Segment Information

12 Months Ended

Dec. 31, 2019

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income, excludes interest income and expense associated with ineffectiveness from fair value hedges that are recorded in the same line as the earnings effect of the hedged item, and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI losses on the Bank’s PLRMBS, other expenses, and assessments, is not included in the segment reporting analysis, but is incorporated into the Bank’s overall assessment of financial performance.

The advances-related business consists of advances and other credit products, related financing and hedging instruments, other non-MBS investments associated with the Bank’s role as a liquidity provider, and capital. Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on all assets associated with the business activities in this segment and the cost of funding those activities, including the net settlements from associated interest rate exchange agreements, and from earnings attributed to the Bank’s capital stock and retained earnings.

The mortgage-related business consists of MBS investments, mortgage loans acquired through the MPF Program, the consolidated obligations specifically identified as funding those assets, and related hedging instruments. Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets. This includes the net settlements from associated interest rate exchange agreements and net accretion related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less the provision for credit losses on mortgage loans.

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before the AHP assessment for the years ended December 31, 2019, 2018, and 2017.



	Advances- Related Business		Mortgage- Related Business⁽¹⁾		Adjusted Net Interest Income		Amortization of Basis Adjustments and (Gain)/Loss on Fair Value Hedges⁽²⁾			Income/(Expense) on Economic Hedges⁽³⁾			Interest Expense on Mandatorily Redeemable Capital Stock⁽⁴⁾		Net Interest Income After Mortgage Loan Loss Provision		Other Income/ (Loss)			Other Expense		Income Before AHP Assessment
2019	$	307	$	256	$	563	$	34		$	(16	)	$	14	$	531	$	21		$	187	$	365
2018	320		291		611		(1		)	(13		)	24		601		(11		)	187		403
2017	234		325		559		—			(40		)	32		567		78			224		421

(1)

The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income totaled $78, $81, and $93 for the years ended December 31, 2019, 2018, and 2017, respectively. The mortgage-related business does not include credit-related OTTI losses of $11, $11, and $16 for the years ended December 31, 2019, 2018, and 2017, respectively.


(2)	Represents amortization of amounts deferred for adjusted net interest income purposes only and changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges recorded in net interest income.

(3)

The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”


(4)	The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.

The following table presents total assets by operating segment at December 31, 2019, 2018, and 2017.



	Advances- Related Business		Mortgage- Related Business		Total Assets
2019	$	85,709	$	21,133	$	106,842
2018	88,272		21,054		109,326
2017	103,426		19,959		123,385