10-Q 1 a331201810q.htm 10-Q Document

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, 2018
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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated
filer o
 
Accelerated
filer o
 
Non-accelerated
filer þ
 
Smaller reporting
company o
 
Emerging growth
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
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
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, 2018, the registrant had outstanding 24,672,863 shares of its Class B Capital Stock, $100 par value per share.
 



FEDERAL HOME LOAN BANK OF DALLAS
TABLE OF CONTENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 EX-10.1
 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,
2018
 
December 31,
2017
ASSETS
 

 
 

Cash and due from banks
$
39,488

 
$
87,965

Interest-bearing deposits
325

 
299

Securities purchased under agreements to resell (Note 11)
4,950,000

 
6,700,000

Federal funds sold
6,675,000

 
7,780,000

Trading securities (Note 3)
99,852

 
114,230

Available-for-sale securities (Notes 4, 11 and 16) ($763,433 and $747,230 pledged at March 31, 2018 and December 31, 2017, respectively, which could be rehypothecated)
14,981,003

 
14,402,398

Held-to-maturity securities (a) (Note 5)
1,864,910

 
1,944,537

Advances (Notes 6 and 8)
35,303,746

 
36,460,524

Mortgage loans held for portfolio, net of allowance for credit losses of $271 at both
March 31, 2018 and December 31, 2017, respectively (Notes 7 and 8)
1,019,382

 
877,852

Accrued interest receivable
116,884

 
110,957

Premises and equipment, net
16,823

 
17,099

Derivative assets (Notes 11 and 12)
5,354

 
17,225

Other assets (including $13,050 of securities held at fair value at March 31, 2018)
27,065

 
11,215

TOTAL ASSETS
$
65,099,832

 
$
68,524,301

 
 
 
 
LIABILITIES AND CAPITAL
 
 
 
Deposits
 
 
 
Interest-bearing
$
886,577

 
$
843,690

Non-interest bearing
19

 
19

Total deposits
886,596

 
843,709

Consolidated obligations (Note 9)
 
 
 
Discount notes
26,641,297

 
32,510,758

Bonds
33,502,435

 
31,376,858

Total consolidated obligations
60,143,732

 
63,887,616

 
 
 
 
Mandatorily redeemable capital stock
832

 
5,941

Accrued interest payable
77,563

 
69,756

Affordable Housing Program (Note 10)
32,174

 
31,246

Derivative liabilities (Notes 11 and 12)
35,237

 
10,960

Other liabilities (Note 4)
324,693

 
195,047

Total liabilities
61,500,827

 
65,044,275

 
 
 
 
Commitments and contingencies (Notes 8 and 16)


 


 
 
 
 
CAPITAL (Note 13)
 
 
 
Capital stock
 
 
 
Capital stock — Class B-1 putable ($100 par value) issued and outstanding shares: 9,306,621 and 8,534,625 shares at March 31, 2018 and December 31, 2017, respectively
930,662

 
853,462

Capital stock — Class B-2 putable ($100 par value) issued and outstanding shares: 14,202,806 and 14,644,748 shares at March 31, 2018 and December 31, 2017, respectively
1,420,281

 
1,464,475

Total Class B Capital Stock
2,350,943

 
2,317,937

Retained earnings
 
 
 
Unrestricted
855,150

 
832,826

Restricted
117,285

 
108,937

Total retained earnings
972,435

 
941,763

Accumulated other comprehensive income (Note 19)
275,627

 
220,326

Total capital
3,599,005

 
3,480,026

TOTAL LIABILITIES AND CAPITAL
$
65,099,832

 
$
68,524,301

_____________________________
(a) 
Fair values: $1,889,320 and $1,971,038 at March 31, 2018 and December 31, 2017, 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,
 
 
2018
 
2017
INTEREST INCOME
 
 
 
 
Advances
 
$
155,345

 
$
75,413

Prepayment fees on advances, net
 
1,981

 
216

Interest-bearing deposits
 
769

 
388

Securities purchased under agreements to resell
 
7,179

 
198

Federal funds sold
 
28,988

 
12,662

Trading securities
 
569

 
568

Available-for-sale securities
 
79,958

 
49,042

Held-to-maturity securities
 
10,232

 
8,270

Mortgage loans held for portfolio
 
8,622

 
1,434

Total interest income
 
293,643

 
148,191

INTEREST EXPENSE
 
 
 
 
Consolidated obligations
 
 
 
 
Bonds
 
128,145

 
61,663

Discount notes
 
94,536

 
32,099

Deposits
 
2,785

 
1,625

Mandatorily redeemable capital stock
 
25

 
8

Other borrowings
 
59

 
50

Total interest expense
 
225,550

 
95,445

NET INTEREST INCOME
 
68,093

 
52,746

 
 
 
 
 
OTHER INCOME (LOSS)
 
 
 
 
Net gains (losses) on trading securities
 
(2,348
)
 
879

Net gains on derivatives and hedging activities
 
1,823

 
4,827

Net gains on other assets carried at fair value
 
13

 

Realized gains on sales of available-for-sale securities
 

 
670

Letter of credit fees
 
2,146

 
1,648

Other, net
 
640

 
533

Total other income
 
2,274

 
8,557

OTHER EXPENSE
 
 
 
 
Compensation and benefits
 
12,552

 
13,686

Other operating expenses
 
7,849

 
5,438

Finance Agency
 
963

 
886

Office of Finance
 
930

 
964

Discretionary grants and donations
 
1,388

 
984

Derivative clearing fees
 
309

 
302

Total other expense
 
23,991

 
22,260

INCOME BEFORE ASSESSMENTS
 
46,376

 
39,043

Affordable Housing Program assessment
 
4,640

 
3,905

NET INCOME
 
$
41,736

 
$
35,138

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,
 
 
2018
 
2017
NET INCOME
 
$
41,736

 
$
35,138

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
 
40,399

 
72,015

Reclassification adjustment for realized gains on sales of available-for-sale securities included in net income
 

 
(670
)
Unrealized gains (losses) on cash flow hedges
 
13,840

 
(147
)
Reclassification adjustment for losses on cash flow hedges included in net income
 
310

 
800

Accretion of non-credit portion of other-than-temporary impairment losses to the carrying value of held-to-maturity securities
 
773

 
993

Postretirement benefit plan
 
 
 
 
Amortization of prior service cost included in net periodic benefit credit
 
5

 
5

Amortization of net actuarial gain included in net periodic benefit credit
 
(26
)
 
(26
)
Total other comprehensive income
 
55,301

 
72,970

TOTAL COMPREHENSIVE INCOME
 
$
97,037

 
$
108,108


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, 2018 AND 2017
(Unaudited, in thousands)

 
Capital Stock
Class B-1 - Putable
(Membership/Excess)
 
Capital Stock
Class B-2 - Putable
(Activity)
 
 
 
 
 
 
 
Accumulated
 Other
Comprehensive
 Income (Loss)
 
 
 
 
 
Retained Earnings
 
 
Total
 Capital
 
Shares
 
Par Value
 
Shares
 
Par Value
 
Unrestricted
 
Restricted
 
Total
 
 
BALANCE, JANUARY 1, 2018
8,534

 
$
853,462

 
14,645

 
$
1,464,475

 
$
832,826

 
$
108,937

 
$
941,763

 
$
220,326

 
$
3,480,026

Net transfers of shares between Class B-1 and Class B-2 Stock
5,245

 
524,463

 
(5,245
)
 
(524,463
)
 

 

 

 

 

Proceeds from sale of capital stock
7

 
736

 
4,803

 
480,269

 

 

 

 

 
481,005

Repurchase/redemption of capital stock
(4,586
)
 
(458,612
)
 

 

 

 

 

 

 
(458,612
)
Shares reclassified to mandatorily redeemable capital stock
(3
)
 
(386
)
 

 


 

 

 

 

 
(386
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 

 
33,388

 
8,348

 
41,736

 

 
41,736

Other comprehensive income

 

 

 

 

 

 

 
55,301

 
55,301

Dividends on capital stock (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 

 

 
(65
)
 

 
(65
)
 

 
(65
)
Stock
110

 
10,999

 

 

 
(10,999
)
 

 
(10,999
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, MARCH 31, 2018
9,307

 
$
930,662

 
14,203

 
$
1,420,281

 
$
855,150

 
$
117,285

 
$
972,435

 
$
275,627

 
$
3,599,005

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, JANUARY 1, 2017
6,904

 
$
690,411

 
12,397

 
$
1,239,737

 
$
745,104

 
$
78,880

 
$
823,984

 
$
63,210

 
$
2,817,342

Net transfers of shares between Class B-1 and Class B-2 Stock
3,525

 
352,502

 
(3,525
)
 
(352,502
)
 

 

 

 

 

Proceeds from sale of capital stock
1

 
106

 
2,957

 
295,701

 

 

 

 

 
295,807

Repurchase/redemption of capital stock
(2,799
)
 
(279,889
)
 

 

 

 

 

 

 
(279,889
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net income

 

 

 

 
28,110

 
7,028

 
35,138

 

 
35,138

Other comprehensive income

 

 

 

 

 

 

 
72,970

 
72,970

Dividends on capital stock (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 

 

 
(66
)
 

 
(66
)
 

 
(66
)
Mandatorily redeemable capital stock

 

 

 

 
(2
)
 

 
(2
)
 

 
(2
)
Stock
60

 
6,012

 

 

 
(6,012
)
 

 
(6,012
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, MARCH 31, 2017
7,691

 
$
769,142

 
11,829

 
$
1,182,936

 
$
767,134

 
$
85,908

 
$
853,042

 
$
136,180

 
$
2,941,300


(a) Dividends were paid at annualized rates of 1.33 percent and 2.33 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the first quarter of 2018.

(b) Dividends were paid at annualized rates of 0.599 percent and 1.599 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the first quarter of 2017.

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,
 
2018
 
2017
OPERATING ACTIVITIES
 
 
 
Net income
$
41,736

 
$
35,138

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
17,524

 
15,915

Concessions on consolidated obligations
1,113

 
856

Premises, equipment and computer software costs
919

 
868

Non-cash interest on mandatorily redeemable capital stock
22

 
5

Gains on sales of available-for-sale securities

 
(670
)
Net gains on other assets carried at fair value
(13
)
 

Net decrease (increase) in trading securities
2,348

 
(768
)
Loss due to changes in net fair value adjustment on derivative and hedging activities
169,357

 
13,974

Increase in accrued interest receivable
(6,034
)
 
(13,440
)
Decrease (increase) in other assets
(3,371
)
 
3,187

Increase in Affordable Housing Program (AHP) liability
928

 
1,058

Increase in accrued interest payable
7,790

 
11,412

Decrease in other liabilities
(9,754
)
 
(7,025
)
Total adjustments
180,829

 
25,372

Net cash provided by operating activities
222,565

 
60,510

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Net decrease (increase) in interest-bearing deposits, including swap collateral pledged
(60,218
)
 
27,995

Net decrease in securities purchased under agreements to resell
1,750,000

 
2,350,000

Net decrease (increase) in federal funds sold
1,105,000

 
(2,698,000
)
Decrease in loan to other FHLBank

 
290,000

Purchases of available-for-sale securities
(766,072
)
 
(1,090,625
)
Proceeds from maturities of available-for-sale securities
33,102

 
79,609

Proceeds from sales of available-for-sale securities

 
169,257

Proceeds from maturities of held-to-maturity securities
80,732

 
117,202

Principal collected on advances
189,611,459

 
145,099,228

Advances made
(188,490,335
)
 
(143,665,419
)
Principal collected on mortgage loans held for portfolio
16,703

 
3,566

Purchases of mortgage loans held for portfolio
(158,773
)
 
(57,788
)
Purchases of premises, equipment and computer software
(1,002
)
 
(1,328
)
Net cash provided by investing activities
3,120,596

 
623,697

 
 
 
 

5


 
For the Three Months Ended
 
March 31,
 
2018
 
2017
FINANCING ACTIVITIES
 
 
 
Net increase in deposits, including swap collateral held
153,533

 
400,068

Net receipts (payments) on derivative contracts with financing elements
50,608

 
(16,547
)
Net proceeds from issuance of consolidated obligations
 

 
 
Discount notes
80,172,581

 
73,551,899

Bonds
7,069,552

 
5,598,723

Debt issuance costs
(1,334
)
 
(890
)
Payments for maturing and retiring consolidated obligations
 
 
 
Discount notes
(86,049,099
)
 
(77,710,954
)
Bonds
(4,804,290
)
 
(2,457,470
)
Proceeds from issuance of capital stock
481,005

 
295,807

Payments for redemption of mandatorily redeemable capital stock
(5,517
)
 
(560
)
Payments for repurchase/redemption of capital stock
(458,612
)
 
(279,889
)
Cash dividends paid
(65
)
 
(66
)
Net cash used in financing activities
(3,391,638
)
 
(619,879
)
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(48,477
)
 
64,328

Cash and cash equivalents at beginning of the period
87,965

 
27,696

Cash and cash equivalents at end of the period
$
39,488

 
$
92,024

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest paid
$
211,069

 
$
85,909

AHP payments, net
$
3,712

 
$
2,847

Stock dividends issued
$
10,999

 
$
6,012

Dividends paid through issuance of mandatorily redeemable capital stock
$

 
$
2

Variation margin recharacterized as settlement payments on derivative contracts (Note 11)
$
250,468

 
$
72,053

Net capital stock reclassified to mandatorily redeemable capital stock
$
386

 
$


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, 2017. 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, 2017 filed with the SEC on March 22, 2018 (the “2017 10-K”). The notes to the interim financial statements update and/or highlight significant changes to the notes included in the 2017 10-K.
The Bank is one of 11 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 housing government-sponsored enterprises ("GSEs"), including the FHLBanks and the Office of Finance.
     Use of Estimates and Assumptions. 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 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
Revenue from Contracts with Customers. On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers" ("ASU 2014-09"), which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In addition, ASU 2014-09 amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer. ASU 2014-09 applies to all contracts with customers except those that are within the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, and lease contracts. The guidance in ASU 2014-09 was effective for fiscal years, and interim periods within those years, beginning after December 15, 2016 (January 1, 2017 for the Bank). Early application was not permitted. On August 12, 2015, the FASB issued ASU 2015-14 "Deferral of Effective Date," which deferred the effective date of ASU 2014-09 by one year. Earlier application was permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Bank adopted ASU 2014-09 effective January 1, 2018. The adoption of this guidance did not have a material impact on the Bank's results of operations or financial condition.
Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued ASU 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"), which makes targeted improvements to existing U.S. GAAP by: (i) requiring certain equity investments to be measured at fair value with changes in fair value recognized in earnings, (ii) simplifying the impairment assessment of equity investments without readily determinable fair values, (iii) requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (iv) requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the statement of condition or in the accompanying notes to the financial statements, (v) eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities, (vi) eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the statement of condition, (vii) requiring a reporting organization to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has

7


elected to measure the liability at fair value in accordance with the fair value option for financial instruments, and (viii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. For public business entities, the guidance in ASU 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption was permitted for certain provisions. The Bank adopted ASU 2016-01 effective January 1, 2018. In conjunction with the adoption of ASU 2016-01, the Bank reclassified $12,082,000 of marketable equity securities (which consist solely of mutual fund investments associated with the Bank's non-qualified deferred compensation plans) from trading securities to other assets on January 1, 2018. Other than this reclassification, the adoption of ASU 2016-01 did not have any impact on the Bank's results of operations or financial condition.
Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which clarifies the guidance for classifying certain cash receipts and cash payments in the statement of cash flows. The guidance is intended to reduce existing diversity in practice regarding eight specific cash flow presentation issues. For public business entities, the guidance in ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. The guidance is to be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied as if the change was made prospectively as of the earliest date practicable. The Bank adopted ASU 2016-15 on January 1, 2018. The adoption of this guidance did not have any impact on the Bank's statement of cash flows, nor did it have any impact on the Bank's results of operations or financial condition.
Restricted Cash. On November 17, 2016, the FASB issued ASU 2016-18, "Restricted Cash" ("ASU 2016-18"), which clarifies the guidance for classifying and presenting certain cash transfers, cash receipts and cash payments in the statement of cash flows. The guidance is intended to reduce existing diversity in practice regarding restricted cash and restricted cash equivalents. For public business entities, the guidance in ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. The guidance is to be applied using a retrospective transition method to each period presented. The adoption of ASU 2016-18 on January 1, 2018 did not have any impact on the Bank's statement of cash flows, nor did it have any impact on the Bank's results of operations or financial condition.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On March 10, 2017, the FASB issued ASU 2017-07 "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 requires an employer to disaggregate the service cost component from the other components of net periodic pension cost and net periodic postretirement benefit cost (net benefit cost). ASU 2017-07 requires an employer to report the service cost component in the same income statement line item as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component. Further, ASU 2017-07 allows only the service cost component of net benefit cost to be eligible for capitalization. For public business entities, the guidance in ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The amendments in ASU 2017-07 are to be applied retrospectively for the presentation of the service cost component and the other components of net benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net benefit cost in assets. Subsequent to the adoption of ASU 2017-07 on January 1, 2018, the Bank continues to report the service cost component of its net periodic postretirement benefit cost in compensation and benefits expense. On and after January 1, 2018, the Bank reports the other components of net periodic postretirement benefit cost (which in aggregate was a credit of $16,000 for the three months ended March 31, 2018) in "other, net" in the other income (loss) section of the statement of income. Because the components of the Bank's net periodic postretirement benefit cost other than the service cost component were insignificant for the three months ended March 31, 2017 (see Note 14), such amounts were not reclassified and are reported in compensation and benefits expense for that period. The adoption of ASU 2017-07 did not have any impact on the Bank's financial condition.

Note 3—Trading Securities
Trading securities as of March 31, 2018 and December 31, 2017 were as follows (in thousands):
 
March 31, 2018
 
December 31, 2017
U.S. Treasury Note
$
99,852

 
$
102,148

Other

 
12,082

Total
$
99,852

 
$
114,230


8


Other trading securities consisted solely of mutual fund investments associated with the Bank's non-qualified deferred compensation plans. As discussed in Note 2, these investments were reclassified to other assets effective January 1, 2018.

Note 4—Available-for-Sale Securities
 Major Security Types. Available-for-sale securities as of March 31, 2018 were as follows (in thousands):
 
Amortized
Cost
 
Gross
 Unrealized
 Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
459,901

 
$
9,234

 
$

 
$
469,135

GSE obligations
5,782,666

 
107,781

 
111

 
5,890,336

Other
171,887

 
1,129

 

 
173,016

 
6,414,454

 
118,144

 
111

 
6,532,487

GSE commercial mortgage-backed securities
8,313,925

 
140,812

 
6,221

 
8,448,516

Total
$
14,728,379

 
$
258,956

 
$
6,332

 
$
14,981,003

Included in the table above are GSE commercial mortgage-backed securities ("MBS") that were purchased but which had not yet settled as of March 31, 2018. The aggregate amount due of $297,359,000 is included in other liabilities on the statement of condition at that date.
Available-for-sale securities as of December 31, 2017 were as follows (in thousands):
 
Amortized
Cost
 
Gross
 Unrealized
 Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
470,436

 
$
8,602

 
$

 
$
479,038

GSE obligations
5,911,841

 
90,938

 
107

 
6,002,672

Other
173,920

 
975

 

 
174,895

 
6,556,197

 
100,515

 
107

 
6,656,605

GSE commercial MBS
7,633,976

 
113,073

 
1,256

 
7,745,793

Total
$
14,190,173

 
$
213,588

 
$
1,363

 
$
14,402,398

Included in the table above are GSE commercial MBS that were purchased but which had not yet settled as of December 31, 2017. The aggregate amount due of $157,980,000 is included in other liabilities on the statement of condition at that date.
Other debentures are comprised of securities issued by the Private Export Funding Corporation ("PEFCO"). These 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, 2018. 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
GSE debentures
1

 
$
49,653

 
$
111

 

 
$

 
$

 
1

 
$
49,653

 
$
111

GSE commercial MBS
34

 
1,048,959

 
6,198

 
2

 
339

 
23

 
36

 
1,049,298

 
6,221

Total
35

 
$
1,098,612

 
$
6,309

 
2

 
$
339

 
$
23

 
37

 
$
1,098,951

 
$
6,332



9


The following table summarizes (in thousands, except number of positions) the available-for-sale securities with unrealized losses as of December 31, 2017. 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
GSE debentures
1

 
$
50,374

 
$
107

 

 
$

 
$

 
1

 
$
50,374

 
$
107

GSE commercial MBS
8

 
163,594

 
593

 
16

 
299,511

 
663

 
24

 
463,105

 
1,256

Total
9

 
$
213,968

 
$
700

 
16

 
$
299,511

 
$
663

 
25

 
$
513,479

 
$
1,363


At March 31, 2018, the gross unrealized losses on the Bank’s available-for-sale securities were $6,332,000. All of the Bank's available-for-sale securities are either guaranteed by the U.S. government, issued by GSEs, or fully secured by collateral that is guaranteed by the U.S government. As of March 31, 2018, the U.S. government and the issuers of the Bank’s holdings of GSE debentures and GSE MBS were rated triple-A by Moody’s Investors Service (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”) and AA+ by S&P Global Ratings (“S&P”). The Bank's holdings of PEFCO debentures are rated triple-A by Moody's and Fitch, and are not rated by S&P. Based upon the Bank's assessment of the creditworthiness of the issuer of the GSE debenture that was in an unrealized loss position at March 31, 2018 and the credit ratings assigned by each of the nationally recognized statistical rating organizations (“NRSROs”), the Bank expects that this debenture would not be settled at an amount less than the Bank's amortized cost basis in the investment. In addition, based upon the Bank's assessment of the strength of the GSEs' guarantees of the Bank's holdings of GSE commercial MBS and the credit ratings assigned by each of the NRSROs, the Bank expects that its holdings of GSE commercial MBS that were in an unrealized loss position at March 31, 2018 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, 2018.
Redemption Terms. The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at March 31, 2018 and December 31, 2017 are presented below (in thousands).
 
 
 
March 31, 2018
 
December 31, 2017
 
Maturity
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
 
Debentures
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
491,140

 
$
492,282

 
$
238,017

 
$
238,292

 
Due after one year through five years
 
2,454,919

 
2,488,764

 
2,756,755

 
2,786,327

 
Due after five years through ten years
 
3,332,159

 
3,411,179

 
3,341,470

 
3,407,595

 
Due after ten years
 
136,236

 
140,262

 
219,955

 
224,391

 
 
 
6,414,454

 
6,532,487

 
6,556,197

 
6,656,605

 
GSE commercial MBS
 
8,313,925

 
8,448,516

 
7,633,976

 
7,745,793

 
Total
 
$
14,728,379

 
$
14,981,003

 
$
14,190,173

 
$
14,402,398

Interest Rate Payment Terms. At March 31, 2018 and December 31, 2017, all of the Bank's available-for-sale securities were fixed rate securities which were swapped to a variable rate.
Sales of Securities. There were no sales of available-for-sale securities during the three months ended March 31, 2018. During the three months ended March 31, 2017, the Bank sold an available-for-sale security with an amortized cost (determined by the specific identification method) of $168,587,000. Proceeds from the sale were $169,257,000, resulting in a realized gain of $670,000.



10


Note 5—Held-to-Maturity Securities
     Major Security Types. Held-to-maturity securities as of March 31, 2018 were as follows (in thousands):
 
Amortized
Cost
 
OTTI Recorded in
Accumulated Other
Comprehensive
Income
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
9,411

 
$

 
$
9,411

 
$
10

 
$
1

 
$
9,420

State housing agency obligations
160,000

 

 
160,000

 
250

 
956

 
159,294

 
169,411

 

 
169,411

 
260

 
957

 
168,714

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed residential MBS
1,759

 

 
1,759

 
4

 

 
1,763

GSE residential MBS
1,582,294

 

 
1,582,294

 
11,686

 
1,704

 
1,592,276

Non-agency residential MBS
89,009

 
12,828

 
76,181

 
15,621

 
450

 
91,352

GSE commercial MBS
35,265

 

 
35,265

 

 
50

 
35,215

 
1,708,327

 
12,828

 
1,695,499

 
27,311

 
2,204

 
1,720,606

Total
$
1,877,738

 
$
12,828

 
$
1,864,910

 
$
27,571

 
$
3,161

 
$
1,889,320


Held-to-maturity securities as of December 31, 2017 were as follows (in thousands):
 
Amortized
Cost
 
OTTI Recorded in
 Accumulated Other
Comprehensive
Income
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
10,774

 
$

 
$
10,774

 
$
7

 
$
20

 
$
10,761

State housing agency obligations
160,000

 

 
160,000

 
537

 
304

 
160,233

 
170,774

 

 
170,774

 
544

 
324

 
170,994

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed residential MBS
1,909

 

 
1,909

 
4

 

 
1,913

GSE residential MBS
1,655,625

 

 
1,655,625

 
12,336

 
1,630

 
1,666,331

Non-agency residential MBS
94,565

 
13,601

 
80,964

 
16,198

 
629

 
96,533

GSE commercial MBS
35,265

 

 
35,265

 
2

 

 
35,267

 
1,787,364

 
13,601

 
1,773,763

 
28,540

 
2,259

 
1,800,044

Total
$
1,958,138

 
$
13,601

 
$
1,944,537

 
$
29,084

 
$
2,583

 
$
1,971,038



11


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of March 31, 2018. The unrealized losses include other-than-temporary impairments recorded in accumulated other comprehensive income ("AOCI") and gross unrecognized holding losses (or, in the case of the Bank's holdings of non-agency residential MBS, gross unrecognized holding gains) 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

 
$
249

 
$
1

 

 
$

 
$

 
1

 
$
249

 
$
1

State housing agency obligations
1

 
34,045

 
956

 

 

 

 
1

 
34,045

 
956

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential MBS
11

 
129,231

 
219

 
20

 
403,804

 
1,485

 
31

 
533,035

 
1,704

Non-agency residential MBS

 

 

 
13

 
45,436

 
1,522

 
13

 
45,436

 
1,522

GSE commercial MBS
1

 
35,215

 
50

 

 

 

 
1

 
35,215

 
50

Total
14

 
$
198,740

 
$
1,226

 
33

 
$
449,240

 
$
3,007

 
47

 
$
647,980

 
$
4,233


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of December 31, 2017. The unrealized losses include other-than-temporary impairments recorded in AOCI and gross unrecognized holding losses (or, in the case of the Bank's holdings of non-agency residential MBS, gross unrecognized holding gains) 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

 
$
4,834

 
$
20

 

 
$

 
$

 
1

 
$
4,834

 
$
20

State housing agency obligations
1

 
34,696

 
304

 

 

 

 
1

 
34,696

 
304

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential MBS
16

 
146,146

 
177

 
17

 
415,080

 
1,453

 
33

 
561,226

 
1,630

Non-agency residential MBS

 

 

 
13

 
48,403

 
1,980

 
13

 
48,403

 
1,980

Total
18

 
$
185,676

 
$
501

 
30

 
$
463,483

 
$
3,433

 
48

 
$
649,159

 
$
3,934


At March 31, 2018, the gross unrealized losses on the Bank’s held-to-maturity securities were $4,233,000, of which $1,522,000 were attributable to its holdings of non-agency (i.e., private-label) residential MBS, $1,755,000 were attributable to securities that are either guaranteed by the U.S. government or issued and guaranteed by GSEs and $956,000 were attributable to a security issued by a state housing agency.
As of March 31, 2018, the U.S. government and the issuers of the Bank’s holdings of GSE MBS 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 guaranty, the Bank expects that the U.S. government-guaranteed obligation that was in an unrealized loss position at March 31, 2018 would not be settled at an amount less than the Bank's amortized cost basis in this investment. In addition, based upon the credit ratings assigned by the NRSROs and the Bank's assessment of the strength of the GSEs’ guarantees of the Bank’s holdings of GSE MBS, the Bank expects that its holdings of GSE MBS that were in an unrealized loss position at March 31, 2018 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Finally, based upon the Bank's assessment of the creditworthiness of the state housing agency and the triple-A credit ratings assigned by the NRSROs, the Bank expects that the state housing agency debenture that was in an unrealized loss position at March 31, 2018 would not be settled at an amount less than the Bank’s amortized cost basis in this investment. 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, 2018.

12


The deterioration in the U.S. housing markets that occurred primarily during the period from 2007 through 2011, as reflected during that period 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”), generally increased the risk that the Bank may not ultimately recover the entire cost bases of some of its non-agency RMBS. However, based upon its analysis of the securities in this portfolio, the Bank believes that the unrealized losses as of March 31, 2018 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 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 23 non-agency RMBS holdings are likely to be recovered, the Bank performed a cash flow analysis for each security as of March 31, 2018 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, 2018 assumed changes in home prices ranging from declines of 7 percent to increases of 12 percent over the 12-month period beginning January 1, 2018. For the vast majority of markets, the changes were projected to range from increases of 1 percent to 6 percent. Thereafter, home price changes for each market were projected to return (at varying rates and over varying transition periods based on historical housing price patterns) to their long-term historical equilibrium levels. Following these transition periods, the constant long-term annual rates of appreciation for the vast majority of markets were projected to range between 2 percent and 5 percent.
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 it is likely that it will fully recover the remaining amortized cost bases of all of its non-agency RMBS. 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, none of the Bank's non-agency RMBS were deemed to be other-than-temporarily impaired at March 31, 2018.
During the year ended December 31, 2016, one of the Bank's non-agency RMBS was determined to be other-than-temporarily impaired. In addition, 14 of the Bank's non-agency RMBS were determined to be other-than-temporarily impaired in periods prior to 2013.

13


The following table presents a rollforward for the three months ended March 31, 2018 and 2017 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,
 
2018
 
2017
Balance of credit losses, beginning of period
$
9,443

 
$
10,515

Increases in cash flows expected to be collected (accreted as interest income over the remaining lives of the applicable securities)
(240
)
 
(270
)
Balance of credit losses, end of period
9,203

 
10,245

Cumulative principal shortfalls on securities held at end of period
(2,048
)
 
(1,832
)
Cumulative amortization of the time value of credit losses at end of period
636

 
474

Credit losses included in the amortized cost bases of other-than-temporarily impaired securities at end of period
$
7,791

 
$
8,887

For a discussion regarding the Bank's assessment of the impact of Hurricanes Harvey and Irma on the Bank's non-agency RMBS holdings, see Note 16 - Commitments and Contingencies.
Redemption Terms. The amortized cost, carrying value and estimated fair value of held-to-maturity securities by contractual maturity at March 31, 2018 and December 31, 2017 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, 2018
 
December 31, 2017
Maturity
 
Amortized Cost
 
Carrying Value
 
Estimated Fair Value
 
Amortized Cost
 
Carrying Value
 
Estimated Fair Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
562

 
$
562

 
$
562

 
$
1,425

 
$
1,425

 
$
1,427

Due after one year through five years
 
3,996

 
3,996

 
3,998

 
4,495

 
4,495

 
4,500

Due after five years through ten years
 
4,853

 
4,853

 
4,860

 
4,854

 
4,854

 
4,834

Due after ten years
 
160,000

 
160,000

 
159,294

 
160,000

 
160,000

 
160,233

 
 
169,411

 
169,411

 
168,714

 
170,774

 
170,774

 
170,994

Mortgage-backed securities
 
1,708,327

 
1,695,499

 
1,720,606

 
1,787,364

 
1,773,763

 
1,800,044

Total
 
$
1,877,738

 
$
1,864,910

 
$
1,889,320

 
$
1,958,138

 
$
1,944,537

 
$
1,971,038


The amortized cost of the Bank’s mortgage-backed securities classified as held-to-maturity includes net purchase discounts of $4,760,000 and $4,895,000 at March 31, 2018 and December 31, 2017, respectively.
     Interest Rate Payment Terms. The following table provides interest rate payment terms for investment securities classified as held-to-maturity at March 31, 2018 and December 31, 2017 (in thousands):
 
March 31, 2018
 
December 31, 2017
Amortized cost of variable-rate held-to-maturity securities other than MBS
$
169,411

 
$
170,774

Amortized cost of held-to-maturity MBS
 
 
 
Fixed-rate pass-through securities
110

 
117

Collateralized mortgage obligations
 
 
 
Fixed-rate
194

 
220

Variable-rate
1,672,758

 
1,751,762

Variable-rate multi-family MBS
35,265

 
35,265

 
1,708,327

 
1,787,364

Total
$
1,877,738

 
$
1,958,138


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 2017 or the three months ended March 31, 2018.
Sales of Securities. There were no sales of held-to-maturity securities during the three months ended March 31, 2018 or 2017.

14



Note 6—Advances
     Redemption Terms. At both March 31, 2018 and December 31, 2017, the Bank had advances outstanding at interest rates ranging from 0.54 percent to 8.27 percent, as summarized below (dollars in thousands).
 
 
March 31, 2018
 
December 31, 2017
Contractual Maturity
 
Amount
 
Weighted Average
Interest Rate
 
Amount
 
Weighted Average
Interest Rate
Overdrawn demand deposit accounts
 
$
2,960

 
2.02
%
 
$
4,826

 
1.55
%
 
 
 
 
 
 
 
 
 
Due in one year or less
 
17,837,656

 
1.82

 
23,695,214

 
1.41

Due after one year through two years
 
1,984,996

 
1.84

 
1,735,507

 
1.64

Due after two years through three years
 
1,873,805

 
2.12

 
1,634,252

 
1.87

Due after three years through four years
 
505,303

 
2.05

 
639,113

 
1.94

Due after four years through five years
 
1,072,892

 
1.96

 
1,064,930

 
1.75

Due after five years
 
10,753,003

 
1.84

 
6,318,785

 
1.49

Amortizing advances
 
1,316,972

 
2.65

 
1,376,084

 
2.66

Total par value
 
35,347,587

 
1.88
%
 
36,468,711

 
1.52
%
 
 
 
 
 
 
 
 
 
Premiums
 
20

 
 
 
23

 
 
Deferred net prepayment fees
 
(10,596
)
 
 
 
(11,271
)
 
 
Commitment fees
 
(114
)
 
 
 
(116
)
 
 
Hedging adjustments
 
(33,151
)
 
 
 
3,177

 
 
Total
 
$
35,303,746

 
 
 
$
36,460,524

 
 

Amortizing advances require repayment according to predetermined amortization schedules.
The Bank offers advances to members that may be prepaid on specified dates without the member incurring prepayment or termination fees (prepayable and callable advances). The prepayment of other advances requires the payment of a fee to the Bank (prepayment fee) if necessary to make the Bank financially indifferent to the prepayment of the advance. At March 31, 2018 and December 31, 2017, the Bank had aggregate prepayable and callable advances totaling $12,681,525,000 and $9,684,619,000, respectively.
The following table summarizes advances outstanding at March 31, 2018 and December 31, 2017, by the earlier of contractual maturity or next call date, or the first date on which prepayable advances can be repaid without a prepayment fee (in thousands):
Contractual Maturity or Next Call Date
 
March 31, 2018
 
December 31, 2017
Overdrawn demand deposit accounts
 
$
2,960

 
$
4,826

 
 
 
 
 
Due in one year or less
 
28,692,467

 
30,795,524

Due after one year through two years
 
1,687,396

 
1,335,427

Due after two years through three years
 
1,163,105

 
941,452

Due after three years through four years
 
373,683

 
490,913

Due after four years through five years
 
562,342

 
538,660

Due after five years
 
1,548,662

 
985,825

Amortizing advances
 
1,316,972

 
1,376,084

Total par value
 
$
35,347,587

 
$
36,468,711


The Bank also offers putable advances. With a putable advance, the Bank purchases a put option from the member that allows the Bank to terminate the fixed-rate advance on specified dates and offer, subject to certain conditions, replacement

15


funding at prevailing market rates. At March 31, 2018 and December 31, 2017, the Bank had putable advances outstanding totaling $1,551,500,000 and $1,113,500,000, respectively.

The following table summarizes advances outstanding at March 31, 2018 and December 31, 2017, by the earlier of contractual maturity or next possible put date (in thousands):
Contractual Maturity or Next Put Date
 
March 31, 2018
 
December 31, 2017
Overdrawn demand deposit accounts
 
$
2,960

 
$
4,826

 
 
 
 
 
Due in one year or less
 
18,908,656

 
24,269,214

Due after one year through two years
 
2,059,996

 
1,785,507

Due after two years through three years
 
1,888,305

 
1,641,752

Due after three years through four years
 
513,303

 
639,113

Due after four years through five years
 
1,037,892

 
1,029,930

Due after five years
 
9,619,503

 
5,722,285

Amortizing advances
 
1,316,972

 
1,376,084

Total par value
 
$
35,347,587

 
$
36,468,711

    
 Interest Rate Payment Terms. The following table provides interest rate payment terms for advances outstanding at March 31, 2018 and December 31, 2017 (in thousands):
 
March 31, 2018
 
December 31, 2017
Fixed-rate
 
 
 
Due in one year or less
$
15,621,931

 
$
20,628,666

Due after one year
6,354,458

 
5,543,774

Total fixed-rate
21,976,389

 
26,172,440

Variable-rate