Advances

12 Months Ended

Dec. 31, 2019

Federal Home Loan Bank, Advances [Text Block]

Advances

General Terms. We offer a wide range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics, and optionality. Advances have maturities ranging from one day to 30 years or longer with the approval of our credit committee. At December 31, 2019 and 2018, we had advances outstanding with interest rates ranging from (0.35) percent to 7.72 percent and 0.00 percent to 7.72 percent. Advances with negative interest rates contain embedded interest-rate features that have met the requirements to be separated from the host contract and are recorded as stand-alone derivatives, and which we economically hedge with derivatives containing offsetting interest-rate features.

Table 9.1 - Advances Outstanding by Year of Contractual Maturity (dollars in thousands)

	December 31, 2019					December 31, 2018
	Amount			Weighted Average Rate		Amount			Weighted Average Rate
Overdrawn demand-deposit accounts	$	5,101		2.05	%	$	12,332		2.88	%
Due in one year or less	18,972,466			1.96		24,029,592			2.48
Due after one year through two years	8,600,922			2.16		11,413,640			2.55
Due after two years through three years	2,200,019			2.16		2,832,290			2.47
Due after three years through four years	1,766,314			2.71		1,648,076			2.37
Due after four years through five years	1,726,754			2.15		1,980,468			2.24
Thereafter	1,312,311			2.68		1,351,987			2.99
Total par value	34,583,887			2.10	%	43,268,385			2.50	%
Premiums	3,397					3,935
Discounts	(41,744		)			(36,528		)
Fair value of bifurcated derivatives ⁽¹⁾	29,983					13,051
Hedging adjustments	19,840					(56,621		)
Total	$	34,595,363				$	43,192,222

_________________________


(1)	At December 31, 2019 and 2018, we had certain advances with embedded features that met the requirements to be separated from the host contract and designated as stand-alone derivatives.

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

Table 9.2 - Advances Outstanding by Year of Contractual Maturity or Next Call Date (dollars in thousands)

	December 31, 2019		December 31, 2018
Overdrawn demand-deposit accounts	$	5,101	$	12,332
Due in one year or less	25,116,961		32,748,467
Due after one year through two years	3,450,922		3,913,640
Due after two years through three years	1,949,499		2,672,290
Due after three years through four years	1,461,314		1,261,176
Due after four years through five years	1,309,679		1,362,468
Thereafter	1,290,411		1,298,012
Total par value	$	34,583,887	$	43,268,385

We offer 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 9.3 - Advances Outstanding by Year of Contractual Maturity or Next Put Date (dollars in thousands)

Year of Contractual Maturity or Next Put Date, Par Value	December 31, 2019		December 31, 2018
Overdrawn demand-deposit accounts	$	5,101	$	12,332
Due in one year or less	20,240,466		25,199,892
Due after one year through two years	8,603,422		11,652,840
Due after two years through three years	2,001,019		2,834,790
Due after three years through four years	965,814		1,367,576
Due after four years through five years	1,598,254		1,152,468
Thereafter	1,169,811		1,048,487
Total par value	$	34,583,887	$	43,268,385

Table 9.4 - Advances by Current Interest Rate Terms (dollars in thousands)

Par value of advances	December 31, 2019		December 31, 2018
Fixed-rate
Due in one year or less	$	18,733,966	$	23,822,091
Due after one year	9,372,625		9,748,187
Total fixed-rate	28,106,591		33,570,278

Variable-rate
Due in one year or less	243,601		219,832
Due after one year	6,233,695		9,478,275
Total variable-rate	6,477,296		9,698,107
Total par value	$	34,583,887	$	43,268,385

Advance Concentrations. Our advances are principally concentrated in commercial banks, insurance companies, savings institutions, and credit unions. At December 31, 2019 and 2018, we had $12.3 billion and $16.4 billion, respectively, of advances issued to members with at least $1.0 billion of advances outstanding. These advances were made to five borrowers and six borrowers at December 31, 2019 and 2018, representing 35.6 percent and 37.9 percent, respectively, of total par value of outstanding advances. For information related to our credit risk on advances and allowance for credit losses, see Note 11 — Allowance for Credit Losses.

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

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

Table 9.5 - Advances Prepayment Fees (dollars in thousands)

	For the Year Ended December 31,
	2019			2018			2017
Prepayment fees received from borrowers	$	33,809		$	409		$	1,568
Hedging fair-value adjustments on prepaid advances	1,923			264			(218		)
Net discounts (premiums) associated with prepaid advances	157			(159		)	(137		)
Deferred recognition of prepayment fees received from borrowers on advance prepayments deemed to be loan modifications	(1,793		)	(298		)	(315		)
Prepayment fees recognized in income on advance restructurings deemed to be extinguishments	915			—			—
Advance prepayment fees recognized in income, net	$	35,011		$	216		$	898