The Bank makes short-term investments 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 a credit rating of BBB or greater (investment grade) by an NRSRO.

Interest-bearing deposits and Federal funds sold are unsecured investments. Federal funds sold are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At September 30, 2020 and December 31, 2019, all investments in interest-bearing deposits and Federal funds sold were repaid according to the contractual terms; no ACL was recorded for these assets at September 30, 2020 and December 31, 2019. Carrying values of interest-bearing deposits and Federal funds exclude accrued interest receivable which was immaterial for all periods presented. At September 30, 2020, none of these investments were with counterparties rated below BBB or with unrated counterparties. These may differ from any internal ratings of the investments by the Bank, if applicable.

Securities purchased under agreements to resell are secured investments. Securities purchased under agreements to resell are generally transacted on an overnight term and have standard market practices that include collateral maintenance provisions. As such, they are evaluated regularly to determine that the securities purchased under agreements to resell are fully collateralized. The counterparty is required to deliver additional collateral if the securities purchased under agreements to resell become under-collateralized, generally by the next business day. At September 30, 2020 and December 31, 2019, all investments in securities purchased under agreements to resell were repaid according to the contractual terms; no ACL was recorded for these assets at September 30, 2020 and December 31, 2019. Carrying value of securities purchased under agreements to resell exclude accrued interest receivable which was immaterial for all periods presented. At September 30, 2020, none of these investments were with counterparties rated below BBB or with unrated counterparties. These may differ from any internal ratings of the investments by the Bank, if applicable.

The Bank invests in debt securities, which are classified as trading, AFS, or HTM. Within these investments, the Bank is primarily subject to credit risk related to private label MBS that are supported by underlying mortgage or asset-backed loans. In 2007, the Bank discontinued the purchase of private label MBS. The Bank is prohibited by Finance Agency regulations from purchasing 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.


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Net unrealized gains (losses) on trading securities held at period-end	$	(3,447)	$	5,429	$	28,640	$	22,840
Net unrealized and realized gains (losses) on trading securities sold/matured during the period	(1,876)		12		25,228		515
Net gains (losses) on trading securities	$	(5,323)	$	5,441	$	53,868	$	23,355


	September 30, 2020
(in thousands)	Amortized Cost (1)		Allowance for Credit Losses (2)		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:

GSE and TVA obligations	$	1,607,356	$	—	$	51,315	$	—	$	1,658,671
State or local agency obligations	234,097		—		13,793		—		247,890
Total non-MBS	$	1,841,453	$	—	$	65,108	$	—	$	1,906,561
MBS:
U.S. obligations single-family MBS	$	651,330	$	—	$	7,490	$	(133)	$	658,687
GSE single-family MBS	3,675,908		—		28,991		(362)		3,704,537
GSE multifamily MBS	3,608,683		—		11,649		(4,719)		3,615,613
Private label MBS	232,906		(1,691)		36,749		(340)		267,624
Total MBS	$	8,168,827	$	(1,691)	$	84,879	$	(5,554)	$	8,246,461
Total AFS securities	$	10,010,280	$	(1,691)	$	149,987	$	(5,554)	$	10,153,022


	December 31, 2019
(in thousands)	Amortized Cost (1)		OTTI Recognized in AOCI		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:
GSE and TVA obligations	$	1,508,264	$	—	$	42,435	$	—	$	1,550,699
State or local agency obligations	238,496		—		9,398		—		247,894
Total non-MBS	$	1,746,760	$	—	$	51,833	$	—	$	1,798,593
MBS:
U.S. obligations single-family MBS	$	805,294	$	—	$	3,590	$	(1,298)	$	807,586
GSE single-family MBS	4,053,700		—		9,574		(7,415)		4,055,859
GSE multifamily MBS	4,120,532		—		4,581		(15,528)		4,109,585
Private label MBS	274,624		—		51,704		(182)		326,146
Total MBS	$	9,254,150	$	—	$	69,449	$	(24,423)	$	9,299,176
Total AFS securities	$	11,000,910	$	—	$	121,282	$	(24,423)	$	11,097,769

(1) Includes adjustments made to the cost basis of an investment for accretion, amortization, OTTI and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $19.3 million and $24.4 million at September 30, 2020 and December 31, 2019.

The following tables summarize the AFS securities with unrealized losses as of September 30, 2020 and December 31, 2019. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.


	September 30, 2020
	Less than 12 Months				Greater than 12 Months				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses





MBS:
U.S. obligations single-family MBS	$	—	$	—	$	56,485	$	(133)	$	56,485	$	(133)
GSE single-family MBS	49,120		(86)		228,764		(276)		277,884		(362)
GSE multifamily MBS	214,578		(269)		2,487,327		(4,450)		2,701,905		(4,719)
Private label MBS	1,799		(22)		2,611		(318)		4,410		(340)
Total MBS	$	265,497	$	(377)	$	2,775,187	$	(5,177)	$	3,040,684	$	(5,554)
Total	$	265,497	$	(377)	$	2,775,187	$	(5,177)	$	3,040,684	$	(5,554)


	December 31, 2019
	Less than 12 Months				Greater than 12 Months				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses




MBS:
U.S. obligations single-family MBS	$	492,038	$	(1,022)	$	46,104	$	(276)	$	538,142	$	(1,298)
GSE single-family MBS	2,458,728		(6,318)		221,806		(1,097)		2,680,534		(7,415)
GSE multifamily MBS	2,515,001		(10,683)		1,181,509		(4,845)		3,696,510		(15,528)
Private label MBS	—		—		2,979		(182)		2,979		(182)
Total MBS	$	5,465,767	$	(18,023)	$	1,452,398	$	(6,400)	$	6,918,165	$	(24,423)
Total	$	5,465,767	$	(18,023)	$	1,452,398	$	(6,400)	$	6,918,165	$	(24,423)

Redemption Terms. The amortized cost and fair value of AFS securities by contractual maturity as of September 30, 2020 and December 31, 2019 are presented below. Expected maturities of some securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.


(in thousands)	September 30, 2020				December 31, 2019
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-MBS:
Due in one year or less	$	65,371	$	65,586	$	—	$	—
Due after one year through five years	545,669		557,360		525,301		534,642
Due after five years through ten years	795,744		823,978		700,613		719,672
Due after ten years	434,669		459,637		520,846		544,279
Total non-MBS	1,841,453		1,906,561		1,746,760		1,798,593
MBS	8,168,827		8,246,461		9,254,150		9,299,176
Total AFS securities	$	10,010,280	$	10,153,022	$	11,000,910	$	11,097,769


(in thousands)	September 30, 2020		December 31, 2019
Amortized cost of AFS non-MBS:
Fixed-rate	$	1,841,453	$	1,746,760
Variable-rate	—		—
Total non-MBS	$	1,841,453	$	1,746,760
Amortized cost of AFS MBS:
Fixed-rate	$	1,619,573	$	1,444,111
Variable-rate	6,549,254		7,810,039
Total MBS	$	8,168,827	$	9,254,150
Total amortized cost of AFS securities	$	10,010,280	$	11,000,910


	September 30, 2020
(in thousands)	Amortized Cost (1)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value




MBS:
U.S. obligations single-family MBS	$	176,039	$	1,384	$	—	$	177,423
GSE single-family MBS	1,158,572		26,140		(709)		1,184,003
GSE multifamily MBS	531,098		55,058		—		586,156
Private label MBS	101,327		301		(1,856)		99,772
Total MBS	$	1,967,036	$	82,883	$	(2,565)	$	2,047,354
Total HTM securities (2)	$	1,967,036	$	82,883	$	(2,565)	$	2,047,354


	December 31, 2019
(in thousands)	Amortized Cost (1)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Non-MBS:

State or local agency obligations	$	94,310	$	—	$	(3,394)	$	90,916

MBS:
U.S. obligations single-family MBS	$	250,195	$	1,087	$	(78)	$	251,204
GSE single-family MBS	1,156,545		20,896		(254)		1,177,187
GSE multifamily MBS	770,823		26,231		(252)		796,802
Private label MBS	123,818		881		(520)		124,179
Total MBS	$	2,301,381	$	49,095	$	(1,104)	$	2,349,372
Total HTM securities	$	2,395,691	$	49,095	$	(4,498)	$	2,440,288

Redemption Terms. The amortized cost and fair value of HTM securities by contractual maturity as of September 30, 2020 and December 31, 2019 are presented below. Expected maturities of some securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.


(in thousands)	September 30, 2020				December 31, 2019
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-MBS:
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—
Due after five years through ten years	—		—		31,925		31,381
Due after ten years	—		—		62,385		59,535
Total non-MBS	—		—		94,310		90,916
MBS	1,967,036		2,047,354		2,301,381		2,349,372
Total HTM securities	$	1,967,036	$	2,047,354	$	2,395,691	$	2,440,288


(in thousands)	September 30, 2020		December 31, 2019
Amortized cost of HTM non-MBS:
Fixed-rate	$	—	$	—
Variable-rate	—		94,310
Total non-MBS	$	—	$	94,310
Amortized cost of HTM MBS:
Fixed-rate	$	1,659,123	$	1,878,151
Variable-rate	307,913		423,230
Total MBS	$	1,967,036	$	2,301,381
Total HTM securities	$	1,967,036	$	2,395,691

Debt Securities ACL. An ACL on AFS and HTM securities was required to be assessed upon adoption of ASU 2016-13, effective January 1, 2020. For HTM securities, there is no ACL at September 30, 2020. For AFS securities, the Bank recorded an ACL only on its private label MBS at September 30, 2020.


(in thousands)	Private label MBS
	September 30, 2020
	Three months ended		Nine months ended
Balance, beginning of period	$	1,574	$	—



Additional increases (decreases) for securities in which a previous allowance or credit loss was recorded	117		1,691



Balance, end of period	$	1,691	$	1,691

GSE and Other U.S. Obligations. The Bank invests in GSE and other U.S. obligations, which includes Tennessee Valley Authority obligations, single-family MBS, and GSE single-family and multifamily MBS. These securities are issued by Federal Agencies or U.S. government corporations and include MBS issued by these same entities that are directly supported by underlying mortgage loans. All of these securities carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero. As a result, no ACL was recorded on GSE and other U.S. obligations at September 30, 2020.

The Bank only purchases GSE and other U.S. obligations considered investment quality. At September 30, 2020, all of these GSE and other U.S. obligations, based on amortized cost, were rated BBB or above by a NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

State or Local Agency Obligations. The Bank invests in state or local agency obligations, such as municipal securities. These securities are subject to credit risk related to a portfolio of state and local agency obligations (i.e., Housing Finance Agency bonds) that are directly or indirectly supported by underlying mortgage loans and carry an implicit or explicit guarantee of the state or local agency. The Bank has not experienced any payment defaults on these instruments.

The Bank only purchases state or local agency obligations considered investment quality. At September 30, 2020, all of these state or local agency obligations, based on amortized cost, were rated BBB or above by a NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

The Bank evaluates AFS state or local agency obligations for an ACL based on a credit assessment of the issuer, or guarantor. If the Bank determines that an ACL should be recognized, it is limited to the unrealized loss of the state or local agency obligation, including zero if it is in an unrealized gain position. At September 30, 2020, the Bank expects to receive all cash flows contractually due, and no ACL was recorded on AFS state or local agency obligations.

Private Label MBS. The Bank also holds investments in private label MBS. The Bank has not purchased any private label MBS since 2007. However, many of these securities have subsequently experienced significant credit deterioration. As of September 30, 2020, 20.6% of private label MBS (AFS and HTM combined, based on amortized cost) were rated BBB or above by a NRSRO and the remaining securities were either rated less than BBB or were unrated. To determine whether an ACL is necessary on these securities, the Bank uses cash flow analyses.

The Bank's evaluation includes estimating the projected cash flows that the Bank is likely to collect based on an assessment of available information, including the structure of the applicable security and certain assumptions such as: