Table 7.1 - Fair Value of Derivative Instruments (dollars in thousands)

	March 31, 2020							December 31, 2019
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments
Interest-rate swaps	$	12,808,610	$	30,660	$	(48,635	)	$	12,128,105	$	14,734	$	(12,805	)
Forward-start interest-rate swaps	17,000		24		—			17,000		19		—
Total derivatives designated as hedging instruments	12,825,610		30,684		(48,635		)	12,145,105		14,753		(12,805		)

Derivatives not designated as hedging instruments
Economic hedges:
Interest-rate swaps	4,142,300		28		(55,319		)	2,902,300		349		(31,000		)
Mortgage-delivery commitments⁽¹⁾	98,765		147		(695		)	49,911		227		—
Total derivatives not designated as hedging instruments	4,241,065		175		(56,014		)	2,952,211		576		(31,000		)
Total notional amount of derivatives	$	17,066,675						$	15,097,316
Total derivatives before netting and collateral adjustments			30,859		(104,649		)			15,329		(43,805		)
Netting adjustments and cash collateral, including related accrued interest ⁽²⁾			196,861		80,245					144,402		33,534
Derivative assets and derivative liabilities			$	227,720	$	(24,404	)			$	159,731	$	(10,271	)

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.

Table 7.2 - Net Gains (Losses) on Hedging Relationships (dollars in thousands)

	For the Three Months Ended March 31, 2020
	Advances			Available-for-sale Securities			CO Bonds
Total interest income (expense) in the statements of operations	$	168,659		$	12,361		$	(123,547	)

Gains (losses) on hedging relationships
Changes in fair value:
Derivatives	$	(127,568	)	$	(376,494	)	$	63,735
Hedged items	124,692			366,518			(64,058		)
Net changes in fair value before price alignment interest	(2,876		)	(9,976		)	(323		)
Price alignment interest⁽¹⁾	389			1,035			(177		)
Net interest settlements on derivatives⁽²⁾⁽³⁾	(2,625		)	(9,098		)	2,956
Net (losses) gains on qualifying hedging relationships	(5,112		)	(18,039		)	2,456
Amortization/accretion of discontinued hedging relationships	(337		)	—			(888		)
Net (losses) gains on derivatives and hedging activities recorded in net interest income	$	(5,449	)	$	(18,039	)	$	1,568



	For the Three Months Ended March 31, 2019
	Advances			Available-for-sale Securities			CO Bonds
Total interest income (expense) in the statements of operations	$	247,877		$	21,291		$	(154,817	)

Gains (losses) on hedging relationships
Changes in fair value:
Derivatives	$	(24,897	)	$	(23,197	)	$	33,636
Hedged items	25,672			19,115			(34,633		)
Net changes in fair value before price alignment interest	775			(4,082		)	(997		)
Price alignment interest⁽¹⁾	286			8			5
Net interest settlements on derivatives⁽²⁾⁽³⁾	16,251			(5,791		)	(9,080		)
Net gains (losses) on qualifying hedging relationships	17,312			(9,865		)	(10,072		)
Amortization/accretion of discontinued hedging relationships	(444		)	—			(75		)
Net gains (losses) on derivatives and hedging activities recorded in net interest income	$	16,868		$	(9,865	)	$	(10,147	)

Table 7.3 - Net Gains (Losses) on Cash Flow Hedging Relationships (dollars in thousands)

	For the Three Months Ended March 31,
	2020			2019
Forward-start interest rate swaps - CO Bonds
Losses reclassified from accumulated other comprehensive loss into interest expense	$	(1,757	)	$	(786	)
Losses recognized in other comprehensive income	(1,125		)	(3,379		)

For the three months ended March 31, 2020 and 2019, there were no reclassifications from accumulated other comprehensive loss 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 time period or within a two-month period thereafter. As of March 31, 2020, the maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted transactions is one year.

Table 7.4 - Cumulative Basis Adjustments for Fair-Value Hedges (dollars in thousands)

	March 31, 2020
Line Item in Statement of Condition of Hedged Item	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	$	6,241,203	$	187,480	$	10,505	$	197,985
Available-for-sale securities	4,419,656		595,088		—		595,088
Consolidated bonds	3,130,935		59,218		41,687		100,905

Table 7.5 - Net Gains and Losses on Derivatives not Designated as Hedging Instruments (dollars in thousands)

	For the Three Months Ended March 31,
	2020			2019
Interest-rate swaps	$	(52,569	)	$	(60	)
Mortgage-delivery commitments	(62		)	608
Price alignment interest⁽¹⁾	73			—

Net (losses) gains on derivatives not designated as hedging instruments	$	(52,558	)	$	548

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. 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 ratings are lowered. Under the terms that govern such agreements, if our credit rating is lowered by Moody's or S&P to a certain level, we are required to deliver additional collateral on uncleared derivatives in a net liability position. 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 March 31, 2020, was $88.3 million for which we had delivered collateral with a post-haircut value of $86.2 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 7.6 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 March 31, 2020.

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 two DCOs, for all cleared derivative transactions, Chicago Mercantile Exchange, Inc. (CME Inc.) and 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 which acts as our agent to the DCO and which 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. We clear our trades via clearing members of the DCOs. These clearing members who act as our agent to the DCOs are the U.S. Commodity Futures Trading Commission (CFTC)-registered futures commission merchants. Our clearing members 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. We were not required to post any such excess margin by our clearing members based on credit considerations at March 31, 2020.

Impacts on Statement of Cash Flows. Due to declines in market values of cleared derivatives during the three months ended March 31, 2020, there was an increase in variation margin posted on cleared derivatives to the DCOs totaling $480.4 million. On the statement of cash flows, $373.3 million of the variation margin cash payment is included in net change in derivatives and hedging activities, as an operating activity, while $107.1 million of the variation margin cash payment is included in net payments on derivatives with a financing element, as a financing activity.

During the three months ended March 31, 2019, we terminated certain uncleared interest-rate exchange agreements with a total notional amount of $611.9 million which were indexed to three-month LIBOR on the floating leg of the swaps. The net fair value of these derivative transactions, from our perspective, was $(251.5) million, which was transferred to the bilateral counterparty upon termination, and securities collateral that we had pledged against this obligation was returned to us. This cash payment is included in net change in derivatives and hedging activities, as an operating activity in the statement of cash flows. Simultaneously with the termination of these derivatives, we entered into replacement interest-rate exchange agreements (the replacement derivatives) having the same notional amount of $611.9 million and which are indexed to the OIS rate based on the federal funds effective rate on the floating leg of the swaps. Upon settlement of the replacement derivatives, the Bank received an initial upfront payment of $251.5 million. The replacement derivatives are cleared through a DCO, which called for variation margin to be delivered. Because the replacement derivatives include off-market terms and this large initial upfront payment, all payments for the replacement derivatives are classified as net payments on derivative contracts with a financing element, within the financing activities section of the statement of cash flows.

We have analyzed the rights, rules, and regulations governing our cleared and non-cleared 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 (solely in the case of non-cleared 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 indirectly owed by us to the relevant counterparty and indirectly payable to us from the relevant counterparty.

Table 7.7 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 March 31, 2020, and December 31, 2019, and the fair value of derivatives that are not subject to such netting. Derivatives subject to netting include any related cash collateral received from or pledged to counterparties.

Table 7.7 - Netting of Derivative Assets and Derivative Liabilities (dollars in thousands)

	March 31, 2020
	Derivative Instruments Meeting Netting Requirements												Non-cash Collateral (Received) or Pledged Not Offset⁽²⁾
	Gross Recognized Amount			Gross Amounts of Netting Adjustments ⁽¹⁾			Mortgage Delivery Commitments			Total Derivative Assets and Total Derivative Liabilities			Can Be Sold or Repledged		Cannot Be Sold or Repledged		Net Amount
Derivative Assets
Uncleared	$	13,187		$	(13,187	)	$	147		$	147		$	—	$	—	$	147
Cleared	17,526			210,047						227,573			—		—		227,573
Total										$	227,720						$	227,720

Derivative Liabilities
Uncleared	$	(100,449	)	$	76,740		$	(695	)	$	(24,404	)	$	—	$	21,442	$	(2,962	)
Cleared	(3,506		)	3,506						—			—		—		—
Total										$	(24,404	)					$	(2,962	)



	December 31, 2019
	Derivative Instruments Meeting Netting Requirements											Non-cash Collateral (Received) or Pledged Not Offset⁽²⁾
	Gross Recognized Amount			Gross Amounts of Netting Adjustments ⁽¹⁾			Mortgage Delivery Commitments		Total Derivative Assets and Total Derivative Liabilities			Can Be Sold or Repledged			Cannot Be Sold or Repledged		Net Amount
Derivative Assets
Uncleared	$	4,950		$	(3,519	)	$	227	$	1,658		$	(995	)	$	—	$	663
Cleared	10,152			147,921					158,073			—			—		158,073
Total									$	159,731							$	158,736

Derivative Liabilities
Uncleared	$	(42,199	)	$	31,928		$	—	$	(10,271	)	$	82		$	9,333	$	(856	)
Cleared	(1,606		)	1,606					—			—			—		—
Total									$	(10,271	)						$	(856	)

Includes non-cash collateral at fair value. Any overcollateralization with a counterparty is not included in the determination of the net amount. At December 31, 2019, we had additional net credit exposure of $300 thousand due to instances where our collateral pledged to a counterparty exceeded our net derivative liability position.