10-Q 1 fhlbdallas-33112x10q.htm FHLB Dallas-3.31.12-10Q
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-51405
FEDERAL HOME LOAN BANK OF DALLAS
(Exact name of registrant as specified in its charter)
Federally chartered corporation
(State or other jurisdiction of incorporation
or organization)
 
71-6013989
(I.R.S. Employer
Identification Number)
 
 
 
8500 Freeport Parkway South, Suite 600
Irving, TX
(Address of principal executive offices)
 
75063-2547
(Zip code)
(214) 441-8500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant [1] has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and [2] has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (17 C.F.R. §232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer þ
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
At April 30, 2012, the registrant had outstanding 10,829,151 shares of its Class B Capital Stock, $100 par value per share.
 



FEDERAL HOME LOAN BANK OF DALLAS
TABLE OF CONTENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 EX-31.1
 EX-31.2
 EX-32.1
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT




PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CONDITION
(Unaudited; in thousands, except share data)
 
March 31,
2012
 
December 31,
2011
ASSETS
 

 
 

Cash and due from banks
$
2,261,223

 
$
1,152,467

Interest-bearing deposits
344

 
223

Securities purchased under agreements to resell
1,000,000

 
500,000

Federal funds sold
1,196,000

 
1,645,000

Trading securities (Note 12)
6,488

 
6,034

Available-for-sale securities, including $533,200 and $512,474 of securities pledged as collateral to derivatives counterparties at March 31, 2012 and December 31, 2011, respectively (Notes 3 and 12)
5,290,776

 
4,927,697

Held-to-maturity securities (a) (Note 4)
5,968,018

 
6,423,610

Advances (Notes 5 and 6)
18,171,626

 
18,797,834

Mortgage loans held for portfolio, net of allowance for credit losses of $190 and $192 at March 31, 2012 and December 31, 2011, respectively (Note 6)
151,992

 
162,645

Loan to other FHLBank (Note 15)

 
35,000

Accrued interest receivable
87,333

 
72,584

Premises and equipment, net
21,529

 
22,182

Derivative assets (Notes 9 and 12)
21,255

 
8,750

Other assets
13,602

 
15,941

TOTAL ASSETS
$
34,190,186

 
$
33,769,967

 
 
 
 
LIABILITIES AND CAPITAL
 
 
 
Deposits
 
 
 
Interest-bearing
$
1,677,051

 
$
1,521,396

Non-interest bearing
29

 
29

Total deposits
1,677,080

 
1,521,425

 
 
 
 
Consolidated obligations (Note 7)
 
 
 
Discount notes
8,564,746

 
9,799,010

Bonds
21,570,440

 
20,070,056

Total consolidated obligations
30,135,186

 
29,869,066

 
 
 
 
Mandatorily redeemable capital stock
4,873

 
14,980

Accrued interest payable
86,882

 
65,451

Affordable Housing Program (Note 8)
30,593

 
32,313

Derivative liabilities (Notes 9 and 12)
512,143

 
531,164

Other liabilities, including $1,356 and $2,498 of optional advance commitments carried at fair value under the fair value option at March 31, 2012 and December 31, 2011, respectively (Notes 12 and 13)
19,834

 
30,733

Total liabilities
32,466,591

 
32,065,132

 
 
 
 
Commitments and contingencies (Notes 6 and 13)


 


 
 
 
 
CAPITAL (Note 10)
 
 
 
Capital stock — Class B putable ($100 par value) issued and outstanding shares: 12,454,095 and 12,557,934 shares at March 31, 2012 and December 31, 2011, respectively
1,245,409

 
1,255,793

Retained earnings
 
 
 
Unrestricted
506,992

 
488,739

Restricted
10,771

 
5,918

Total retained earnings
517,763

 
494,657

 
 
 
 
Accumulated other comprehensive income (loss) (Note 16)
(39,577
)

(45,615
)
Total capital
1,723,595

 
1,704,835

TOTAL LIABILITIES AND CAPITAL
$
34,190,186

 
$
33,769,967

_____________________________
(a) 
Fair values: $6,032,880 and $6,482,402 at March 31, 2012 and December 31, 2011, respectively.
The accompanying notes are an integral part of these financial statements.

1


FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF INCOME
(Unaudited, in thousands)

 
 
For the Three Months Ended
 
 
March 31,
 
 
2012
 
2011
INTEREST INCOME
 
 
 
 
Advances
 
$
50,429

 
$
59,405

Prepayment fees on advances, net
 
1,971

 
1,266

Interest-bearing deposits
 
153

 
72

Securities purchased under agreements to resell
 
566

 
104

Federal funds sold
 
436

 
1,205

Available-for-sale securities
 
7,602

 

Held-to-maturity securities
 
17,952

 
24,132

Mortgage loans held for portfolio
 
2,187

 
2,780

Other
 

 
6

Total interest income
 
81,296

 
88,970

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Consolidated obligations
 
 
 
 
Bonds
 
38,974

 
45,468

Discount notes
 
1,625

 
1,244

Deposits
 
43

 
117

Mandatorily redeemable capital stock
 
7

 
18

Other borrowings
 
1

 

Total interest expense
 
40,650

 
46,847

 
 
 
 
 
NET INTEREST INCOME
 
40,646

 
42,123

 
 
 
 
 
OTHER INCOME (LOSS)
 
 
 
 
Total other-than-temporary impairment losses on held-to-maturity securities
 

 

Net non-credit impairment losses recognized in other comprehensive income
 
(214
)
 
(1,378
)
Credit component of other-than-temporary impairment losses on held-to-maturity securities
 
(214
)
 
(1,378
)
 
 
 
 
 
Service fees
 
519

 
570

Net gain on trading securities
 
182

 
129

Net gains (losses) on derivatives and hedging activities
 
2,577

 
(6,515
)
Unrealized gains (losses) on other liabilities carried at fair value under the fair value option
 
1,142

 
(861
)
Gains on early extinguishment of debt
 

 
369

Letter of credit fees
 
1,229

 
1,429

Other, net
 
(6
)
 
(10
)
Total other income (loss)
 
5,429

 
(6,267
)
 
 
 
 
 
OTHER EXPENSE
 
 
 
 
Compensation and benefits
 
11,447

 
11,585

Other operating expenses
 
6,290

 
6,694

Finance Agency
 
799

 
1,145

Office of Finance
 
574

 
733

Total other expense
 
19,110

 
20,157

 
 
 
 
 
INCOME BEFORE ASSESSMENTS
 
26,965

 
15,699

Affordable Housing Program
 
2,697

 
1,283

REFCORP
 

 
2,883

Total assessments
 
2,697

 
4,166

NET INCOME
 
$
24,268

 
$
11,533

The accompanying notes are an integral part of these financial statements.

2


FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)

 
 
For the Three Months Ended
 
 
March 31,
 
 
2012
 
2011
 
 
 
 
 
NET INCOME
 
$
24,268

 
$
11,533

OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
Net unrealized gains on available-for-sale securities, net of unrealized gains and losses relating to hedged interest rate risk included in net income
 
3,084

 

Reclassification adjustment for non-credit portion of other-than-temporary impairment losses recognized as credit losses in net income
 
214

 
1,378

Accretion of non-credit portion of other-than-temporary impairment losses to the carrying value of held-to-maturity securities
 
2,757

 
4,596

Postretirement benefit plan
 
 
 
 

Amortization of prior service credit included in net periodic benefit cost
 
(9
)
 
(9
)
Amortization of net actuarial gain included in net periodic benefit cost
 
(8
)
 
(6
)
Total other comprehensive income
 
6,038

 
5,959

TOTAL COMPREHENSIVE INCOME
 
$
30,306

 
$
17,492


The accompanying notes are an integral part of these financial statements.



3


FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(Unaudited, in thousands)

 
 
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
Capital Stock
Class B - Putable
 
Retained Earnings
 
Other
Comprehensive
 
Total
 
Shares
 
Par Value
 
Unrestricted
 
Restricted
 
Total
 
Income (Loss)
 
Capital
BALANCE, JANUARY 1, 2012
12,557

 
$
1,255,793

 
$
488,739

 
$
5,918

 
$
494,657

 
$
(45,615
)
 
$
1,704,835

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of capital stock
1,274

 
127,356

 

 

 

 

 
127,356

Repurchase/redemption of capital stock
(1,383
)
 
(138,262
)
 

 

 

 

 
(138,262
)
Shares reclassified to mandatorily redeemable capital stock
(5
)
 
(590
)
 

 

 

 

 
(590
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 
19,415

 
4,853

 
24,268

 

 
24,268

Other comprehensive income

 

 

 

 

 
6,038

 
6,038

Dividends on capital stock (at 0.375 percent annualized rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 
(45
)
 

 
(45
)
 

 
(45
)
Mandatorily redeemable capital stock

 

 
(5
)
 

 
(5
)
 

 
(5
)
Stock
11

 
1,112

 
(1,112
)
 

 
(1,112
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, MARCH 31, 2012
12,454

 
$
1,245,409

 
$
506,992

 
$
10,771

 
$
517,763

 
$
(39,577
)
 
$
1,723,595

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, JANUARY 1, 2011
16,009

 
$
1,600,909

 
$
452,205

 
$

 
$
452,205

 
$
(62,702
)
 
$
1,990,412

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from sale of capital stock
750

 
74,976

 

 

 

 

 
74,976

Repurchase/redemption of capital stock
(1,883
)
 
(188,255
)
 

 

 

 

 
(188,255
)
Shares reclassified to mandatorily redeemable capital stock
(613
)
 
(61,268
)
 

 

 

 

 
(61,268
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 
11,533

 

 
11,533

 

 
11,533

Other comprehensive income

 

 

 

 

 
5,959

 
5,959

Dividends on capital stock (at 0.375 percent annualized rate)
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 
(46
)
 

 
(46
)
 

 
(46
)
Mandatorily redeemable capital stock

 

 
(56
)
 

 
(56
)
 

 
(56
)
Stock
15

 
1,448

 
(1,448
)
 

 
(1,448
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, MARCH 31, 2011
14,278

 
$
1,427,810

 
$
462,188

 
$

 
$
462,188

 
$
(56,743
)
 
$
1,833,255


The accompanying notes are an integral part of these financial statements.



4


FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
For the Three Months Ended
 
March 31,
 
2012
 
2011
OPERATING ACTIVITIES
 
 
 
Net income
$
24,268

 
$
11,533

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
 
 
 
Net premiums and discounts on advances, consolidated obligations, investments and mortgage loans
14,414

 
(19,149
)
Concessions on consolidated obligation bonds
1,178

 
984

Premises, equipment and computer software costs
1,691

 
1,605

Non-cash interest on mandatorily redeemable capital stock
10

 
5

Credit component of other-than-temporary impairment losses on held-to-maturity securities
214

 
1,378

Gains on early extinguishment of debt

 
(369
)
Unrealized losses (gains) on other liabilities carried at fair value under the fair value option
(1,142
)
 
861

Net increase in trading securities
(454
)
 
(639
)
Loss due to change in net fair value adjustment on derivative and hedging activities
16,862

 
14,329

Decrease (increase) in accrued interest receivable
(14,776
)
 
2,583

Decrease in other assets
1,617

 
1,683

Decrease in Affordable Housing Program (AHP) liability
(1,720
)
 
(2,191
)
Increase in accrued interest payable
21,431

 
23,081

Decrease in payable to REFCORP

 
(2,544
)
Increase (decrease) in other liabilities
(9,774
)
 
695

Total adjustments
29,551

 
22,312

Net cash provided by operating activities
53,819

 
33,845

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Net decrease (increase) in interest-bearing deposits, including swap collateral pledged
(11,851
)
 
26,847

Net increase in securities purchased under agreements to resell
(500,000
)
 
(375,000
)
Net decrease in federal funds sold
449,000

 
1,441,000

Decrease in loan to other FHLBank
35,000

 

Purchases of available-for-sale securities
(406,763
)
 

Proceeds from maturities of long-term held-to-maturity securities
463,885

 
670,196

Principal collected on advances
88,328,288

 
59,401,324

Advances made
(87,749,824
)
 
(55,826,927
)
Principal collected on mortgage loans held for portfolio
10,594

 
12,365

Purchases of premises, equipment and computer software
(810
)
 
(2,183
)
Net cash provided by investing activities
617,519

 
5,347,622




5




FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CASH FLOWS (continued)
(Unaudited, in thousands)
 
For the Three Months Ended
 
March 31,
 
2012
 
2011
FINANCING ACTIVITIES
 
 
 
Net increase in deposits, including swap collateral held
154,954

 
237,495

Net proceeds from (payments on) derivative contracts with financing elements
9,291

 
(5,130
)
Net proceeds from issuance of consolidated obligations
 
 
 
Discount notes
76,001,219

 
89,715,189

Bonds
5,551,319

 
1,182,862

Proceeds from assumption of debt from other FHLBank

 
167,381

Debt issuance costs
(707
)
 
(464
)
Payments for maturing and retiring consolidated obligations
 
 
 
Discount notes
(77,234,806
)
 
(94,344,690
)
Bonds
(4,022,190
)
 
(3,289,696
)
Proceeds from issuance of capital stock
127,356

 
74,976

Payments for redemption of mandatorily redeemable capital stock
(10,711
)
 
(51,275
)
Payments for repurchase/redemption of capital stock
(138,262
)
 
(188,255
)
Cash dividends paid
(45
)
 
(46
)
Net cash provided by (used in) financing activities
437,418

 
(6,501,653
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
1,108,756

 
(1,120,186
)
Cash and cash equivalents at beginning of the period
1,152,467

 
1,631,899

Cash and cash equivalents at end of the period
$
2,261,223

 
$
511,713

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest paid
$
28,691

 
$
29,226

AHP payments, net
$
4,417

 
$
3,474

REFCORP payments
$

 
$
5,427

Stock dividends issued
$
1,112

 
$
1,448

Dividends paid through issuance of mandatorily redeemable capital stock
$
5

 
$
56

Capital stock reclassified to mandatorily redeemable capital stock
$
590

 
$
61,268

The accompanying notes are an integral part of these financial statements.

6


FEDERAL HOME LOAN BANK OF DALLAS
NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS

Note 1—Basis of Presentation
The accompanying interim financial statements of the Federal Home Loan Bank of Dallas (the “Bank”) are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions provided by Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. The financial statements contain all adjustments that are, in the opinion of management, necessary for a fair statement of the Bank’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments were of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.
The Bank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2011. The interim financial statements presented herein should be read in conjunction with the Bank’s audited financial statements and notes thereto, which are included in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 23, 2012 (the “2011 10-K”). The notes to the interim financial statements update and/or highlight significant changes to the notes included in the 2011 10-K.
The Bank is one of 12 district Federal Home Loan Banks, each individually a “FHLBank” and collectively the “FHLBanks,” and, together with the Office of Finance, a joint office of the FHLBanks, the “FHLBank System.” The Office of Finance manages the sale and servicing of the FHLBanks’ consolidated obligations. The Federal Housing Finance Agency (“Finance Agency”), an independent agency in the executive branch of the U.S. government, supervises and regulates the FHLBanks and the Office of Finance.
     Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates. These assumptions and estimates may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Significant assumptions include those that are used by the Bank in its periodic evaluation of its holdings of non-agency mortgage-backed securities for other-than-temporary impairment (“OTTI”). Significant estimates include the valuations of the Bank’s investment securities, as well as its derivative instruments and any associated hedged items. Actual results could differ from these estimates.

Note 2—Recently Issued Accounting Guidance
      Reconsideration of Effective Control for Repurchase Agreements. On April 29, 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-03 “Reconsideration of Effective Control for Repurchase Agreements” (“ASU 2011-03”), which eliminates from U.S. GAAP the requirement for entities to consider whether a transferor has the ability to repurchase the financial assets in a repurchase agreement. The guidance is intended to focus the assessment of effective control over financial assets on a transferor’s contractual rights and obligations with respect to transferred financial assets and not on whether the transferor has the practical ability to exercise those rights or honor those obligations. In addition to removing the criterion for entities to consider a transferor’s ability to repurchase the financial assets, ASU 2011-03 also removes the collateral maintenance implementation guidance related to that criterion. The guidance is effective prospectively for transactions, or modifications of existing transactions, that occur during or after the first interim or annual reporting period beginning on or after December 15, 2011 (January 1, 2012 for the Bank). Early adoption was not permitted. The adoption of this guidance did not have any impact on the Bank’s results of operations or financial condition.
     Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRSs”). On May 12, 2011, the FASB issued ASU 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” which clarifies and, in some cases, amends the existing guidance in U.S. GAAP for measuring fair value and provides for certain additional disclosures regarding fair value measurements. The guidance is intended to result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. The guidance is effective for interim and annual reporting periods beginning on or after December 15, 2011 (January 1, 2012 for the Bank) and is to be applied prospectively. Early adoption was not permitted. The adoption of this guidance did not have any impact on the Bank’s results of operations or financial condition. The required additional disclosures are presented in Note 12.
 

7


    Presentation of Comprehensive Income. On June 16, 2011, the FASB issued ASU 2011-05 “Presentation of Comprehensive Income” ("ASU 2011-05"), which eliminates the option to present components of other comprehensive income as part of the statement of capital and requires, among other things, that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement must present total net income and its components followed consecutively by a second statement that must present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The guidance is intended to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to earnings.
On December 23, 2011, the FASB issued ASU 2011-12 "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05" ("ASU 2011-12"), which defers indefinitely the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. ASU 2011-12 was issued in order to allow the FASB time to reconsider whether it is necessary to require companies to present reclassification adjustments by component in both the statement where net income is presented and the statement where other comprehensive income is presented for both interim and annual financial statements. The guidance in ASU 2011-12 did not defer the requirement to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements.
The guidance in both ASU 2011-05 and ASU 2011-12 is effective for interim and annual reporting periods beginning on or after December 15, 2011 (January 1, 2012 for the Bank) and is to be applied retrospectively. Early adoption was permitted. The Bank adopted this guidance effective January 1, 2012. The adoption of this guidance did not impact the Bank’s results of operations or financial condition.
Disclosures about Offsetting Assets and Liabilities. On December 16, 2011, the FASB issued ASU 2011-11 "Disclosures about Offsetting Assets and Liabilities," which requires enhanced disclosures about financial instruments and derivative instruments that are either offset in the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset. This information is intended to enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. The International Accounting Standards Board concurrently issued similar disclosure guidance.
The eligibility criteria for offsetting are different in IFRSs and U.S. GAAP. Unlike IFRSs, U.S. GAAP allows entities the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party where rights of set-off are only available in the event of default or bankruptcy. The new disclosure requirements allow investors to better compare financial statements prepared in accordance with IFRSs or U.S. GAAP. The common disclosure requirements also improve transparency in the reporting of how entities mitigate credit risk, including disclosure of related collateral pledged or received.
The guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods (January 1, 2013 for the Bank), and is to be applied retrospectively to all periods presented. The adoption of this guidance may result in increased financial statement footnote disclosures for the Bank, but will not have any impact on the Bank’s results of operations or financial condition.
Asset Classification and Charge-offs. On April 9, 2012, the Finance Agency issued Advisory Bulletin 2012-02, Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention ("AB 2012-02").  The guidance establishes a standard and uniform methodology for classifying assets and prescribes the timing of asset charge-offs, excluding investment securities. The guidance in AB 2012-02 is generally consistent with the Uniform Retail Credit Classification and Account Management Policy issued by the federal banking regulators in June 2000. AB 2012-02 was effective upon issuance. The adoption of the accounting guidance in AB 2012-02 is not expected to have a significant impact on the Bank's results of operations or financial condition.



8


Note 3—Available-for-Sale Securities
     Major Security Types. Available-for-sale securities as of March 31, 2012 were as follows (in thousands):
 
Amortized
Cost
 
Gross Unrealized Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
54,429

 
$
105

 
$
51

 
$
54,483

Government-sponsored enterprises
4,822,853

 
10,427

 
3,308

 
4,829,972

Other
405,213

 
1,222

 
114

 
406,321

Total
$
5,282,495

 
$
11,754

 
$
3,473

 
$
5,290,776


Available-for-sale securities as of December 31, 2011 were as follows (in thousands):
 
Amortized
Cost
 
Gross Unrealized Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
54,708

 
$
157

 
$

 
$
54,865

Government-sponsored enterprises
4,643,191

 
7,971

 
3,391

 
4,647,771

Other
224,601

 
505

 
45

 
225,061

Total
$
4,922,500

 
$
8,633

 
$
3,436

 
$
4,927,697


Other debentures are fully secured by U.S. government-guaranteed obligations and the payment of interest on the debentures is guaranteed by an agency of the U.S. government. The amortized cost of the Bank's available-for-sale securities includes hedging adjustments. The following table summarizes (in thousands, except number of positions) the available-for-sale securities with unrealized losses as of March 31, 2012. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
3

 
$
35,082

 
$
51

 

 
$

 
$

 
3

 
$
35,082

 
$
51

Government-sponsored enterprises
68

 
879,112

 
3,308

 

 

 

 
68

 
879,112

 
3,308

Other
8

 
106,981

 
114

 

 

 

 
8

 
106,981

 
114

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
79

 
$
1,021,175

 
$
3,473

 

 
$

 
$

 
79

 
$
1,021,175

 
$
3,473


The following table summarizes (in thousands, except number of positions) the available-for-sale securities with unrealized losses as of December 31, 2011.The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored enterprises
67

 
$
1,532,618

 
$
3,391

 

 
$

 
$

 
67

 
$
1,532,618

 
$
3,391

Other
5

 
19,703

 
45

 

 

 

 
5

 
19,703

 
45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
72

 
$
1,552,321

 
$
3,436

 

 
$

 
$

 
72

 
$
1,552,321

 
$
3,436



9


At March 31, 2012, the gross unrealized losses on the Bank’s available-for-sale securities were $3,473,000. All of the Bank's available-for-sale securities are either guaranteed by the U.S. government, issued by government-sponsored enterprises (“GSEs”), or fully secured by collateral that is guaranteed by the U.S government. As of March 31, 2012, the U.S. government and the issuers of the Bank’s holdings of GSE debentures were rated triple-A by Moody’s Investors Service (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”) and AA+ by Standard and Poor’s (“S&P”). The issuer of the Bank's other debentures was rated Aaa by Moody's and AA+ by S&P at that date; the issuer of the other debentures is not rated by Fitch. Based upon the U.S. government's guaranty of the payment of principal and interest, the Bank expects that its holdings of U.S. government-guaranteed debentures that were in an unrealized loss position at March 31, 2012 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. In addition, based upon the Bank’s assessment of the creditworthiness of the issuers of the GSE debentures and the credit ratings assigned by each of the nationally recognized statistical rating organizations (“NRSROs”), the Bank expects that its holdings of GSE debentures that were in an unrealized loss position at March 31, 2012 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Further, based on the creditworthiness of the issuer of the Bank's holdings of other debentures, the U.S. government's guaranty of the payment of principal and interest on the collateral securing those debentures, and the guaranty of the payment of interest on the debentures by an agency of the U.S. government, the Bank expects that its holdings of other debentures that were in an unrealized loss position at March 31, 2012 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Because the current market value deficits associated with the Bank's available-for-sale securities are not attributable to credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, the Bank does not consider any of these investments to be other-than-temporarily impaired at March 31, 2012.
Redemption Terms. The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at March 31, 2012 and December 31, 2011 are presented below (in thousands).
 
 
March 31, 2012
 
December 31, 2011
Maturity
 
Amortized Cost
 
Estimated
Fair Value
 
Amortized Cost
 
Estimated
Fair Value
 
 
 
 
Debentures
 
 
 
 
 
 
 
 
Due after one year through five years
 
$
1,210,925

 
$
1,214,342

 
$
568,889

 
$
570,229

Due after five years through ten years
 
3,959,580

 
3,964,412

 
4,275,148

 
4,279,140

Due after ten years
 
111,990

 
112,022

 
78,463

 
78,328

Total
 
$
5,282,495

 
$
5,290,776

 
$
4,922,500

 
$
4,927,697

Interest Rate Payment Terms. The following table provides interest rate payment terms for investment securities classified as available-for-sale at March 31, 2012 and December 31, 2011 (in thousands):
 
March 31, 2012
 
December 31, 2011
Amortized cost of available-for-sale securities
 
 
 
Fixed-rate
$
5,207,495

 
$
4,847,500

Variable-rate
75,000

 
75,000

 
 
 
 
Total
$
5,282,495

 
$
4,922,500


At March 31, 2012 and December 31, 2011, all of the Bank's fixed-rate available-for-sale securities were swapped to a variable rate.


10


Note 4—Held-to-Maturity Securities
     Major Security Types. Held-to-maturity securities as of March 31, 2012 were as follows (in thousands):

 
Amortized
Cost
 
OTTI Recorded in
Accumulated Other
Comprehensive
Income (Loss)
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
43,238

 
$

 
$
43,238

 
$
260

 
$
216

 
$
43,282

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
15,911

 

 
15,911

 
39

 

 
15,950

Government-sponsored enterprises
5,669,036

 

 
5,669,036

 
88,674

 
2,253

 
5,755,457

Non-agency residential mortgage-backed securities
288,291

 
48,458

 
239,833

 

 
21,642

 
218,191

 
5,973,238

 
48,458

 
5,924,780

 
88,713

 
23,895

 
5,989,598

Total
$
6,016,476

 
$
48,458

 
$
5,968,018

 
$
88,973

 
$
24,111

 
$
6,032,880


Held-to-maturity securities as of December 31, 2011 were as follows (in thousands):

 
Amortized
Cost
 
OTTI Recorded in
Accumulated Other
Comprehensive
Income (Loss)
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
45,342

 
$

 
$
45,342

 
$
290

 
$
291

 
$
45,341

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
16,692

 

 
16,692

 
40

 

 
16,732

Government-sponsored enterprises
6,109,080

 

 
6,109,080

 
93,138

 
2,682

 
6,199,536

Non-agency residential mortgage-backed securities
303,925

 
51,429

 
252,496

 

 
31,703

 
220,793

 
6,429,697

 
51,429

 
6,378,268

 
93,178

 
34,385

 
6,437,061

Total
$
6,475,039

 
$
51,429

 
$
6,423,610

 
$
93,468

 
$
34,676

 
$
6,482,402


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of March 31, 2012. The unrealized losses include other-than-temporary impairments recognized in accumulated other comprehensive income (loss) and gross unrecognized holding losses and are aggregated by major security type and length of time that individual securities have been in a continuous loss position.

11


 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations

 
$

 
$

 
2

 
$
19,071

 
$
216

 
2

 
$
19,071

 
$
216

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored enterprises
23

 
361,178

 
206

 
38

 
667,660

 
2,047

 
61

 
1,028,838

 
2,253

Non-agency residential mortgage-backed securities

 

 

 
33

 
218,191

 
70,100

 
33

 
218,191

 
70,100

 
23

 
361,178

 
206

 
71

 
885,851

 
72,147

 
94

 
1,247,029

 
72,353

Total
23

 
$
361,178

 
$
206

 
73

 
$
904,922

 
$
72,363

 
96

 
$
1,266,100

 
$
72,569


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of December 31, 2011. The unrealized losses include other-than-temporary impairments recognized in accumulated other comprehensive income (loss) and gross unrecognized holding losses and are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
1

 
$
9,136

 
$
174

 
1

 
$
10,357

 
$
117

 
2

 
$
19,493

 
$
291

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored enterprises
18

 
423,121

 
383

 
42

 
723,500

 
2,299

 
60

 
1,146,621

 
2,682

Non-agency residential mortgage-backed securities

 

 

 
34

 
220,793

 
83,132

 
34

 
220,793

 
83,132

 
18

 
423,121

 
383

 
76

 
944,293

 
85,431

 
94

 
1,367,414

 
85,814

Total
19

 
$
432,257

 
$
557

 
77

 
$
954,650

 
$
85,548

 
96

 
$
1,386,907

 
$
86,105


At March 31, 2012, the gross unrealized losses on the Bank’s held-to-maturity securities were $72,569,000, of which $70,100,000 was attributable to its holdings of non-agency (i.e., private-label) residential mortgage-backed securities and $2,469,000 was attributable to securities that are either guaranteed by the U.S. government or issued and guaranteed by GSEs. As of March 31, 2012, the U.S. government and the issuers of the Bank’s holdings of GSE mortgage-backed securities were rated triple-A by Moody’s and Fitch and AA+ by S&P.
Based upon the Bank’s assessment of the strength of the government guarantees of the debentures held by the Bank, the credit ratings assigned by the NRSROs and the strength of the GSEs’ guarantees of the Bank’s holdings of agency mortgage-backed securities (“MBS”), the Bank expects that its holdings of U.S. government-guaranteed debentures and GSE MBS that were in an unrealized loss position at March 31, 2012 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Because the current market value deficits associated with these securities are not attributable to credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, the Bank does not consider any of these investments to be other-than-temporarily impaired at March 31, 2012.
The deterioration in the U.S. housing markets that began in 2007, as reflected by declines in the values of residential real estate and higher levels of delinquencies, defaults and losses on residential mortgages, including the mortgages underlying the Bank’s non-agency residential MBS (“RMBS”), has generally increased the risk that the Bank may not ultimately recover the entire cost bases of some of its non-agency RMBS. Based on its analysis of the securities in this portfolio, however, the Bank believes that the unrealized losses as of March 31, 2012 were principally the result of liquidity risk related discounts in the non-agency RMBS market and do not accurately reflect the currently likely future credit performance of the securities.
Because the ultimate receipt of contractual payments on the Bank’s non-agency RMBS will depend upon the credit and prepayment performance of the underlying loans and the credit enhancements for the senior securities owned by the Bank, the Bank closely monitors these investments in an effort to determine whether the credit enhancement associated with each security is sufficient to protect against potential losses of principal and interest on the underlying mortgage loans. The credit enhancement for each of the Bank’s non-agency RMBS is provided by a senior/subordinate structure, and none of the securities

12


owned by the Bank are insured by third-party bond insurers. More specifically, each of the Bank’s non-agency RMBS represents a single security class within a securitization that has multiple classes of securities. Each security class has a distinct claim on the cash flows from the underlying mortgage loans, with the subordinate securities having a junior claim relative to the more senior securities. The Bank’s non-agency RMBS have a senior claim on the cash flows from the underlying mortgage loans.
To assess whether the entire amortized cost bases of its 33 non-agency RMBS will be recovered, the Bank performed a cash flow analysis for each security as of March 31, 2012 using two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank’s securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core based statistical areas (“CBSAs”), which are based upon an assessment of the individual housing markets. (The term “CBSA” refers collectively to metropolitan and micropolitan statistical areas as defined by the U.S. Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area of 10,000 or more people.) The Bank’s housing price forecast as of March 31, 2012 assumed current-to-trough home price declines ranging from 0 percent (for those housing markets that management believes have reached their trough) to 8.0 percent. For those markets for which management anticipates further home price declines, such declines were projected to occur over the 3- to 9-month period beginning January 1, 2012. From the trough, home prices were projected to recover using one of five different recovery paths that vary by housing market. Under those recovery paths, home prices were projected to increase as set forth in the table below.
Months
 
Range of Annualized Rates
 
 
 
1 - 6
 
0.0% - 2.8%
7 - 18
 
0.0% - 3.0%
19 - 24
 
1.0% - 4.0%
25 - 30
 
2.0% - 4.0%
31 - 42
 
2.0% - 5.0%
43 - 66
 
2.0% - 6.0%
Thereafter
 
2.3% - 5.6%
The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancement for the senior securities is derived from the presence of subordinate securities, losses are generally allocated first to the subordinate securities until their principal balance is reduced to zero.
Based on the results of its cash flow analyses, the Bank determined that it is likely that it will not fully recover the amortized cost bases of two of its non-agency RMBS and, accordingly, these securities were deemed to be other-than-temporarily impaired as of March 31, 2012. Both of these securities had previously been deemed to be other-than-temporarily impaired. The difference between the present value of the cash flows expected to be collected from these two securities and their amortized cost bases (i.e., the credit losses) totaled $214,000 as of March 31, 2012. Because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their remaining amortized cost bases (that is, their previous amortized cost bases less the current-period credit losses), only the amounts related to the credit losses were recognized in earnings. The credit losses associated with these two securities were reclassified from accumulated other comprehensive income (loss) to earnings during the three months ended March 31, 2012 as the estimated fair values of the securities were greater than their carrying amounts at that date.
In addition to the 2 securities that were determined to be other-than-temporarily impaired at March 31, 2012, 12 other securities were previously deemed to be other-than-temporarily impaired. The following tables set forth additional information for each of the securities that were other-than-temporarily impaired as of March 31, 2012, including those securities that were deemed to be other-than-temporarily impaired in a prior period but which were not further impaired as of March 31, 2012 (in thousands). All of the Bank’s RMBS are rated by Moody’s, S&P and/or Fitch. The credit ratings presented in the first table represent the lowest rating assigned to the security by these NRSROs as of March 31, 2012.


13


 
 
 
 
 
Three Months Ended March 31, 2012
 
Period of
Initial
Impairment
 
Credit
Rating
 
Credit
Component
of OTTI
 
Non-Credit
Component
of OTTI
 
Total
OTTI
Security #1
Q1 2009
 
Triple-C
 
$

 
$

 
$

Security #2
Q1 2009
 
Triple-C
 

 

 

Security #3
Q2 2009
 
Single-C
 
170

 
(170
)
 

Security #4
Q2 2009
 
Triple-C
 

 

 

Security #5
Q3 2009
 
Triple-C
 

 

 

Security #6
Q3 2009
 
Triple-C
 

 

 

Security #7
Q3 2009
 
Single-B
 

 

 

Security #8
Q1 2010
 
Triple-C
 

 

 

Security #9
Q1 2010
 
Single-B
 

 

 

Security #10
Q4 2010
 
Triple-C
 

 

 

Security #11
Q4 2010
 
Triple-C
 

 

 

Security #12
Q4 2010
 
Triple-C
 

 

 

Security #13
Q4 2010
 
Triple-C
 

 

 

Security #14
Q2 2011
 
Single-B
 
44

 
(44
)
 

Totals
 
 
 
 
$
214

 
$
(214
)
 
$


 
March 31, 2012
 
Cumulative from Period of Initial Impairment Through March 31, 2012
 
March 31, 2012
 
Unpaid
Principal
Balance
 
Amortized
Cost
 
Non-Credit
Component of
OTTI
 
Accretion of
Non-Credit
Component
 
Carrying
Value
 
Estimated
Fair
Value
Security #1
$
15,373

 
$
12,475

 
$
10,271

 
$
6,356

 
$
8,560

 
$
8,321

Security #2
16,263

 
15,572

 
12,389

 
6,767

 
9,950

 
10,158

Security #3
29,613

 
24,889

 
15,420

 
8,935

 
18,404

 
20,856

Security #4
11,171

 
10,461

 
7,890

 
4,405

 
6,976

 
7,235

Security #5
18,975

 
17,270

 
10,047

 
5,594

 
12,817

 
11,320

Security #6
16,157

 
14,765

 
10,567

 
5,170

 
9,368

 
9,704

Security #7
6,297

 
6,222

 
3,575

 
1,668

 
4,315

 
4,115

Security #8
8,932

 
8,910

 
4,968

 
2,142

 
6,084

 
5,820

Security #9
4,097

 
4,060

 
2,208

 
907

 
2,759

 
2,637

Security #10
7,303

 
6,882

 
3,331

 
874

 
4,425

 
4,438

Security #11
9,044

 
9,040

 
4,096

 
1,063

 
6,007

 
6,095

Security #12
4,809

 
4,726

 
1,820

 
496

 
3,402

 
3,050

Security #13
5,577

 
5,562

 
2,418

 
743

 
3,887

 
3,578

Security #14
19,873

 
19,655

 
5,747

 
1,169

 
15,077

 
15,714

Totals
$
173,484

 
$
160,489

 
$
94,747

 
$
46,289

 
$
112,031

 
$
113,041



14


For those securities for which an other-than-temporary impairment was determined to have occurred as of March 31, 2012, the following table presents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings during the three months ended March 31, 2012 (dollars in thousands):
 
 
 
 
 
 
 
Significant Inputs(2)
 
 
 
Year of
Securitization
 
Collateral
Type(1)
 
Unpaid Principal Balance as of
March 31, 2012

 
Projected Prepayment
Rate
 
Projected Default
Rate
 
Projected Loss
Severity
 
Current Credit Enhancement as of March 31, 2012(3)
Security #3
2006
 
Alt-A/Fixed Rate
 
$
29,613

 
7.5%
 
41.7%
 
46.8%
 
4.5
%
Security #14
2005
 
Alt-A/Fixed Rate
 
19,873

 
9.8%
 
20.6%
 
40.9%
 
7.9
%
Total
 
 
 
 
$
49,486

 
 
 
 
 
 
 
 
_____________________________
(1) 
Security #14 is the only security presented in the table above that was labeled as Alt-A at the time of issuance; however, based upon their current collateral or performance characteristics, both of the other-than-temporarily impaired securities presented in the table above were analyzed using Alt-A assumptions.
(2) 
Prepayment rates reflect the weighted average of projected future voluntary prepayments. Default rates reflect the total balance of loans projected to default as a percentage of the current unpaid principal balance of the underlying loan pool. Loss severities reflect the total projected loan losses as a percentage of the total balance of loans that are projected to default.
(3) 
Current credit enhancement percentages reflect the ability of subordinated classes of securities to absorb principal losses and interest shortfalls before the senior class held by the Bank is impacted (i.e., the losses, expressed as a percentage of the outstanding principal balances, that could be incurred in the underlying loan pool before the security held by the Bank would be impacted, assuming that all of those losses occurred on the measurement date). Depending upon the timing and amount of losses in the underlying loan pool, it is possible that the senior classes held by the Bank could bear losses in scenarios where the cumulative loan losses do not exceed the current credit enhancement percentage.

The following table presents a rollforward for the three months ended March 31, 2012 and 2011 of the amount related to credit losses on the Bank’s non-agency RMBS holdings for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (in thousands).
 
Three Months Ended
 
March 31,
 
2012
 
2011
Balance of credit losses, beginning of period
$
12,679

 
$
6,576

Credit losses on securities for which an other-than-temporary impairment was previously recognized
214

 
1,378

Balance of credit losses, end of period
$
12,893

 
$
7,954

Because the Bank currently expects to recover the entire amortized cost basis of each of its other 31 non-agency RMBS holdings (including the 12 securities that were previously deemed to be other-than-temporarily impaired), and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, the Bank does not consider any of these other non-agency RMBS to be other-than-temporarily impaired (or, in the case of the 12 previously impaired securities, further impaired) at March 31, 2012.
 

15


    Redemption Terms. The amortized cost, carrying value and estimated fair value of held-to-maturity securities by contractual maturity at March 31, 2012 and December 31, 2011 are presented below (in thousands). The expected maturities of some debentures could differ from the contractual maturities presented because issuers may have the right to call such debentures prior to their final stated maturities.

 
 
March 31, 2012
 
December 31, 2011
Maturity
 
Amortized Cost
 
Carrying Value
 
Estimated Fair Value
 
Amortized Cost
 
Carrying Value
 
Estimated Fair Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
Due after one year through five years
 
$
5,268

 
$
5,268

 
$
5,330

 
$
1,521

 
$
1,521

 
$
1,541

Due after five years through ten years
 
28,659

 
28,659

 
28,774

 
24,037

 
24,037

 
24,307

Due after ten years
 
9,311

 
9,311

 
9,178

 
19,784

 
19,784

 
19,493

 
 
43,238

 
43,238

 
43,282

 
45,342

 
45,342

 
45,341

Mortgage-backed securities
 
5,973,238

 
5,924,780

 
5,989,598

 
6,429,697

 
6,378,268

 
6,437,061

Total
 
$
6,016,476

 
$
5,968,018

 
$
6,032,880

 
$
6,475,039

 
$
6,423,610

 
$
6,482,402


The amortized cost of the Bank’s mortgage-backed securities classified as held-to-maturity includes net purchase discounts of $73,495,000 and $79,050,000 at March 31, 2012 and December 31, 2011, respectively.
     Interest Rate Payment Terms. The following table provides interest rate payment terms for investment securities classified as held-to-maturity at March 31, 2012 and December 31, 2011 (in thousands):
 
March 31, 2012
 
December 31, 2011
Amortized cost of variable-rate held-to-maturity securities other than mortgage-backed securities
$
43,238

 
$
45,342

Amortized cost of held-to-maturity mortgage-backed securities
 
 
 
Fixed-rate pass-through securities
637

 
693

Collateralized mortgage obligations
 
 
 
Fixed-rate
1,278

 
1,329

Variable-rate
5,971,323

 
6,427,675

 
5,973,238

 
6,429,697

Total
$
6,016,476

 
$
6,475,039


All of the Bank’s variable-rate collateralized mortgage obligations classified as held-to-maturity securities have coupon rates that are subject to interest rate caps, none of which were reached during 2011 or the three months ended March 31, 2012.


16


Note 5—Advances
     Redemption Terms. At both March 31, 2012 and December 31, 2011, the Bank had advances outstanding at interest rates ranging from 0.04 percent to 8.61 percent, as summarized below (in thousands).

 
 
March 31, 2012
 
December 31, 2011
Contractual Maturity
 
Amount
 
Weighted Average Interest Rate
 
Amount
 
Weighted Average Interest Rate
Overdrawn demand deposit accounts
 
$
775

 
4.05
%
 
$
9,835

 
%
 
 
 
 
 
 
 
 
 
Due in one year or less
 
6,806,399