Estimated Fair Values (Tables)

9 Months Ended

Sep. 30, 2020

The carrying value and estimated fair value of the Bank’s financial instruments at September 30, 2020 and December 31, 2019 are presented in the table below.


Fair Value Summary Table
	September 30, 2020
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral (1)		Estimated Fair Value
Assets:
Cash and due from banks	$	1,386,471	$	1,386,471	$	—	$	—	$	—	$	1,386,471
Interest-bearing deposits	1,084,526		1,077,235		7,291		—		—		1,084,526
Federal funds sold	1,950,000		—		1,949,997		—		—		1,949,997
Securities purchased under agreement to resell (2)	1,350,000		—		1,349,998		—		—		1,349,998
Trading securities	1,287,548		—		1,287,548		—		—		1,287,548
AFS securities	10,153,022		—		9,885,398		267,624		—		10,153,022
HTM securities	1,967,036		—		1,947,582		99,772		—		2,047,354
Advances	35,841,036		—		35,981,783		—		—		35,981,783
Mortgage loans held for portfolio, net	5,089,745		—		5,398,229		—		—		5,398,229
BOB loans, net	21,213		—		—		21,213		—		21,213
Accrued interest receivable	104,597		—		104,597		—		—		104,597
Derivative assets	160,986		—		7,452		—		153,534		160,986
Liabilities:
Deposits	$	990,571	$	—	$	990,571	$	—	$	—	$	990,571
Discount notes	13,995,722		—		13,997,567		—		—		13,997,567
Bonds	41,583,307		—		42,067,719		—		—		42,067,719
Mandatorily redeemable capital stock (3)	223,052		227,124		—		—		—		227,124
Accrued interest payable (3)	93,364		—		89,292		—		—		89,292
Derivative liabilities	1,751		—		5,329		—		(3,578)		1,751


	December 31, 2019
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral (1)		Estimated Fair Value
Assets:
Cash and due from banks	$	21,490	$	21,490	$	—	$	—	$	—	$	21,490
Interest-bearing deposits	1,476,890		1,471,717		5,173		—		—		1,476,890
Federal funds sold	3,770,000		—		3,769,965		—		—		3,769,965
Securities purchased under agreement to resell (2)	2,200,000		—		2,199,973		—		—		2,199,973
Trading securities	3,631,650		—		3,631,650		—		—		3,631,650
AFS securities	11,097,769		—		10,771,623		326,146		—		11,097,769
HTM securities	2,395,691		—		2,316,109		124,179		—		2,440,288
Advances	65,610,075		—		65,662,578		—		—		65,662,578
Mortgage loans held for portfolio, net	5,114,625		—		5,313,973		—		—		5,313,973
BOB loans, net	19,706		—		—		19,706		—		19,706
Accrued interest receivable	193,352		—		193,352		—		—		193,352
Derivative assets	140,251		—		16,201		—		124,050		140,251
Liabilities:
Deposits	$	573,382	$	—	$	573,382	$	—	$	—	$	573,382
Discount notes	23,141,362		—		23,142,588		—		—		23,142,588
Bonds	66,807,807		—		66,981,400		—		—		66,981,400
Mandatorily redeemable capital stock (3)	343,575		350,287		—		—		—		350,287
Accrued interest payable (3)	205,118		—		198,406		—		—		198,406
Derivative liabilities	3,024		—		8,869		—		(5,845)		3,024

Notes:

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions and also cash collateral held and related interest accrued or placed by the Bank with the same clearing agent and/or counterparties.

(2) Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented. There were no offsetting liabilities related to these securities at September 30, 2020 and December 31, 2019. These instruments’ maturity term is overnight.

(3) The estimated fair value amount for the mandatorily redeemable capital stock line item includes accrued dividend interest; this amount is excluded from the estimated fair value for the accrued interest payable line item.

Fair Value Measurements

Fair Value Measurements. The following tables present, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on a recurring or non-recurring basis on its Statement of Condition at September 30, 2020 and December 31, 2019. The Bank measures certain mortgage loans held for portfolio at fair value when a charge-off is recognized and subsequently when the fair value of collateral less costs to sell is lower than the carrying amount. Real estate owned is measured using fair value when the assets' fair value less costs to sell is lower than the carrying amount.


	September 30, 2020
(in thousands)	Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral(1)		Total
Recurring fair value measurements - Assets
Trading securities:
Non MBS:
U.S. Treasury obligations	$	—	$	1,028,642	$	—	$	—	$	1,028,642
GSE and TVA obligations	—		258,906		—		—		258,906
Total trading securities	$	—	$	1,287,548	$	—	$	—	$	1,287,548
AFS securities:
Non MBS:

GSE and TVA obligations	$	—	$	1,658,671	$	—	$	—	$	1,658,671
State or local agency obligations	—		247,890		—		—		247,890
MBS:
U.S. obligations single-family MBS	—		658,687		—		—		658,687
GSE single-family MBS	—		3,704,537		—		—		3,704,537
GSE multifamily MBS	—		3,615,613		—		—		3,615,613
Private label MBS	—		—		267,624		—		267,624
Total AFS securities	$	—	$	9,885,398	$	267,624	$	—	$	10,153,022
Derivative assets:
Interest rate related	$	—	$	7,403	$	—	$	153,534	$	160,937
Mortgage delivery commitments	—		49		—		—		49
Total derivative assets	$	—	$	7,452	$	—	$	153,534	$	160,986

Total recurring assets at fair value	$	—	$	11,180,398	$	267,624	$	153,534	$	11,601,556
Recurring fair value measurements - Liabilities
Derivative liabilities:
Interest rate related	$	—	$	5,226	$	—	$	(3,578)	$	1,648
Mortgage delivery commitments	—		103		—		—		103
Total recurring liabilities at fair value (2)	$	—	$	5,329	$	—	$	(3,578)	$	1,751
Non-recurring fair value measurements - Assets
Impaired mortgage loans held for portfolio	$	—	$	—	$	14,931	$	—	$	14,931
REO	—		—		1,112		—		1,112
Total non-recurring assets at fair value	$	—	$	—	$	16,043	$	—	$	16,043


	December 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral(1)		Total
Recurring fair value measurements - Assets
Trading securities:
Non MBS:
U.S. Treasury obligations	$	—	$	3,390,772	$	—	$	—	$	3,390,772
GSE and TVA obligations	—		240,878		—		—		240,878
Total trading securities	$	—	$	3,631,650	$	—	$	—	$	3,631,650
AFS securities:
Non MBS:
GSE and TVA obligations	$	—	$	1,550,699	$	—	$	—	1,550,699
State or local agency obligations	—		247,894		—		—		247,894
MBS:
U.S. obligations single-family MBS	—		807,586		—		—		807,586
GSE single-family MBS	—		4,055,859		—		—		4,055,859
GSE multifamily MBS	—		4,109,585		—		—		4,109,585
Private label MBS	—		—		326,146		—		326,146
Total AFS securities	$	—	$	10,771,623	$	326,146	$	—	$	11,097,769
Derivative assets:
Interest rate related	$	—	$	16,172	$	—	$	124,050	$	140,222
Mortgage delivery commitments	—		29		—		—		29
Total derivative assets	$	—	$	16,201	$	—	$	124,050	$	140,251
Total recurring assets at fair value	$	—	$	14,419,474	$	326,146	$	124,050	$	14,869,670
Recurring fair value measurements - Liabilities
Derivative liabilities:
Interest rate related	$	—	$	8,790	$	—	$	(5,845)	$	2,945
Mortgage delivery commitments	—		79		—		—		79
Total recurring liabilities at fair value (2)	$	—	$	8,869	$	—	$	(5,845)	$	3,024
Non-recurring fair value measurements - Assets
Impaired mortgage loans held for portfolio	$	—	$	—	$	7,850	$	—	$	7,850
REO	—		—		2,449		—		2,449
Total non-recurring assets at fair value	$	—	$	—	$	10,299	$	—	$	10,299

Notes:

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions and also cash collateral and related accrued interest held or placed by the Bank with the same clearing agent and/or counterparties.

(2) Derivative liabilities represent the total liabilities at fair value.

Rollforward of Level 3 Assets and Liabilities

Level 3 Disclosures for all Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis. The following table presents a reconciliation of all assets and liabilities that are measured at fair value on the Statement of Condition using significant unobservable inputs (Level 3) for the nine months ended September 30, 2020 and 2019. For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications each quarter. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in/out at fair value in the quarter in which the changes occur. Transfers are reported as of the beginning of the period. There were no Level 3 transfers during the first nine months of 2020 or 2019.


	AFS Private Label MBS
	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2020		2019		2020		2019
Balance, beginning of period	$	280,882	$	371,402	$	326,146	$	409,550
Total gains (losses) (realized/unrealized) included in:

(Provision) benefit for credit losses (1)	(117)		—		(1,691)		—
Accretion of credit losses in interest income	3,000		4,794		8,938		11,589
Net OTTI losses, credit portion	—		(271)		—		(330)
Net unrealized gains (losses) on AFS in OCI	1,400		(14)		(15,114)		18
Reclassification of non-credit portion included in net income	—		271		—		330
Unrealized gains (losses) on OTTI AFS in OCI	—		(4,880)		—		(9,383)
Purchases, issuances, sales, and settlements:

Settlements	(17,541)		(26,796)		(50,655)		(67,268)
Balance at September 30	$	267,624	$	344,506	$	267,624	$	344,506
Total amount of gains for the periods presented included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at September 30	$	2,883	$	3,558	$	7,247	$	8,887
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held September 30 (2)	$	1,400	N/A		$	(15,114)	N/A

Notes:

(1) Due to the adoption of ASU 2016-13, effective January 1, 2020, the Bank was required to record an ACL for expected credit losses on AFS securities.

(2) Due to the prospective adoption of ASU 2018-13: Changes to the Disclosure Requirements for Fair Value Measurement, effective January 1, 2020, this is not applicable for 2019.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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