,585,000 $ 2,500,000
Interest bearing deposits 1,809,628 1,643,587
Supranational institutions 343,666 346,375
U.S. government-owned corporations 237,634 235,191
GSEs 100,216 99,421
Corporate bonds 1,496 1,395
Mortgage Loans
We invest in mortgages through the MPF program. The MPF program is further described under - Mortgage Loans Credit Risk and in Part I - Item 1 - Business - Business Lines - Mortgage Loan Finance in the 2023 Annual Report.
As of September 30, 2024, our mortgage loan investment portfolio totaled $3.5 billion, an increase of $484.2 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.
Mortgage Loans Credit Risk
We are subject to credit risk from the mortgage loans in which we invest due to our exposure to the credit risk of the underlying borrowers and the credit risk of the participating financial institutions when the participating financial institutions retain credit-enhancement and/or servicing obligations. For additional information on the credit risks arising from our participation in the MPF program, see Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Mortgage Loans - Mortgage Loans Credit Risk in the 2023 Annual Report. For information on the credit performance of our mortgage loan portfolio as of September 30, 2024, see Item I - Financial Statements - Notes to Financial Statements - Note 4 - Mortgage Loans Held for Portfolioin this report.
Although our mortgage loan portfolio includes loans throughout the U.S., concentrations of 5 percent or greater of the par value of our conventional mortgage loan portfolio are shown in Table 12.
Table 12 - State Concentrations by Par Value
Percentage of Total Par Value of Conventional Mortgage Loans
September 30, 2024 December 31, 2023
Massachusetts 59 % 62 %
Maine 16 13
Connecticut 6 7
Vermont 6 5
All others 13 13
Total 100 % 100 %
We place conventional mortgage loans on nonaccrual status when the collection of interest or principal is doubtful or contractual principal or interest is 90 days or more past due. Accrued interest on nonaccrual loans is excluded from interest income. We monitor the delinquency levels of the mortgage loan portfolio on a monthly basis.
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Table 13 - Mortgage Loans - Risk Elements and Credit Losses
(dollars in thousands)
For the Nine Months Ended September 30,
2024 2023
Average par value of mortgage loans outstanding during the period ending $ 3,228,740 $ 2,753,043
Net recoveries 4 15
Net charge-offs to average loans outstanding during the period ending - % - %
As of September 30, 2024 As of December 31, 2023
Mortgage loans held for portfolio, par value $ 3,503,694 $ 3,023,423
Nonaccrual loans, par value 6,405 7,871
Allowance for credit losses on mortgage loans 2,200 2,000
Allowance for credit losses to mortgage loans held for portfolio 0.06 % 0.07 %
Nonaccrual loans to mortgage loans held for portfolio 0.18 0.26
Allowance for credit losses to nonaccrual loans 34.35 25.41
Consolidated Obligations
See Liquidity and Capital Resourcesfor information regarding our COs.
Derivative Instruments
All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled $355.4 million and $383.1 million as of September 30, 2024, and December 31, 2023, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled $6.8 million and $3.0 million as of September 30, 2024, and December 31, 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 September 30, 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.
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Table 14 - Derivatives and Hedge-Accounting Treatment
(dollars in thousands)
September 30, 2024 December 31, 2023
Hedged Item Derivative
Designation(2)
Notional
Amount 		Fair
Value 		Notional
Amount 		Fair
Value
Advances (1)
Swaps Fair value $ 14,668,356 $ (170,235) $ 12,534,180 $ (120,326)
Swaps Economic - - 90,000 (793)
Total associated with advances 14,668,356 (170,235) 12,624,180 (121,119)
Available-for-sale securities Swaps Fair value 11,858,270 (249,991) 12,391,160 (197,733)
COs Swaps Fair value 24,061,330 (501,775) 26,662,140 (876,631)
Swaps Economic 1,641,043 9 - -
Forward starting swaps Cash Flow 941,000 1,384 1,391,000 83
Total associated with COs 26,643,373 (500,382) 28,053,140 (876,548)
Total 53,169,999 (920,608) 53,068,480 (1,195,400)
Mortgage delivery commitments 69,710 (47) 29,995 290
Total derivatives $ 53,239,709 (920,655) $ 53,098,475 (1,195,110)
Accrued interest 321,241 262,631
Cash collateral, including related accrued interest 947,993 1,312,535
Net derivatives $ 348,579 $ 380,056
Derivative asset $ 355,423 $ 383,073
Derivative liability (6,844) (3,017)
Net derivatives $ 348,579 $ 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.
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 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
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deliver collateral in the amount by which the initial margin requirement exceeds such specified threshold. Initial margin is required to be held at a third-party custodian for the benefit of the secured party, which can only assert ownership of such collateral upon the occurrence of certain events, which may include an event of default due to bankruptcy, insolvency, or similar proceeding. As of September 30, 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 15 - Credit Exposure to Derivatives Counterparties
(dollars in thousands)
As of September 30, 2024
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged to Counterparty Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
Single-A $ 297,500 $ 1,163 $ (1,054) $ 109
Cleared derivatives 21,335,879 27,723 320,269 347,992
Liability positions with credit exposure:
Uncleared derivatives
Single-A 13,639,870 (221,812) 229,026 7,214
Total interest-rate swap positions with nonmember counterparties to which we had credit exposure 35,273,249 (192,926) 548,241 355,315
Mortgage delivery commitments (1)
69,710 108 - 108
Total $ 35,342,959 $ (192,818) $ 548,241 $ 355,423
_______________________
(1) Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.
For information on our approach to the credit risks arising from our use of derivatives, see Part II - Item 7 - Management's Discussion and Analysis and Results of Operations - Financial Condition - Derivative Instruments - Derivative Instruments Credit Risk in the 2023 Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I - Item 1 - Business - Consolidated Obligations of the 2023 Annual Report. Outstanding COs and the condition of the market for COs are discussed below under - Debt Financing - Consolidated Obligations. Our equity capital resources are governed by our capital plan, certain portions of which are described under - Capital below as well as by applicable legal and regulatory requirements.
Liquidity
We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors. We seek to be in a position to meet the credit and liquidity needs of our members and all current and future financial commitments by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of our assets and liabilities.
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We are unable to predict future trends in member credit needs because they are driven by complex interactions among several factors, including, but not limited to, increases and decreases in members assets and deposits, and the attractiveness of advances compared to other sources of wholesale funding. We regularly monitor current trends and anticipate future debt issuance needs and maintain a portfolio of highly liquid assets to be prepared to fund member credit needs and investment opportunities. We are generally able to expand our CO debt issuance in response to members' increased need for advances and to increase our acquisitions of mortgage loans. Alternatively, in response to reduced member credit needs, we may shrink our balance sheet by allowing our COs to mature without replacement, transferring debt to another FHLBank, repurchasing and retiring outstanding COs, or redeeming callable COs on eligible redemption dates.
Sources and Uses of Liquidity.Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short- and intermediate-term financial instruments that can be sold or pledged as collateral under a repurchase agreement. During the nine months ended September 30, 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 nine months ended September 30, 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 1 - Item 1 - Financial Statements - Notes to the Financial Statements - Note 12 - Commitments and Contingencies. For further information and discussion of the joint and several liability for FHLBank COs, see below - Debt Financing - Consolidated Obligations.
Internal Liquidity Sources / Liquidity Management
We have developed a methodology and policies by which we measure and manage the Bank's short-term liquidity needs based on projected net cash flow and contingent obligations.
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 21stday following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not breach this threshold at any time during the nine months ended September 30, 2024. Table 16 below shows this calculation as of September 30, 2024.
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Table 16 - Projected Net Cash Flow
(dollars in thousands)
As of September 30, 2024
21 Days
Uses of funds
Interest payable $ 214,330
Maturing or expected option exercise of liabilities 9,728,811
Committed asset settlements 10,000
Capital outflow 131,886
MPF delivery commitments 69,710
Projected Calls 525,000
Gross uses of funds 10,679,737
Sources of funds
Interest receivable 318,947
Maturing or projected amortization of assets 14,248,922
Committed liability settlements 99,114
Cash and due from banks and interest bearing deposits 1,859,640
Other 32,286
Gross sources of funds 16,558,909
Projected net cash flow $ 5,879,172
Base Case Liquidity Requirement. The Bank is subject to FHFA guidance on liquidity, including Advisory Bulletin 2018-07 (Liquidity Guidance AB), which communicates the FHFA's expectations with respect to the maintenance of sufficient liquidity to enable us to provide advances and fund standby letters of credit for members for a specified time without access to the capital markets or other unsecured funding sources.
The Liquidity Guidance AB provides guidance on the level of on-balance sheet liquid assets related to base case liquidity. As part of the base case liquidity measure, the guidance also includes a separate provision covering off-balance sheet commitments from standby letters of credit. In addition, the Liquidity Guidance AB provides guidance related to asset/liability maturity funding gap limits.
Under the Liquidity Guidance AB, FHLBanks are required to maintain sufficient liquid assets to achieve positive projected net cash flow while rolling over maturing advances to all members and assuming no access to capital markets for a period of time between 10 and 30 calendar days, with a specific measurement period set forth in a supervisory letter. The Liquidity Guidance AB also sets forth the initial cash flow assumptions and formula to calculate base case liquidity. With respect to standby letters of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.
We were in compliance with the Base Case Liquidity Requirement at all times during the nine months ended September 30, 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
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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 17 - Funding Gap Metric
Funding Gap Metric (1)
Limit Management Action Trigger Three-Month Average
September 30, 2024 		Three-Month Average
December 31, 2023
3-month Funding Gap 15% 13% 6.3% 3.8%
1-year Funding Gap 30% 25% 13.0% 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
At September 30, 2024, and December 31, 2023, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled $67.3 billion and $62.2 billion, respectively. CO bonds outstanding for which we are primarily liable at September 30, 2024, and December 31, 2023, include issued callable bonds totaling $19.3 billion and $22.2 billion, respectively.
CO discount notes comprised 22.2 percent and 35.3 percent of the outstanding COs for which we are primarily liable at September 30, 2024, and December 31, 2023, respectively, but accounted for 68.5 percent and 81.2 percent of the proceeds from the issuance of such COs during the nine months ended September 30, 2024 and 2023, respectively.
Overall, we continued to experience strong demand for COs among investors. During the period covered by this report, the capital markets have supported our funding needs and we have been able to issue debt in the amounts and structures required to satisfy the demand for advances and meet our funding and risk-management needs.
The Federal Reserve has highlighted continued progress toward achieving its two percent inflation objective, noting that labor market conditions have generally eased and the unemployment rate has moved up but remains low. While inflation has made progress toward the FOMC's objectives, it remains somewhat elevated. As such, the FOMC lowered the target range of the federal funds rate by 0.50 percentage points in September 2024, and 0.25 percentage points in November 2024, to a range of 4.50 to 4.75 percent and will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. These actions remain important factors that could continue to shape investor demand for debt, including COs.
Capital
Total capital at September 30, 2024, was $3.8 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 September 30, 2024, as discussed in Part 1 - Item 1 - Financial Statements - Notes to the Financial Statements - Note 9 - Capital.
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Capital Rule
The FHFA's regulation on FHLBank capital classification and critical capital levels (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. 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 September 26, 2024, the Director of the FHFA notified us that, based on financial information as of June 30, 2024, we met the definition of adequately capitalized under the Capital Rule.
Internal Capital Practices and Policies
We take steps we believe to be prudent beyond legal or regulatory requirements to ensure capital adequacy, reflected in our internal minimum capital requirement, which exceeds regulatory requirements, our minimum retained earnings management action trigger and limit, and limitations on our dividends. In the event that the board of directors deems capital to be deficient, the Bank has a number of options it can pursue, either individually or collectively, to address capital deficiencies and these include, but are not limited to:
•Limiting or withholding dividends;
•Limiting or precluding capital stock repurchases;
•Increasing membership and/or activity-based stock requirements; and/or
•Restricting risk taking as needed to restore compliance, such as by reducing assets or risk exposures.
Internal Minimum Capital Requirement in Excess of Regulatory Requirements
To provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model (together, our internal minimum capital requirement). As of September 30, 2024, this internal minimum capital requirement equaled $3.6 billion, which was satisfied by our actual regulatory capital of $4.0 billion.
Minimum Retained Earnings
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 September 30, 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 $1.4 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.
Repurchases of Excess Stock
We have the authority, but are not obliged, to repurchase excess stock, as discussed under Part I - Item 1 - Business - Capital Resources - Repurchase of Excess Stock in the 2023 Annual Report.
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Table 18 - Capital Stock Requirements and Excess Capital Stock
(dollars in thousands)
Membership Stock
Investment
Requirement 		Activity-Based
Stock Investment
Requirement
Total Stock
Investment
Requirement (1)
Outstanding Class B
Capital Stock (2)
Excess Class B
Capital Stock
September 30, 2024 $ 348,443 $ 1,686,207 $ 2,034,671 $ 2,166,557 $ 131,886
December 31, 2023 335,004 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
At September 30, 2024, our total required contribution to the restricted retained earnings account was $643.6 million compared with the current restricted retained earnings account balance of $492.8 million.
Off-Balance-Sheet Arrangements
Our significant off-balance-sheet arrangements consist of the following:
• commitments that obligate us for additional advances;
• standby letters of credit;
• commitments for unused lines-of-credit advances; and
• unsettled COs.
Off-balance-sheet arrangements are more fully discussed in Part 1 - Item 1 - Financial Statements - Notes to the Financial Statements - Note 12 - Commitments and Contingencies.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income and expense. To understand the Bank's financial position and results of operations, it is important to understand the Bank's most significant accounting policies and the extent to which management uses judgment, estimates and assumptions in applying those policies. The Bank's critical accounting estimates include:
•Estimation of Fair Values, for derivatives, hedged items in a fair-value hedge relationship, and available-for-sale investment securities; and
•Amortization of Premiums and Accretion of Discounts Associated with Prepayable MBS.
Management considers these policies to be critical because they require us to make subjective and complex judgments about matters that are inherently uncertain. Management bases its judgment and estimates on current market conditions and industry practices, historical experience, changes in the business environment and other factors that it believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and/or conditions. The Audit Committee of our board of directors has reviewed these estimates. The assumptions involved in applying these policies are discussed in Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates in the 2023 Annual Report.
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As of September 30, 2024, we have not made any significant changes to the estimates and assumptions used in applying our critical accounting policies and estimates from those used to prepare our audited financial statements.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
We summarize certain significant legislative and regulatory actions and related developments for the period covered by this report below.
FHFA'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 it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes: (1) the mission of the FHLBank System; (2) the FHLBank System as a stable and reliable source of liquidity; (3) housing and community development; and (4) FHLBank System operational efficiency, structure, and governance. The FHFA has stated that it expects to continue a multi-year collaborative effort with the FHLBanks, their member institutions, and other stakeholders to address the recommended actions in the System at 100 Report and has stated that it can implement some of the recommendations from the report through ongoing supervision, guidance, or rulemaking, as well as through statutory changes by proposing specific requests for Congressional action. The FHFA 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. Other significant recent regulatory actions for the FHLBanks are discussed in this section.
We continue to monitor the FHFA's efforts to implement the recommendations from the System at 100 Report, including proposed plans and actions, and we are unable to predict what actions will ultimately result, the timing or extent of any actions or changes, or the ultimate effect on us, our members, or the FHLBank System in the future. We plan to continue engaging with the FHFA and other stakeholders in an effort to ensure the FHLBank System remains well positioned to serve the Bank's members and their communities. For further discussion of the System at 100 Report, see, Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Legislative and Regulatory Developments in our 2023 Annual Report.
Advisory Bulletin on FHLBank Member Credit Risk Management. On September 27, 2024, the FHFA issued an advisory bulletin setting forth the FHFA's expectations that an FHLBank's underwriting and credit decisions should reflect a member's financial condition and not rely solely on the collateral securing a 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. While we are comparing this advisory bulletin against our current member credit risk management policies and procedures to assess the potential impact on our financial condition and operations, we do not expect that this guidance will impact our role as a reliable source of liquidity for our members.
Advisory Bulletin on 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, 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. We are evaluating the potential impact of the advisory bulletin on the us and our operations, with some aspects of this advisory bulletin applying to the Office of Finance.
Proposed Rule on Unsecured Credit Limits for Federal Home Loan Banks.On October 3, 2024, the FHFA published a proposed rule with a comment deadline of December 2, 2024, to amend the FHFA's regulation on capital requirements (Capital Regulation) to modify unsecured credit limits for FHLBanks. The proposed rule would include interest bearing deposit accounts (IBDAs) in a category of authorized overnight investments that would be excluded from the general limit on unsecured credit to a single counterparty. IBDAs are non-maturity deposits in approved counterparties which may be used to manage liquidity. The proposed rule would, among other things, increase the frequency of the required performance of certain capital calculations and clarify that certain non-interest-bearing deposit accounts (such as settlement, payment or other
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transactional accounts) are to be considered unsecured extensions of credit subject to the Capital Regulation's unsecured general or overall (less restrictive) limit. Although excluding IBDAs from the general unsecured credit limit could provide greater flexibility for an FHLBank's liquidity management, several of the other proposed changes, if adopted, could result in significant changes to our current business processes. We are evaluating the potential impact of the proposed rule on our financial condition and operations.
Proposed Rule on Federal Home Loan Bank System Boards of Directors and Executive Management. On October 21, 2024, the FHFA proposed revisions to its regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance. The comment deadline will be 90 days after the proposed rule is published in the Federal Register. If adopted as presented, the proposed rule would, among other things: (1) impact 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 Bank to complete and submit background checks to the FHFA on every nominee for a directorship; (3) impact 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 FHLBank 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, FHLBank conflicts of interest policies, covering all FHLBank employees, including specific limitations on executive officers and senior management and record retention policies.
While some proposed revisions would codify existing guidance and practice, several of the proposed revisions could result in significant changes to the nomination, election and retention of our board of directors. Additional director eligibility requirements and limitations on and potential reductions or limitations to director compensation resulting from the proposed rule could hinder the Bank's ability to recruit and retain directors having the talent and expertise critical to the Bank's ability to satisfy its mission, particularly given the growing complexities of the finance industry. We continue to analyze the impact that the proposed rule could have on us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Sources and Types of Market and Interest-Rate Risk
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. Sources and types of market and interest-rate risk are described in Part II - Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Sources and Types of Market and Interest-Rate Risk in the 2023 Annual Report.
Strategies to Manage Market and Interest-Rate Risk
General
We use various strategies and techniques to manage our market- and interest-rate risk including the following and combinations of the following:
•the issuance of COs that can be used to match interest-rate-risk exposures of our assets;
•the issuance of COs with embedded call options to mitigate interest-rate and prepayment risks of our mortgage loans and certain MBS;
•the issuance of COs together with interest-rate swaps (either cleared if no optionality or uncleared if containing optionality) that receive a coupon rate that offsets the cost of the debt and any optionality embedded in the debt, thereby effectively creating a floating-rate liability;
•the issuance of advances 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;
•the purchase of available-for-sale securities together with interest-rate swaps that pay a coupon rate that offsets the security's coupon rate, thereby effectively creating a floating-rate asset;
•contractual provisions for certain advances that require borrowers to pay us prepayment fees, to make us financially indifferent if the borrower prepays such advances prior to maturity; and
•the use of derivatives to hedge the interest-rate risk of anticipated future CO debt issuance.
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The following table provides the outstanding balances for the strategies to manage market and interest-rate risk noted above.
Table 19 - Interest-Rate Risk Management
(dollars in thousands)
Outstanding Par Value/Notional Balance as of
September 30, 2024 December 31, 2023
Fixed-rate noncallable debt, not hedged by interest-rate swaps $ 10,957,010 $ 10,286,735
Fixed-rate callable debt not hedged by interest-rate swaps 1,571,500 1,131,500
CO debt hedged by interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships (1)
25,702,373 26,662,140
Advances hedged by interest-rate-exchange agreements, including both fair-value hedge relationships and economic hedge relationships 14,668,356 12,624,180
Available-for-sale securities (non-MBS) hedged by interest-rate-exchange agreements 6,861,915 6,861,915
Available-for-sale securities (MBS) hedged by interest-rate-exchange agreements 4,996,355 5,529,245
Total hedged available-for-sale securities 11,858,270 12,391,160
Notional principal balance of forward starting interest-rate swaps hedging the anticipated future issuance of CO debt 941,000 1,391,000
_______________________
(1) The amount for September 30, 2024, includes unsettled CO bonds with a par value of $55.0 million.
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.
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.
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.
We measure our exposure to market and interest-rate risk using several metrics, including:
•the ratio of MVE to BVE;
•the ratio of MVE to the par value of our Class B Stock (Par Stock), which we refer to as the MVE to Par Stock ratio;
•the ratio of MVE to the market value of assets, which we refer to as the economic capital ratio;
•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 effective rate (Federal Funds-OIS), SOFR, Treasury and CO curves;
•VaR, which measures the potential change in our MVE, based on a set of stress scenarios (VaR Stress Scenarios) using historically-based interest-rate, volatility, and Option Adjusted Spread (OAS) movements starting at the most recent
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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 case scenarios.
•duration of equity, which is calculated as the estimated percentage change to MVE for a 100 basis point parallel shift in rates;
•MVE sensitivity, which is the estimated percent change in MVE in various shocked interest rate scenarios versus base case MVE;
•the duration gap of our assets and liabilities, which is the difference between the estimated durations (percentage change in market value for a 100 basis point shift in rates) 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; and
•the use of an income-simulation model that projects net interest income over a range of potential interest-rate scenarios, including parallel interest-rate shocks, nonparallel interest-rate shocks, and basis changes.
We maintain limits and management action triggers in connection with some of the foregoing metrics. Those limits, management action triggers, and the foregoing market and interest-rate risk metrics are more fully discussed under Part II - Item 7A - Quantitative and Qualitative Disclosures About Market Risk - Measurement of Market and Interest-Rate Risk and Related Policy Constraints in the 2023 Annual Report.
Table 20 - Interest-Rate / Market-Rate Risk Metrics
September 30, 2024 December 31, 2023 Target, Limit or Management Action Trigger
MVE $3.7 billion $3.5 billion None
MVE/BVE 97% 99% None
MVE/Par Stock 171% 170% Maintain above 130% (management action trigger) and 125% (limit)
Economic Capital Ratio 5.1% 5.2% Maintain above 4.5% (management action trigger) and 4.0% (limit)
MVE/Par Stock Maintain above 125% under a +/- 2 standard deviation shock of historically determined basis changes of the SOFR, Federal Funds-OIS, Treasury, and CO yield curves (management action trigger)
+ 2 standard deviation shock 164% 161%
- 2 standard deviation shock 177% 179%
VaR
9.4% of MVE
11.0% of MVE
Management action trigger invoked when VaR exceeds 12% of MVE
Duration of Equity (1)
+1.39 years +0.75 years Maintain between +/- 3.5 years (management action trigger) and +/- 4.0 years (limit)
MVE Sensitivity: (1)
Down 200 basis point parallel rate shock 2.0% 0.7% Maintain above -10% (management action trigger) and -15% (limit)
Up 200 basis point parallel rate shock (3.7)% (2.4)%
Duration Gap (1)
+0.85 months +0.46 months None
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(1) Metrics for measuring against the management action triggers and limits are calculated using a methodology which does not constrain interest rates to a minimum of zero percent. Additional metrics are 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. Due to the significant increase in interest rates for the periods ended March 31, 2024, and December 31, 2023, the results of the constrained and unconstrained metrics were the same.
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 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 September 30, 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.
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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 21 - Value-at-Risk
(dollars in millions)
Value-at-Risk
(Gain) Loss Exposure
September 30, 2024 December 31, 2023
Confidence Level
% of
MVE (1)
Amount
% of
MVE (1)
Amount
50% 5.82 % $ 215.3 6.91 % $ 241.3
75% 6.71 248.4 7.97 278.4
95% 8.25 305.3 9.34 326.1
99% 9.06 335.0 10.68 373.0
Average of five worst scenarios - as of period end 9.37 346.7 10.95 382.5
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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 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. 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.
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.
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 September 30, 2024, showed that in the base case our ROCS was 492 basis points over SOFR, and in the worst case modeled, the down 200 basis points scenario, our ROCS fell 125 basis points to 367 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.
Certain Market and Interest-Rate Risk Metrics under Potential Interest-Rate Scenarios
We also monitor the sensitivities of MVE and the duration of equity to potential interest-rate scenarios. The following table presents certain market and interest-rate risk metrics under different interest-rate scenarios.
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Table 22 - Market and Interest-Rate Risk Metrics
(dollars in millions)
September 30, 2024
Down 300(1)
Down 200(1)
Down 100(1)
Base Up 100 Up 200 Up 300
MVE $3,805 $3,773 $3,743 $3,700 $3,641 $3,564 $3,468
Percent change in MVE from base 2.8% 2.0% 1.2% -% (1.6)% (3.7)% (6.3)%
MVE/BVE 100% 99% 98% 97% 96% 93% 91%
MVE/Par Stock 176% 174% 173% 171% 168% 165% 160%
Duration of Equity +1.33 years +0.72 years +0.95 years +1.39 years +1.81 years +2.42 years +2.95 years
Return on Capital Stock less SOFR 2.71% 3.67% 4.21% 4.92% 5.43% 5.89% 6.06%
Net income percent change from base (59.35)% (37.02)% (19.47)% -% 17.17% 33.62% 46.70%
December 31, 2023
Down 300(1)
Down 200(1)
Down 100(1)
Base Up 100 Up 200 Up 300
MVE $3,522 $3,518 $3,511 $3,492 $3,459 $3,408 $3,347
Percent change in MVE from base 0.9% 0.7% 0.5% -% (0.9)% (2.4)% (4.2)%
MVE/BVE 99% 99% 99% 99% 98% 96% 94%
MVE/Par Stock 172% 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 SOFR 3.28% 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.
Item 4. 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 September 30, 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 September 30, 2024.
Changes in Internal Control over Financial Reporting
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During the quarter ended September 30, 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.
PART II. OTHER INFORMATION
ITEM 1. 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 1A. RISK FACTORS
In addition to the information presented in this report, readers should carefully consider the risk factors set forth in the 2023 Annual Report, which could materially impact our business, financial condition, or future results. These risks are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially impact us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Number Exhibit Description Reference
10.1 Federal Home Loan Bank of Boston 2025 Director Compensation Policy *
31.1 Certification of the president and chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed within this Form 10-Q
31.2 Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed within this Form 10-Q
32.1 Certification 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
Filed within this Form 10-Q
32.2 Certification 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
Filed within this Form 10-Q
101.INS XBRL Instance Document The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document Filed within this Form 10-Q
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed within this Form 10-Q
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed within this Form 10-Q
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed within this Form 10-Q
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed within this Form 10-Q
104 The cover page of the Bank's Quarterly report on Form 10-Q, formatted in Inline XBRL Included within the Exhibit 101 attachments
* Management contract or compensatory plan. Portions of this exhibit have been omitted.
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.
Date FEDERAL HOME LOAN BANK OF BOSTON (Registrant)
November 12, 2024 By: /s/ Timothy J. Barrett
Timothy J. Barrett
President and Chief Executive Officer
November 12, 2024 By: /s/ Frank Nitkiewicz
Frank Nitkiewicz
Executive Vice President, Chief Operating Officer
and Chief Financial Officer
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