UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172022
OR
o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-51404
FEDERAL HOME LOAN BANK OF INDIANAPOLIS
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Federally chartered corporationChartered Corporation | | 35-6001443 |
(State or other jurisdiction of incorporation or organization)incorporation) | | 35-6001443
(I.R.S.IRS employer identification number) |
| |
8250 Woodfield Crossing BoulevardBlvd. Indianapolis, IN | | 46240 |
(Address of principal executive offices) | | 46240
(Zip code) |
(317) 465-0200
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
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 for the past 90 days.
x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
|
| | | | | | | | | | | | | | | | |
o☐
| Large accelerated filer | o☐
| Accelerated filer | ☐ | Emerging growth company |
x | Non-accelerated filer (Do not check if a smaller reporting company)Filer | o☐
| Smaller reporting company |
| o Emerging growth company
| |
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 by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o☐ Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. | | | | | |
| Shares outstanding as of October 31, 2022 |
Class A Stock, par value $100 | — | |
Class B Stock, par value $100 | 24,066,625 | |
| | | | | | | | |
Table of Contents | Page |
| | Number |
| | |
| Special Note Regarding Forward-Looking Statements | as of October 31, 2017
|
|
Class B Stock, par value $100PART I. | 19,836,564FINANCIAL INFORMATION |
|
Item 1. | FINANCIAL STATEMENTS (unaudited) | |
| | |
Table of Contents | Page |
| | Number |
| Glossary of Terms | |
| Special Note Regarding Forward-Looking Statements | |
PART I. | FINANCIAL INFORMATION | |
Item 1. | FINANCIAL STATEMENTS (unaudited) | |
| | |
| Statements of Condition as of September 30, 20172022 and December 31, 20162021 | |
| | |
| Statements of Income for the Three and Nine Months Ended September 30, 20172022 and 20162021 | |
| | |
| Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 20172022 and 20162021 | |
| | |
| Statements of Capital for the Three and Nine Months Ended September 30, 20162022 and 20172021 | |
| | |
| Statements of Cash Flows for the Nine Months Ended September 30, 20172022 and 20162021 | |
| | |
| Notes to Financial Statements: | |
| Note 1 - Summary of Significant Accounting Policies | |
| Note 2 - Recently Adopted and Issued Accounting Guidance | |
| Note 3 - Available-for-Sale SecuritiesInvestments | |
| Note 4 - Held-to-Maturity SecuritiesAdvances | |
| Note 5 - Other-Than-Temporary Impairment | |
| Note 6 - Advances | |
| Note 7 - Mortgage Loans Held for Portfolio | |
| Note 8 - Allowance for Credit Losses | |
| Note 96 - Derivatives and Hedging Activities | |
| Note 107 - Consolidated Obligations | |
| Note 118 - Affordable Housing Program | |
| Note 129 - Capital | |
| Note 1310 - Accumulated Other Comprehensive Income (Loss) | |
| Note 1411 - Segment Information | |
| Note 1512 - Estimated Fair Values | |
| Note 1613 - Commitments and Contingencies | |
| Note 1714 - Related Party and Other Transactions | |
| | |
| Defined Terms | |
| | |
Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
| Presentation | |
| Executive Summary | |
| Selected Financial Data | |
| Results of Operations and Changes in Financial Condition | |
| Operating Segments | |
| Analysis of Financial Condition | |
| Liquidity and Capital Resources | |
| Off-Balance Sheet ArrangementsCritical Accounting Estimates | |
| Critical Accounting Policies and Estimates | |
| Recent Accounting and Regulatory Developments | |
| Risk Management | |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |
Item 4. | CONTROLS AND PROCEDURES | |
| | |
PART II. | OTHER INFORMATION | |
Item 1. | LEGAL PROCEEDINGS | |
Item 1A. | RISK FACTORS | |
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |
Item 3. | DEFAULTS UPON SENIOR SECURITIES | |
Item 4. | MINE SAFETY DISCLOSURES | |
Item 5. | OTHER INFORMATION | |
Item 6. | EXHIBITS | |
GLOSSARY OF TERMS
ABS: Asset-Backed Securities
Advance: Secured loan to members, former members or Housing Associates
AFS: Available-for-Sale
AHP: Affordable Housing Program
AMA: Acquired Member Assets
AOCI: Accumulated Other Comprehensive Income (Loss)
Bank Act: Federal Home Loan Bank Act of 1932, as amended
bps: basis points
CBSA: Core Based Statistical Areas, refer collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget
CDFI: Community Development Financial Institution
CE: Credit Enhancement
CEO: Chief Executive Officer
CFI: Community Financial Institution
CFPB: Consumer Financial Protection Bureau
CFTC: United States Commodity Futures Trading Commission
Clearinghouse: A United States Commodity Futures Trading Commission-registered derivatives clearing organization
CME: CME Clearing
CMO: Collateralized Mortgage Obligation
CO bond: Consolidated Obligation bond
DB plan: Pentegra Defined Benefit Pension Plan for Financial Institutions
DC plan: Pentegra Defined Contribution Retirement Savings Plan for Financial Institutions
Director: Director of the Federal Housing Finance Agency
Dodd-Frank Act: Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended
Exchange Act: Securities Exchange Act of 1934, as amended
Fannie Mae: Federal National Mortgage Association
FASB: Financial Accounting Standards Board
FDIC: Federal Deposit Insurance Corporation
FHA: Federal Housing Administration
FHLBank: A Federal Home Loan Bank
FHLBanks: The 11 Federal Home Loan Banks or a subset thereof
FHLBank System: The 11 Federal Home Loan Banks and the Office of Finance
FICO®: Fair Isaac Corporation, the creators of the FICO credit score
Final Membership Rule: Final Rule on FHLBank Membership issued by the Federal Housing Finance Agency effective February 19, 2016
Finance Agency: Federal Housing Finance Agency, successor to Finance Board
Finance Board: Federal Housing Finance Board, predecessor to Finance Agency
Fitch: Fitch Ratings, Inc.
FLA: First Loss Account
FOMC: Federal Open Market Committee
Form 8-K: Current Report on Form 8-K as filed with the SEC under the Exchange Act
Form 10-K: Annual Report on Form 10-K as filed with the SEC under the Exchange Act
Form 10-Q: Quarterly Report onAs used in this Form 10-Q, as filed with the SEC under the Exchange Act
FRB: Federal Reserve Board
Freddie Mac: Federal Home Loan Mortgage Corporation
GAAP: Generally Accepted Accounting Principles in the United States of America
GDP: Gross Domestic Product
Genworth: Genworth Mortgage Insurance Corporation
Ginnie Mae: Government National Mortgage Association
GLB Act: Gramm-Leach-Bliley Act of 1999, as amended
GSE: United States Government-Sponsored Enterprise
HERA: Housing and Economic Recovery Act of 2008, as amended
Housing Associate: Approved lender under Title II of the National Housing Act of 1934 that is either a government agency or is chartered under federal or state law with rights and powers similar to those of a corporation
HTM: Held-to-Maturity
HUD: United States Department of Housing and Urban Development
JCE Agreement: Joint Capital Enhancement Agreement, as amended, among the 11 FHLBanks
KESA: Key Employee Severance Agreement between our Bank and an NEO
LCH: LCH.Clearnet LLC
LIBOR: London Interbank Offered Rate
LRA: Lender Risk Account
LTV: Loan-to-Value
MAP-21: Moving Ahead for Progress in the 21st Century Act, enacted on July 6, 2012
MBS: Mortgage-Backed Securities
MCC: Master Commitment Contract
MDC: Mandatory Delivery Commitment
MGIC: Mortgage Guaranty Insurance Corporation
Moody's: Moody's Investor Services
MPF: Mortgage Partnership Finance®
MPP: Mortgage Purchase Program, including Original and Advantage unless indicated otherwise
MRCS: Mandatorily Redeemable Capital Stock
MVE: Market Value of Equity
NRSRO: Nationally Recognized Statistical Rating Organization
OCC: Office of the Comptroller of the Currency
OCI: Other Comprehensive Income (Loss)
OIS: Overnight Indexed Swap
ORERC: Other Real Estate-Related Collateral
OTTI: Other-Than-Temporary Impairment or -Temporarily Impaired (as the context indicates)
PFI: Participating Financial Institution
PMI: Primary Mortgage Insurance
REMIC: Real Estate Mortgage Investment Conduit
REO: Real Estate Owned
RHA: Rural Housing Service ofotherwise requires, the Department of Agriculture
RMBS: Residential Mortgage-Backed Securities
S&P: Standard & Poor's Rating Service
Safetyterms "we," "us," "our," and Soundness Act: Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended
SEC: Securities and Exchange Commission
Securities Act: Securities Act of 1933, as amended
SERP:"Bank" refer to the Federal Home Loan Bank of Indianapolis 2005 Supplemental Executive Retirement Planor its management. We use acronyms and a similar frozen planterms throughout that are defined herein or in the Defined Terms in Part I Item 1.
SMI: Supplemental Mortgage Insurance
TBA: To Be Announced
TDR: Troubled Debt Restructuring
TVA: Tennessee Valley Authority
UCC: Uniform Commercial Code
UPB: Unpaid Principal Balance
VA: Department of Veterans Affairs
VaR: Value at Risk
VIE: Variable Interest Entity
WAIR: Weighted-Average Interest Rate
Special Note Regarding Forward-Looking Statements
Statements in this Form 10-Q, including statements describing our objectives, projections, estimates or predictions, may be considered to be "forward-looking statements." These statements may use forward-looking terminology, such as "anticipates," "believes," "could," "estimates," "may," "should," "expects," "will," or their negatives or other variations on these terms. We caution that, by their nature, forward-looking statements involve risk or uncertainty and that actual results either could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
•economic and market conditions, including the timing and volume of market activity, inflation or deflation, changes in the value of global currencies, and changes in the financial condition of market participants;
•volatility of market prices, interest rates, and indices or the availability of suitable interest rate indices, or other factors, resulting from the effects of, and changes in, various monetary or fiscal policies and regulations, including those determined by the FRBFederal Reserve and the FDIC, or a decline in liquidity in the financial markets, that could affect the value of investments (including OTTI of private-label RMBS), or collateral we hold as security for the obligations of our members and counterparties;
•changes in demand for our advances and purchases of mortgage loans resulting from:
| |
◦ | changes in our members' deposit flows and credit demands; |
| |
◦ | federal or state regulatory developments impacting suitability or eligibility of membership classes; |
| |
◦ | membership changes, including, but not limited to, mergers, acquisitions and consolidations of charters; |
| |
◦ | changes in the general level of housing activity in the United States and particularly our district states of Indiana and Michigan, the level of refinancing activity and consumer product preferences; and |
| |
◦ | competitive forces, including, without limitation, other sources of funding available to our members; |
◦changes in our members' deposit flows and credit demands;
◦changes in products or services we are able to provide;
◦federal or state regulatory developments impacting suitability or eligibility of membership classes;
◦membership changes, including, but not limited to, mergers, acquisitions and consolidations of charters;
◦changes in the general level of housing activity in the United States and particularly our district states of Michigan and Indiana, the level of refinancing activity and consumer product preferences;
◦competitive forces, including, without limitation, other sources of funding available to our members; and
◦changes in the terms and conditions of ownership of our capital stock;
•changes in mortgage asset prepayment patterns, delinquency rates and housing values or improper or inadequate mortgage originations and mortgage servicing;
•ability to introduce and successfully manage new products and services, including new types of collateral securing advances;
•political events, including federal government shutdowns, administrative, legislative, regulatory, or other developments, changes in international political structures and alliances, and judicial rulings that affect us, our status as a secured creditor, our members (or certain classes of members), prospective members, counterparties, GSE'sGSEs generally, one or more of the FHLBanks and/or investors in the consolidated obligations of the FHLBanks;
•national or international health crises, such as the COVID-19 pandemic, including any resurgence of the pandemic, new and evolving pandemic strains, and the effects of health crises on our and our counterparties' operations, member demand, market liquidity, and the global funding markets, and the governmental, regulatory, and fiscal interventions undertaken to stabilize local, national, and global economic conditions;
•ability to access the capital markets and raise capital market funding on acceptable terms;
•changes in our credit ratings or the credit ratings of the other FHLBanks and the FHLBank System;
•changes in the level of government guarantees provided to other United States and international financial institutions;
competition from other entities borrowing funds in the capital markets;
•dealer commitment to supporting the issuance of our consolidated obligations;
•ability of one or more of the FHLBanks to repay its portion of the consolidated obligations, or otherwise meet its financial obligations;
•ability to attract and retain skilled personnel;
•ability to develop, implement and support technology and information systems sufficient to manage our business effectively;
•nonperformance of counterparties to uncleared and cleared derivative transactions;
•changes in terms of derivative agreements and similar agreements;
•loss arising from natural disasters, acts of war, riots, insurrection or acts of terrorism;
•changes in or differing interpretations of accounting guidance; and
•other risk factors identified in our filings with the SEC.
Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, additional disclosures may be made through reports filed with the SEC in the future, including our reports on Forms 10-K, 10-Q and 8-K.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Federal Home Loan Bank of Indianapolis
Statements of Condition
(Unaudited, $ amounts in thousands, except par value)
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Assets: | | | |
Cash and due from banks | $ | 22,361 | | | $ | 867,880 | |
Interest-bearing deposits (Note 3) | 478,042 | | | 100,041 | |
Securities purchased under agreements to resell (Note 3) | 2,500,000 | | | 3,500,000 | |
Federal funds sold (Note 3) | 4,607,000 | | | 2,580,000 | |
Trading securities (Note 3) | 3,114,789 | | | 3,946,799 | |
Available-for-sale securities (Note 3) (amortized cost of $11,280,892 and $9,007,993) | 11,296,691 | | | 9,159,935 | |
Held-to-maturity securities (Note 3) (estimated fair values of $3,900,977 and $4,322,157) | 3,975,656 | | | 4,313,773 | |
Advances (Note 4) | 31,196,085 | | | 27,497,835 | |
Mortgage loans held for portfolio, net (Note 5) | 7,649,219 | | | 7,616,134 | |
Accrued interest receivable | 105,135 | | | 80,758 | |
Derivative assets, net (Note 6) | 341,195 | | | 220,202 | |
Other assets | 109,288 | | | 121,246 | |
| | | |
Total assets | $ | 65,395,461 | | | $ | 60,004,603 | |
| | | |
Liabilities: | | | |
Deposits | $ | 538,280 | | | $ | 1,366,397 | |
Consolidated obligations (Note 7): | | | |
Discount notes | 21,280,766 | | | 12,116,358 | |
Bonds | 39,259,698 | | | 42,361,572 | |
Total consolidated obligations, net | 60,540,464 | | | 54,477,930 | |
Accrued interest payable | 129,753 | | | 88,068 | |
Affordable Housing Program payable (Note 8) | 31,193 | | | 31,049 | |
Derivative liabilities, net (Note 6) | 16,529 | | | 12,185 | |
Mandatorily redeemable capital stock (Note 9) | 43,290 | | | 50,422 | |
Other liabilities | 532,340 | | | 422,221 | |
| | | |
Total liabilities | 61,831,849 | | | 56,448,272 | |
| | | |
Commitments and contingencies (Note 13) | | | |
| | | |
Capital (Note 9): | | | |
Capital stock (putable at par value of $100 per share): | | | |
Class B issued and outstanding shares: 23,255,342 and 22,462,009 | 2,325,534 | | | 2,246,201 | |
Retained earnings: | | | |
Unrestricted | 931,063 | | | 889,869 | |
Restricted | 308,702 | | | 287,203 | |
Total retained earnings | 1,239,765 | | | 1,177,072 | |
Total accumulated other comprehensive income (loss) (Note 10) | (1,687) | | | 133,058 | |
| | | |
Total capital | 3,563,612 | | | 3,556,331 | |
| | | |
Total liabilities and capital | $ | 65,395,461 | | | $ | 60,004,603 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Assets: | | | |
Cash and due from banks | $ | 69,564 |
| | $ | 546,612 |
|
Interest-bearing deposits | 301,459 |
| | 150,225 |
|
Securities purchased under agreements to resell | 2,720,698 |
| | 1,781,309 |
|
Federal funds sold | 2,835,000 |
| | 1,650,000 |
|
Available-for-sale securities (Notes 3 and 5) | 6,983,996 |
| | 6,059,835 |
|
Held-to-maturity securities (estimated fair values of $5,839,280 and $5,848,692, respectively) (Notes 4 and 5) | 5,807,104 |
| | 5,819,573 |
|
Advances (Note 6) | 32,952,801 |
| | 28,095,953 |
|
Mortgage loans held for portfolio, net of allowance for loan losses of $(850) and $(850), respectively (Notes 7 and 8) | 10,195,650 |
| | 9,501,397 |
|
Accrued interest receivable | 96,910 |
| | 93,716 |
|
Premises, software, and equipment, net | 36,368 |
| | 37,638 |
|
Derivative assets, net (Note 9) | 141,727 |
| | 134,848 |
|
Other assets | 36,522 |
| | 36,294 |
|
| | | |
Total assets | $ | 62,177,799 |
| | $ | 53,907,400 |
|
| | | |
Liabilities: | |
| | |
Deposits | $ | 489,911 |
| | $ | 524,073 |
|
Consolidated obligations (Note 10): | |
| | |
Discount notes | 22,380,509 |
| | 16,801,763 |
|
Bonds | 35,902,425 |
| | 33,467,279 |
|
Total consolidated obligations, net | 58,282,934 |
| | 50,269,042 |
|
Accrued interest payable | 115,966 |
| | 98,411 |
|
Affordable Housing Program payable (Note 11) | 27,808 |
| | 26,598 |
|
Derivative liabilities, net (Note 9) | 1,404 |
| | 25,225 |
|
Mandatorily redeemable capital stock (Note 12) | 165,161 |
| | 170,043 |
|
Other liabilities | 263,528 |
| | 357,812 |
|
Total liabilities | 59,346,712 |
| | 51,471,204 |
|
| | | |
Commitments and contingencies (Note 16) |
|
| |
|
|
| | | |
Capital (Note 12): | |
| | |
Capital stock (putable at par value of $100 per share): | | | |
Class B-1 issued and outstanding shares: 17,780,387 and 14,897,390, respectively | 1,778,039 |
| | 1,489,739 |
|
Class B-2 issued and outstanding shares: 11,271 and 28,416, respectively | 1,127 |
| | 2,842 |
|
Total capital stock | 1,779,166 |
| | 1,492,581 |
|
Retained earnings: | | | |
Unrestricted | 774,252 |
| | 734,982 |
|
Restricted | 174,275 |
| | 152,265 |
|
Total retained earnings | 948,527 |
| | 887,247 |
|
Total accumulated other comprehensive income (Note 13) | 103,394 |
| | 56,368 |
|
Total capital | 2,831,087 |
| | 2,436,196 |
|
| | | |
Total liabilities and capital | $ | 62,177,799 |
| | $ | 53,907,400 |
|
The accompanying notes are an integral part of these financial statements.
4
6
Federal Home Loan Bank of Indianapolis
Statements of Income
(Unaudited, $ amounts in thousands) |
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Interest Income: | | | | | | | |
Advances | $ | 111,513 |
| | $ | 55,487 |
| | $ | 280,412 |
| | $ | 155,243 |
|
Prepayment fees on advances, net | 1,077 |
| | 6 |
| | 1,179 |
| | 205 |
|
Interest-bearing deposits | 924 |
| | 252 |
| | 1,895 |
| | 650 |
|
Securities purchased under agreements to resell | 1,329 |
| | 2,769 |
| | 5,034 |
| | 4,992 |
|
Federal funds sold | 13,844 |
| | 1,655 |
| | 30,874 |
| | 7,165 |
|
Available-for-sale securities | 32,590 |
| | 18,218 |
| | 86,309 |
| | 47,997 |
|
Held-to-maturity securities | 32,932 |
| | 30,638 |
| | 86,810 |
| | 84,427 |
|
Mortgage loans held for portfolio | 79,295 |
| | 67,994 |
| | 233,575 |
| | 205,165 |
|
Other interest income, net | 534 |
| | 434 |
| | 1,385 |
| | 1,171 |
|
Total interest income | 274,038 |
|
| 177,453 |
| | 727,473 |
|
| 507,015 |
|
| | | | | | | |
Interest Expense: | | | | | | | |
Consolidated obligation discount notes | 54,701 |
| | 16,485 |
| | 121,955 |
| | 47,588 |
|
Consolidated obligation bonds | 147,521 |
| | 109,368 |
| | 404,294 |
| | 309,767 |
|
Deposits | 1,324 |
| | 190 |
| | 3,155 |
| | 412 |
|
Mandatorily redeemable capital stock | 1,768 |
| | 1,880 |
| | 5,277 |
| | 4,748 |
|
Other interest expense | — |
| | — |
| | — |
| | — |
|
Total interest expense | 205,314 |
| | 127,923 |
| | 534,681 |
| | 362,515 |
|
| | | | | | | |
Net interest income | 68,724 |
| | 49,530 |
| | 192,792 |
| | 144,500 |
|
Provision for (reversal of) credit losses | (90 | ) | | 85 |
| | 191 |
| | (132 | ) |
| | | | | | | |
Net interest income after provision for credit losses | 68,814 |
| | 49,445 |
| | 192,601 |
| | 144,632 |
|
| | | | | | | |
Other Income (Loss): | | | | | | | |
Total other-than-temporary impairment losses | — |
| | — |
| | — |
| | — |
|
Non-credit portion reclassified to (from) other comprehensive income, net | (14 | ) | | (75 | ) | | (207 | ) | | (168 | ) |
Net other-than-temporary impairment losses, credit portion | (14 | ) | | (75 | ) | | (207 | ) | | (168 | ) |
Net gains (losses) on derivatives and hedging activities | (3,745 | ) | | (4,826 | ) | | (12,830 | ) | | (9,716 | ) |
Service fees | 232 |
| | 227 |
| | 694 |
| | 970 |
|
Standby letters of credit fees | 130 |
| | 165 |
| | 535 |
| | 570 |
|
Other, net (Note 16) | 409 |
| | 339 |
| | 1,322 |
| | 1,089 |
|
Total other income (loss) | (2,988 | ) | | (4,170 | ) | | (10,486 | ) | | (7,255 | ) |
| | | | | | | |
Other Expenses: | | | | | | | |
Compensation and benefits | 11,753 |
| | 11,274 |
| | 34,512 |
| | 33,195 |
|
Other operating expenses | 6,813 |
| | 6,307 |
| | 18,833 |
| | 17,643 |
|
Federal Housing Finance Agency | 785 |
| | 661 |
| | 2,388 |
| | 2,110 |
|
Office of Finance | 804 |
| | 785 |
| | 2,813 |
| | 2,373 |
|
Other | 200 |
| | 272 |
| | 706 |
| | 778 |
|
Total other expenses | 20,355 |
| | 19,299 |
| | 59,252 |
| | 56,099 |
|
| | | | | | | |
Income before assessments | 45,471 |
| | 25,976 |
| | 122,863 |
| | 81,278 |
|
| | | | | | | |
Affordable Housing Program assessments | 4,724 |
| | 2,786 |
| | 12,814 |
| | 8,603 |
|
| | | | | | | |
Net income | $ | 40,747 |
| | $ | 23,190 |
| | $ | 110,049 |
| | $ | 72,675 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Interest Income: | | | | | | | |
Advances | $ | 187,002 | | | $ | 20,432 | | | $ | 289,605 | | | $ | 84,716 | |
Interest-bearing deposits | 10,807 | | | 136 | | | 13,720 | | | 413 | |
Securities purchased under agreements to resell | 16,486 | | | 540 | | | 23,457 | | | 1,192 | |
Federal funds sold | 25,159 | | | 728 | | | 33,683 | | | 2,182 | |
Trading securities | 6,397 | | | 10,473 | | | 20,189 | | | 41,064 | |
Available-for-sale securities | 88,443 | | | 22,477 | | | 149,451 | | | 73,497 | |
Held-to-maturity securities | 15,250 | | | 7,694 | | | 31,794 | | | 25,367 | |
Mortgage loans held for portfolio | 52,874 | | | 44,111 | | | 152,142 | | | 124,512 | |
Other interest income | 98 | | | — | | | 120 | | | — | |
Total interest income | 402,516 | | | 106,591 | | | 714,161 | | | 352,943 | |
| | | | | | | |
Interest Expense: | | | | | | | |
Consolidated obligation discount notes | 107,558 | | | 1,675 | | | 137,746 | | | 7,607 | |
Consolidated obligation bonds | 218,109 | | | 46,601 | | | 369,000 | | | 153,071 | |
Deposits | 3,866 | | | 42 | | | 5,512 | | | 122 | |
Mandatorily redeemable capital stock | 408 | | | 312 | | | 922 | | | 2,345 | |
| | | | | | | |
Total interest expense | 329,941 | | | 48,630 | | | 513,180 | | | 163,145 | |
| | | | | | | |
Net interest income | 72,575 | | | 57,961 | | | 200,981 | | | 189,798 | |
Provision for (reversal of) credit losses | (8) | | | (16) | | | (68) | | | 28 | |
| | | | | | | |
Net interest income after provision for credit losses | 72,583 | | | 57,977 | | | 201,049 | | | 189,770 | |
| | | | | | | |
Other Income: | | | | | | | |
Net realized losses from sales of held-to-maturity securities | (1,033) | | | — | | | (1,033) | | | — | |
| | | | | | | |
Net gains (losses) on trading securities | 382 | | | (8,207) | | | (38,033) | | | (35,566) | |
Net gains (losses) on derivatives | 8,984 | | | (1,361) | | | 46,181 | | | (2,013) | |
| | | | | | | |
Other, net | (1,133) | | | 701 | | | (9,015) | | | 5,968 | |
Total other income (loss) | 7,200 | | | (8,867) | | | (1,900) | | | (31,611) | |
| | | | | | | |
Other Expenses: | | | | | | | |
Compensation and benefits | 14,681 | | | 14,570 | | | 41,048 | | | 44,420 | |
Other operating expenses | 7,680 | | | 7,352 | | | 22,530 | | | 22,041 | |
Federal Housing Finance Agency | 1,801 | | | 1,473 | | | 5,518 | | | 4,420 | |
Office of Finance | 1,170 | | | 1,493 | | | 3,668 | | | 4,718 | |
Other | 2,681 | | | 2,030 | | | 6,846 | | | 7,887 | |
Total other expenses | 28,013 | | | 26,918 | | | 79,610 | | | 83,486 | |
| | | | | | | |
Income before assessments | 51,770 | | | 22,192 | | | 119,539 | | | 74,673 | |
| | | | | | | |
Affordable Housing Program assessments | 5,218 | | | 2,250 | | | 12,046 | | | 7,702 | |
| | | | | | | |
Net income | $ | 46,552 | | | $ | 19,942 | | | $ | 107,493 | | | $ | 66,971 | |
The accompanying notes are an integral part of these financial statements.
5
7
Federal Home Loan Bank of Indianapolis
Statements of Comprehensive Income
(Unaudited, $ amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
Net income | $ | 46,552 | | | $ | 19,942 | | | $ | 107,493 | | | $ | 66,971 | |
| | | | | | | |
Other Comprehensive Income: | | | | | | | |
| | | | | | | |
Net change in unrealized gains (losses) on available-for-sale securities | (16,452) | | | (36,864) | | | (136,143) | | | 41,167 | |
| | | | | | | |
Pension benefits, net | 609 | | | (5,093) | | | 1,398 | | | 4,898 | |
| | | | | | | |
Total other comprehensive income (loss) | (15,843) | | | (41,957) | | | (134,745) | | | 46,065 | |
| | | | | | | |
Total comprehensive income (loss) | $ | 30,709 | | | $ | (22,015) | | | $ | (27,252) | | | $ | 113,036 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | |
Net income | $ | 40,747 |
| | $ | 23,190 |
| | $ | 110,049 |
| | $ | 72,675 |
|
| | | | | | | |
Other Comprehensive Income (Loss): | | | | | | | |
| | | | | | | |
Net change in unrealized gains on available-for-sale securities | 5,007 |
| | 24,784 |
| | 42,617 |
| | 23,878 |
|
| | | | | | | |
Non-credit portion of other-than-temporary impairment losses on available-for-sale securities: | | | | | | | |
Reclassification of non-credit portion to other income (loss) | 11 |
| | 75 |
| | 166 |
| | 168 |
|
Net change in fair value not in excess of cumulative non-credit losses | (5 | ) | | (131 | ) | | (3 | ) | | (79 | ) |
Unrealized gains (losses) | 1,617 |
| | 564 |
| | 3,199 |
| | (5,733 | ) |
Net non-credit portion of other-than-temporary impairment losses on available-for-sale securities | 1,623 |
| | 508 |
| | 3,362 |
| | (5,644 | ) |
| | | | | | | |
Non-credit portion of other-than-temporary impairment losses on held-to-maturity securities: | | | | | | | |
Reclassification of non-credit portion to other income (loss) | 4 |
| | — |
| | 42 |
| | — |
|
Accretion of non-credit portion | — |
| | 6 |
| | 12 |
| | 22 |
|
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities | 4 |
| | 6 |
| | 54 |
| | 22 |
|
| | | | | | | |
Pension benefits, net | 340 |
| | (310 | ) | | 993 |
| | (926 | ) |
| | | | | | | |
Total other comprehensive income | 6,974 |
|
| 24,988 |
|
| 47,026 |
| | 17,330 |
|
| | | | | | | |
Total comprehensive income | $ | 47,721 |
| | $ | 48,178 |
| | $ | 157,075 |
| | $ | 90,005 |
|
The accompanying notes are an integral part of these financial statements.
6
8
Federal Home Loan Bank of Indianapolis
Statements of Capital
NineThree Months Ended September 30, 20162022 and 20172021
(Unaudited, $ amounts and shares in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Capital Stock Class B Putable | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Capital |
| | Shares | | Par Value | | Unrestricted | | Restricted | | Total | | |
| | | | | | | | | | | | | | |
Balance, December 31, 2015 | | 15,278 |
| | $ | 1,527,806 |
| | $ | 705,449 |
| | $ | 129,664 |
| | $ | 835,113 |
| | $ | 22,878 |
| | $ | 2,385,797 |
|
| | | | | | | | | | | | | | |
Total comprehensive income | | | | | | 58,140 |
| | 14,535 |
| | 72,675 |
| | 17,330 |
| | 90,005 |
|
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 930 |
| | 93,014 |
| | | | | | | | | | 93,014 |
|
Shares reclassified to mandatorily redeemable capital stock, net | | (1,830 | ) | | (183,056 | ) | | | | | | | | | | (183,056 | ) |
| | | | | | | | | | | | | | |
Distributions on mandatorily redeemable capital stock | | | | | | (1,072 | ) | | — |
| | (1,072 | ) | | | | (1,072 | ) |
Cash dividends on capital stock (4.25% annualized) | | | | | | (44,823 | ) | | — |
| | (44,823 | ) | | | | (44,823 | ) |
| | | | | | | | | | | | | | |
Balance, September 30, 2016 | | 14,378 |
| | $ | 1,437,764 |
| | $ | 717,694 |
| | $ | 144,199 |
| | $ | 861,893 |
| | $ | 40,208 |
| | $ | 2,339,865 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Balance, December 31, 2016 | | 14,926 |
| | $ | 1,492,581 |
| | $ | 734,982 |
| | $ | 152,265 |
| | $ | 887,247 |
| | $ | 56,368 |
| | $ | 2,436,196 |
|
| | | | | | | | | | | | | | |
Total comprehensive income | | | | | | 88,039 |
| | 22,010 |
| | 110,049 |
| | 47,026 |
| | 157,075 |
|
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 2,866 |
| | 286,585 |
| | | | | | | | | | 286,585 |
|
| | | | | | | | | | | | | | |
Cash dividends on capital stock (4.25% annualized) | | | | | | (48,769 | ) | | — |
| | (48,769 | ) | | | | (48,769 | ) |
| | | | | | | | | | | | | | |
Balance, September 30, 2017 | | 17,792 |
| | $ | 1,779,166 |
| | $ | 774,252 |
| | $ | 174,275 |
| | $ | 948,527 |
| | $ | 103,394 |
| | $ | 2,831,087 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Capital Stock | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Capital |
| | Shares | | Par Value | | Unrestricted | | Restricted | | Total | | |
| | | | | | | | | | | | | | |
Balance, June 30, 2022 | | 22,508 | | | $ | 2,250,835 | | | $ | 912,329 | | | $ | 299,391 | | | $ | 1,211,720 | | | $ | 14,156 | | | $ | 3,476,711 | |
| | | | | | | | | | | | | | |
Total comprehensive income (loss) | | | | | | 37,241 | | | 9,311 | | | 46,552 | | | (15,843) | | | 30,709 | |
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 747 | | | 74,699 | | | | | | | | | | | 74,699 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Cash dividends on capital stock (3.42% annualized) | | | | | | (18,507) | | | — | | | (18,507) | | | | | (18,507) | |
| | | | | | | | | | | | | | |
Balance, September 30, 2022 | | 23,255 | | | $ | 2,325,534 | | | $ | 931,063 | | | $ | 308,702 | | | $ | 1,239,765 | | | $ | (1,687) | | | $ | 3,563,612 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Balance, June 30, 2021 | | 22,339 | | | $ | 2,233,916 | | | $ | 878,581 | | | $ | 277,832 | | | $ | 1,156,413 | | | $ | 193,424 | | | $ | 3,583,753 | |
| | | | | | | | | | | | | | |
Total comprehensive income (loss) | | | | | | 15,954 | | | 3,988 | | | 19,942 | | | (41,957) | | | (22,015) | |
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 183 | | | 18,302 | | | | | | | | | | | 18,302 | |
| | | | | | | | | | | | | | |
Redemption/repurchase of capital stock | | (113) | | | (11,277) | | | | | | | | | | | (11,277) | |
| | | | | | | | | | | | | | |
Shares reclassified to mandatorily redeemable capital stock, net | | (44) | | | (4,449) | | | | | | | | | | | (4,449) | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Cash dividends on capital stock (2.35% annualized) | | | | | | (13,079) | | | — | | | (13,079) | | | | | (13,079) | |
| | | | | | | | | | | | | | |
Balance, September 30, 2021 | | 22,365 | | | $ | 2,236,492 | | | $ | 881,456 | | | $ | 281,820 | | | $ | 1,163,276 | | | $ | 151,467 | | | $ | 3,551,235 | |
The accompanying notes are an integral part of these financial statements.
7
9
Federal Home Loan Bank of Indianapolis
Statements of Capital
Nine Months Ended September 30, 2022 and 2021
(Unaudited, $ amounts and shares in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Capital Stock | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Capital |
| | Shares | | Par Value | | Unrestricted | | Restricted | | Total | | |
| | | | | | | | | | | | | | |
Balance, December 31, 2021 | | 22,462 | | | $ | 2,246,201 | | | $ | 889,869 | | | $ | 287,203 | | | $ | 1,177,072 | | | $ | 133,058 | | | $ | 3,556,331 | |
| | | | | | | | | | | | | | |
Total comprehensive income (loss) | | | | | | 85,994 | | | 21,499 | | | 107,493 | | | (134,745) | | | (27,252) | |
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 2,412 | | | 241,218 | | | | | | | | | | | 241,218 | |
| | | | | | | | | | | | | | |
Redemption/repurchase of capital stock | | (1,619) | | | (161,885) | | | | | | | | | | | (161,885) | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Cash dividends on capital stock (2.73% annualized) | | | | | | (44,800) | | | — | | | (44,800) | | | | | (44,800) | |
| | | | | | | | | | | | | | |
Balance, September 30, 2022 | | 23,255 | | | $ | 2,325,534 | | | $ | 931,063 | | | $ | 308,702 | | | $ | 1,239,765 | | | $ | (1,687) | | | $ | 3,563,612 | |
| | | | | | | | | | | | | | |
Balance, December 31, 2020 | | 22,076 | | | $ | 2,207,570 | | | $ | 868,904 | | | $ | 268,426 | | | $ | 1,137,330 | | | $ | 105,402 | | | $ | 3,450,302 | |
| | | | | | | | | | | | | | |
Total comprehensive income | | | | | | 53,577 | | | 13,394 | | | 66,971 | | | 46,065 | | | 113,036 | |
| | | | | | | | | | | | | | |
Proceeds from issuance of capital stock | | 449 | | | 44,929 | | | | | | | | | | | 44,929 | |
| | | | | | | | | | | | | | |
Redemption/repurchase of capital stock | | (113) | | | (11,277) | | | | | | | | | | | (11,277) | |
| | | | | | | | | | | | | | |
Shares reclassified to mandatorily redeemable capital stock, net | | (47) | | | (4,730) | | | | | | | | | | | (4,730) | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Cash dividends on capital stock (2.48% annualized) | | | | | | (41,025) | | | — | | | (41,025) | | | | | (41,025) | |
| | | | | | | | | | | | | | |
Balance, September 30, 2021 | | 22,365 | | | $ | 2,236,492 | | | $ | 881,456 | | | $ | 281,820 | | | $ | 1,163,276 | | | $ | 151,467 | | | $ | 3,551,235 | |
The accompanying notes are an integral part of these financial statements.
8
Federal Home Loan Bank of Indianapolis
Statements of Cash Flows
(Unaudited, $ amounts in thousands)
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Operating Activities: | | | |
Net income | $ | 110,049 |
| | $ | 72,675 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Amortization and depreciation | 57,454 |
| | 42,947 |
|
Prepayment fees on advances, net of related swap termination fees | — |
| | (526 | ) |
Changes in net derivative and hedging activities | 376 |
| | 30,601 |
|
Net other-than-temporary impairment losses, credit portion | 207 |
| | 168 |
|
Provision for (reversal of) credit losses | 191 |
| | (132 | ) |
Changes in: | | | |
Accrued interest receivable | (3,327 | ) | | (6,133 | ) |
Other assets | 232 |
| | 652 |
|
Accrued interest payable | 17,557 |
| | 8,759 |
|
Other liabilities | 19,193 |
| | 23,258 |
|
Total adjustments, net | 91,883 |
| | 99,594 |
|
| | | |
Net cash provided by operating activities | 201,932 |
| | 172,269 |
|
| | | |
Investing Activities: | | |
|
|
Net change in: | | | |
Interest-bearing deposits | (166,306 | ) | | (335,205 | ) |
Securities purchased under agreements to resell | (939,389 | ) | | (2,250,000 | ) |
Federal funds sold | (1,185,000 | ) | | (1,450,000 | ) |
Available-for-sale securities: | | | |
Proceeds from maturities | 942,491 |
| | 641,054 |
|
Purchases | (1,910,989 | ) | | (2,643,720 | ) |
Held-to-maturity securities: | | | |
Proceeds from maturities | 920,737 |
| | 1,035,530 |
|
Purchases | (911,505 | ) | | (845,844 | ) |
Advances: | | | |
Principal repayments | 192,773,340 |
| | 106,942,904 |
|
Disbursements to members | (197,645,975 | ) | | (106,464,271 | ) |
Mortgage loans held for portfolio: | | | |
Principal collections | 911,928 |
| | 1,202,287 |
|
Purchases from members | (1,637,664 | ) | | (2,307,678 | ) |
Purchases of premises, software, and equipment | (3,173 | ) | | (2,830 | ) |
| | | |
Net cash used in investing activities | (8,851,505 | ) | | (6,477,773 | ) |
(continued)
| | | | | | | | | | | |
| |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
Operating Activities: | | | |
Net income | $ | 107,493 | | | $ | 66,971 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Amortization and depreciation | 100,247 | | | 61,766 | |
Changes in net derivative and hedging activities | 1,123,640 | | | 87,188 | |
| | | |
| | | |
Provision for (reversal of) credit losses | (68) | | | 28 | |
Net losses on trading securities | 38,033 | | | 35,566 | |
| | | |
Net realized losses from sales of held-to-maturity securities | 1,033 | | | — | |
Changes in: | | | |
Accrued interest receivable | (27,406) | | | 26,750 | |
Other assets | 8,296 | | | (17,725) | |
Accrued interest payable | 42,051 | | | 461 | |
Other liabilities | 12,473 | | | 19,697 | |
Total adjustments, net | 1,298,299 | | | 213,731 | |
| | | |
Net cash provided by operating activities | 1,405,792 | | | 280,702 | |
| | | |
Investing Activities: | | | |
Net change in: | | | |
Interest-bearing deposits | (1,650,018) | | | 492,551 | |
Securities purchased under agreements to resell | 1,000,000 | | | (1,700,000) | |
Federal funds sold | (2,027,000) | | | (860,000) | |
Trading securities: | | | |
Proceeds from maturities | 2,525,000 | | | 2,000,000 | |
Proceeds from sales | 200,000 | | | 50,006 | |
Purchases | (1,930,219) | | | (1,849,689) | |
Available-for-sale securities: | | | |
Proceeds from maturities and paydowns | 703,730 | | | 727,875 | |
| | | |
Purchases | (4,330,214) | | | (140,093) | |
Held-to-maturity securities: | | | |
Proceeds from maturities and paydowns | 789,190 | | | 770,773 | |
Proceeds from sales | 63,111 | | | — | |
Purchases | (384,620) | | | (742,571) | |
Advances: | | | |
Principal repayments | 156,213,544 | | | 193,228,613 | |
Disbursements to members | (160,746,988) | | | (189,160,818) | |
Mortgage loans held for portfolio: | | | |
Principal collections | 824,635 | | | 2,348,187 | |
Purchases from members | (927,167) | | | (1,577,038) | |
Purchases of premises, software, and equipment | (2,768) | | | (3,375) | |
Loans to other Federal Home Loan Banks: | | | |
Principal repayments | 1,040,000 | | | 30,000 | |
Disbursements | (1,040,000) | | | (30,000) | |
| | | |
Net cash provided by (used in) investing activities | (9,679,784) | | | 3,584,421 | |
(continued) |
The accompanying notes are an integral part of these financial statements.
9
10
Federal Home Loan Bank of Indianapolis
Statements of Cash Flows, continued
(Unaudited, $ amounts in thousands)
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Financing Activities: | | | |
Changes in deposits | (40,952 | ) | | 20,808 |
|
Net payments on derivative contracts with financing elements | (17,358 | ) | | (28,417 | ) |
Net proceeds from issuance of consolidated obligations: | | | |
Discount notes | 161,660,654 |
| | 273,582,542 |
|
Bonds | 17,978,166 |
| | 26,104,166 |
|
Payments for matured and retired consolidated obligations: | | | |
Discount notes | (156,102,609 | ) | | (276,449,167 | ) |
Bonds | (15,538,310 | ) | | (21,226,935 | ) |
Proceeds from issuance of capital stock | 286,585 |
| | 93,014 |
|
Payments for redemption/repurchase of capital stock | — |
| | — |
|
Payments for redemption/repurchase of mandatorily redeemable capital stock | (4,882 | ) | | (18,972 | ) |
Dividend payments on capital stock | (48,769 | ) | | (44,823 | ) |
| | | |
Net cash provided by financing activities | 8,172,525 |
| | 2,032,216 |
|
| | | |
Net decrease in cash and due from banks | (477,048 | ) | | (4,273,288 | ) |
| | | |
Cash and due from banks at beginning of period | 546,612 |
| | 4,931,602 |
|
| | | |
Cash and due from banks at end of period | $ | 69,564 |
| | $ | 658,314 |
|
| | | |
Supplemental Disclosures: | | | |
Interest payments | $ | 395,802 |
| | $ | 302,462 |
|
Purchases of securities, traded but not yet settled | 17,034 |
| | 230,700 |
|
Affordable Housing Program payments | 11,604 |
| | 16,037 |
|
Capitalized interest on certain held-to-maturity securities | 1,669 |
| | 875 |
|
Par value of shares reclassified to mandatorily redeemable capital stock, net | — |
| | 183,056 |
|
| | | | | | | | | | | |
| | | |
| | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
Financing Activities: | | | |
Net change in deposits | (637,931) | | | 360,803 | |
Net payments on derivative contracts with financing elements | (592) | | | (11,629) | |
Net proceeds from issuance of consolidated obligations: | | | |
Discount notes | 642,682,864 | | | 183,417,467 | |
Bonds | 13,648,088 | | | 33,114,188 | |
Payments for matured and retired consolidated obligations: | | | |
Discount notes | (633,562,007) | | | (187,316,013) | |
Bonds | (14,729,350) | | | (33,075,310) | |
| | | |
| | | |
| | | |
Proceeds from issuance of capital stock | 241,218 | | | 44,929 | |
| | | |
Payments for redemption/repurchase of capital stock | (161,885) | | | (11,277) | |
Payments for redemption/repurchase of mandatorily redeemable capital stock | (7,132) | | | (205,056) | |
| | | |
Dividend payments on capital stock | (44,800) | | | (41,025) | |
| | | |
Net cash provided by (used in) financing activities | 7,428,473 | | | (3,722,923) | |
| | | |
Net increase (decrease) in cash and due from banks | (845,519) | | | 142,200 | |
| | | |
Cash and due from banks at beginning of period | 867,880 | | | 1,811,544 | |
| | | |
Cash and due from banks at end of period | $ | 22,361 | | | $ | 1,953,744 | |
| | | |
Supplemental Disclosures: | | | |
Cash activities: | | | |
Interest payments | $ | 334,152 | | | $ | 220,573 | |
Affordable Housing Program payments | 11,902 | | | 11,638 | |
Non-cash activities: | | | |
Purchases of investment securities, traded but not yet settled | 136,587 | | | 122,924 | |
Capitalized interest on certain held-to-maturity securities | 1,870 | | | 841 | |
| | | |
| | | |
The accompanying notes are an integral part of these financial statements.
10
11
Federal Home Loan Bank of Indianapolis
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Note 1 - Summary of Significant Accounting Policies
We use certain acronyms and terms throughout these notes to financial statements, which are defined in the Glossary of Terms. Unless the context otherwise requires, the terms "Bank,""Bank", "we," "us," and "our" refer to the Federal Home Loan Bank of Indianapolis or its management. We use acronyms and terms throughout these Notes to Financial Statements that are defined in the Defined Terms.
Basis of Presentation. The accompanying interim financial statements have been prepared in accordance with GAAP and SEC requirements for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. Certain disclosures that would have substantially duplicateduplicated the disclosures in the financial statements, and notes thereto, included in our 20162021 Form 10-K have been omitted unless the information contained in those disclosures materially changed. Therefore, these interim financial statements should be read in conjunction with our audited financial statements, and notes thereto, included in our 20162021 Form 10-K.
The financial statements contain all adjustments that are, in the opinion of management, necessary for a fair statement of ourthe 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 calendar year or any other interim period.
Our significant accounting policies and certain other disclosures are set forthin our 2016 Form 10-K in Note 1 - Summary of Significant Accounting Policies. There have been no significant changes to these policies through September 30, 2017, except for our policy on derivatives, which has been updated to reflect changes made to the CME rulebook.
Derivatives. We record derivative instruments, related cash collateral (including initial and variation margin received or pledged/posted) and associated accrued interest on a net basis, by clearing agent and/or by counterparty when the netting requirements have been met, as either derivative assets or derivative liabilities at their estimated fair values. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability.
We use two clearinghouses for all cleared derivative transactions, LCH and CME. Effective January 3, 2017, CME made certain amendments to its rulebook, including changing the legal characterization of variation margin payments to be daily settled contracts, rather than cash collateral. Variation margin payments related to LCH contracts continue to be characterized as cash collateral. Initial margin continues to be considered by both clearinghouses as cash collateral.
Use of Estimates.Estimates.When preparing financial statements in accordance with GAAP, we are required to make subjective assumptions and estimates that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. The most significant estimates include derivatives and hedging activities, fair value estimates, the provision for credit losses, and OTTI. Although the reported amounts and disclosures reflect our best estimates, actual results could differ significantly from these estimates. The most significant estimates pertain to the fair values of financial instruments.
Reclassifications.We have reclassified certain amounts from thereported in prior periodperiods to conform to the current period presentation. These reclassifications had no effect on total assets, total liabilities, total capital, net income, total comprehensive income total capital, or net cash flows.
Significant Accounting Policies. Our significant accounting policies and certain other disclosures are set forthin our 2021 Form 10-K in Note 1 - Summary of Significant Accounting Policies. There have been no significant changes to these policies through September 30, 2022.
Note 2 - Recently Adopted and Issued Accounting Guidance
Recently Adopted Accounting Guidance.
Contingent Put and Call Options in Debt Instruments. On March 14, 2016, the FASB issued amendments to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt host contracts. The amendments require entities to apply only the four-step decision sequence when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
This amended guidance was effective for the interim and annual periods beginning on January 1, 2017. The adoption of this guidance on January 1, 2017 had no effect on our financial condition, results of operations, or cash flows.
Recently Issued Accounting Guidance.
Targeted Improvements to Accounting forFair-Value Hedging Activities. On August 28, 2017, the FASB issued amended guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness must be recorded in OCI. In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness and permit, among other things, the following:
Measurement of the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception.
Measurement of the hedged item in a partial-term fair value hedge of interest-rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged.
Consideration only of how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest-rate risk.
This guidance is effective beginning January 1, 2019. Early adoption is permitted; however, we plan to adopt the guidance on the effective date. The amended presentation and disclosure guidance is applicable only prospectively. We are in the process of evaluating this guidance; therefore, its effect on our financial condition, results of operations, and cash flows has not yet been determined.
Premium Amortization on Purchased Callable Debt Securities.- Portfolio Layer Method (ASU 2022-01).On March 30, 2017, the FASB issued amendments to shorten the amortization period for certain callable debt securities purchased at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. No change is required for securities purchased at a discount.
These amendments are effective beginning on January 1, 2019. Early adoption is permitted; however, we plan to adopt the amendments on the effective date. The amendments should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are in the process of evaluating these amendments; therefore, their effect on our financial condition, results of operations, and cash flows has not yet been determined.
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On March 10, 2017, the FASB issued amendments to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer disaggregate the service cost component from the other components of net pension and benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net pension and benefit cost in the income statement.
These amendments are effective for interim and annual periods beginning on January 1, 2018. Early adoption is permitted; however, we plan to adopt the amendments on the effective date. The amendments should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit. The adoption of these amendments will result in a reclassification on the income statement only. As such, it will have no effect on our financial condition, results of operations, or cash flows.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued amendments to clarify existing guidance on the classification of certain cash receipts and payments on the statement of cash flows to reduce current and potential future diversity in practice regarding eight specific cash flow issues.
These amendments are effective for interim and annual periods beginning on January 1, 2018. Early adoption is permitted; however, we plan to adopt the amendments on the effective date. These amendments should be applied using a retrospective transition method to each period presented. The adoption of these amendments will have no effect on our financial condition, results of operations, or cash flows.
Measurement of Credit Losses on Financial Instruments. On June 16, 2016, the FASB issued amended guidance for the measurement of credit losses on financial instruments. See Note 2 - Changes in Accounting Principle and Recently Adopted and Issued Accounting Guidance in our 2016 Form 10-K for information related to this guidance.
This guidance is effective for the interim and annual periods beginning on January 1, 2020. Early adoption is permitted as of the interim and annual reporting periods beginning after December 15, 2018. However, we plan to adopt this guidance on the effective date. We are in the process of evaluating this guidance, but expect the adoption to result in an increase to the allowance for credit losses, including an allowance for debt securities, primarily due to the requirement to measure losses for the entire estimated life of the financial asset. The impact on our financial condition, results of operations, and cash flows will depend upon the composition of financial assets held at the adoption date as well as the economic conditions and forecasts at that time.
Leases. On February 25, 2016,28, 2022, the FASB issued guidance which requires recognitionexpanding the existing last-of-layer fair-value hedging method by allowing entities to hedge multiple layers of leasea single closed portfolio of prepayable financial assets and lease liabilities onrather than a single (or last) layer only. To reflect the statement of condition and disclosure of key information about leasing arrangements. See Note 2 - Changes in Accounting Principle and Recently Adopted and Issued Accounting Guidance in our 2016 Form 10-K for information related to this guidance.change, the last-of-layer method was renamed the portfolio layer method.
This guidance is effective for the interim and annual periods beginning on January 1, 2019, and early adoption is permitted. However, we plan to adopt this guidance on the effective date. Upon adoption, we expect to report higher assets and liabilities as a result of including right-of-use assets and lease liabilities on the statement of condition, but we do not expect its effect on our financial condition, results of operations, or cash flows to be material.
Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued amended guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. See Note 2 - Changes in Accounting Principle and Recently Adopted and Issued Accounting Guidance in our 2016 Form 10-K for information related to this guidance.
The guidance is effective for the interim and annual periods beginning on January 1, 2018, and2023, although early adoption is only permitted for certain provisions. However, we plan to adoptpermitted. We have evaluated this guidance on the effective date. Weand do not expect itsthat, upon adoption, toit will have no effect ona material impact to our financial condition, results of operations,statements or cash flows.disclosures.
Revenue from Contracts with Customers.Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02).On May 28, 2014,March 31, 2022, the FASB issued new guidance on revenue from contracts with customers. See Note 2 - Changes in Accounting Principleeliminating the accounting guidance for TDRs by creditors that have adopted the current expected credit losses methodology while enhancing disclosure requirements for certain loan refinancings and Recently Adopted and Issued Accounting Guidance in our 2016 Form 10-K for information relatedrestructurings made to this guidance.borrowers experiencing financial difficulty. Additionally, the guidance requires disclosure of current-period gross write-offs by year of origination.
The guidance is effective for the interim and annual periods beginning on January 1, 2018. Early2023, although early adoption is permitted only aspermitted. The transition method related to the recognition and measurement of the interim and annual reporting periods beginning after January 1, 2017. However, we do not planTDRs can be applied using a modified retrospective transition method, while all other amendments are to adoptbe applied prospectively. We have evaluated this guidance early. Given that the majority of our financial instruments and other contractual rights that generate revenue are covered by other GAAP provisions, we do not expect thethat, upon adoption, of this guidance toit will have a material effect onimpact to our financial condition, results of operations,statements or cash flows.disclosures.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Note 3 - Available-for-Sale SecuritiesInvestments
Short-term Investments. We invest in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that maintain a credit rating of triple-B or higher (investment grade) by an NRSRO. At September 30, 2022 and December 31, 2021, all of these investments were with counterparties rated single-A or above, based on the lowest long-term credit rating for each counterparty. The NRSRO ratings may differ from our internal ratings of the investments, if applicable.
Allowance for Credit Losses.At September 30, 2022 and December 31, 2021, based on our evaluation, we did not record an allowance for credit losses on any of our short-term investments.
Investment Securities.
Trading Securities.
Major Security Types.The following table presents our trading securities by type of security.
| | | | | | | | | | | | | | |
Security Type | | September 30, 2022 | | December 31, 2021 |
| | | | |
U.S. Treasury obligations | | $ | 3,114,789 | | | $ | 3,946,799 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Total trading securities at estimated fair value | | $ | 3,114,789 | | | $ | 3,946,799 | |
Net Gains (Losses) on Trading Securities. The following table presents net gains (losses) on trading securities, excluding any offsetting effect of gains (losses) on the associated derivatives.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net gains (losses) on trading securities held at period end | | $ | (459) | | | $ | (5,793) | | | $ | (32,361) | | | $ | (19,064) | |
Net gains (losses) on trading securities that matured/sold during the period | | 841 | | | (2,414) | | | (5,672) | | | (16,502) | |
Net gains (losses) on trading securities | | $ | 382 | | | $ | (8,207) | | | $ | (38,033) | | | $ | (35,566) | |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Available-for-Sale Securities.
Major Security Types. The following table presents ourAFS securities by type of security.
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Gross | | Gross | | |
| | Amortized | | Non-Credit | | Unrealized | | Unrealized | | Estimated |
September 30, 2017 | | Cost (1) | | OTTI | | Gains | | Losses | | Fair Value |
GSE and TVA debentures | | $ | 4,478,116 |
| | $ | — |
| | $ | 47,055 |
| | $ | (198 | ) | | $ | 4,524,973 |
|
GSE MBS | | 2,192,026 |
| | — |
| | 35,228 |
| | — |
| | 2,227,254 |
|
Private-label RMBS | | 201,469 |
| | (100 | ) | | 30,400 |
| | — |
| | 231,769 |
|
Total AFS securities | | $ | 6,871,611 |
| | $ | (100 | ) | | $ | 112,683 |
| | $ | (198 | ) | | $ | 6,983,996 |
|
| | | | | | | | | | |
December 31, 2016 | | | | | | | | | | |
GSE and TVA debentures | | $ | 4,693,211 |
| | $ | — |
| | $ | 25,624 |
| | $ | (4,201 | ) | | $ | 4,714,634 |
|
GSE MBS | | 1,058,037 |
| | — |
| | 18,279 |
| | (234 | ) | | 1,076,082 |
|
Private-label RMBS | | 242,181 |
| | (263 | ) | | 27,201 |
| | — |
| | 269,119 |
|
Total AFS securities | | $ | 5,993,429 |
| | $ | (263 | ) | | $ | 71,104 |
| | $ | (4,435 | ) | | $ | 6,059,835 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Gross | | Gross | | |
| | Amortized | | Unrealized | | Unrealized | | Estimated |
September 30, 2022 | | Cost (1) | | Gains | | Losses | | Fair Value |
U.S. Treasury obligations | | $ | 3,401,191 | | | $ | 2,195 | | | $ | (1,845) | | | $ | 3,401,541 | |
GSE and TVA debentures | | 1,876,800 | | | 23,316 | | | — | | | 1,900,116 | |
GSE multifamily MBS | | 6,002,901 | | | 25,388 | | | (33,255) | | | 5,995,034 | |
Total AFS securities | | $ | 11,280,892 | | | $ | 50,899 | | | $ | (35,100) | | | $ | 11,296,691 | |
| | | | | | | | |
December 31, 2021 | | | | | | | | |
| | | | | | | | |
GSE and TVA debentures | | $ | 2,651,571 | | | $ | 45,557 | | | $ | (12) | | | $ | 2,697,116 | |
GSE multifamily MBS | | 6,356,422 | | | 109,956 | | | (3,559) | | | 6,462,819 | |
Total AFS securities | | $ | 9,007,993 | | | $ | 155,513 | | | $ | (3,571) | | | $ | 9,159,935 | |
| |
(1)
| Includes adjustments made to the cost basis of an investment for accretion, amortization, collection of principal, and, if applicable, OTTI recognized in earnings (credit losses) and fair-value hedge accounting adjustments. |
(1) Includes adjustments made to the cost basis for purchase discount or premium and related accretion or amortization, and, if applicable, fair-value hedging basis adjustments. Includes at September 30, 2022 and December 31, 2021 net unamortized discounts totaling $278,342 and net unamortized premiums totaling $14,344, respectively. The applicable fair value hedging basis adjustments at September 30, 2022 and December 31, 2021 totaled net losses of $1,158,698 and net gains of $206,199, respectively. Excludes accrued interest receivable at September 30, 2022 and December 31, 2021 of $38,201 and $32,127, respectively.
Unrealized Loss Positions. The following table presents impaired AFS securities (i.e., in an unrealized loss position), aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or More | | Total |
| | Estimated | | Unrealized | | Estimated | | Unrealized | | Estimated | | Unrealized |
September 30, 2022 | | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses |
U.S. Treasury obligations | | $ | 1,349,185 | | | $ | (1,845) | | | $ | — | | | $ | — | | | $ | 1,349,185 | | | $ | (1,845) | |
| | | | | | | | | | | | |
GSE multifamily MBS | | 3,319,931 | | | (24,726) | | | 241,245 | | | (8,529) | | | 3,561,176 | | | (33,255) | |
Total impaired AFS securities | | $ | 4,669,116 | | | $ | (26,571) | | | $ | 241,245 | | | $ | (8,529) | | | $ | 4,910,361 | | | $ | (35,100) | |
| | | | | | | | | | | | |
December 31, 2021 | | | | | | | | | | | | |
| | | | | | | | | | | | |
GSE and TVA debentures | | $ | 250,145 | | | $ | (12) | | | $ | — | | | $ | — | | | $ | 250,145 | | | $ | (12) | |
GSE multifamily MBS | | 384,015 | | | (3,559) | | | — | | | — | | | 384,015 | | | (3,559) | |
Total impaired AFS securities | | $ | 634,160 | | | $ | (3,571) | | | $ | — | | | $ | — | | | $ | 634,160 | | | $ | (3,571) | |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or more | | Total |
| | Estimated | | Unrealized | | Estimated | | Unrealized | | Estimated | | Unrealized |
September 30, 2017 | | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses |
GSE and TVA debentures | | $ | 82,225 |
| | $ | (198 | ) | | $ | — |
| | $ | — |
| | $ | 82,225 |
| | $ | (198 | ) |
GSE MBS | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Private-label RMBS | | — |
| | — |
| | 2,576 |
| | (100 | ) | | 2,576 |
| | (100 | ) |
Total impaired AFS securities | | $ | 82,225 |
| | $ | (198 | ) | | $ | 2,576 |
| | $ | (100 | ) | | $ | 84,801 |
| | $ | (298 | ) |
| | | | | | | | | | | | |
December 31, 2016 | | | | | | | | | | | | |
GSE and TVA debentures | | $ | 525,722 |
| | $ | (3,604 | ) | | $ | 176,104 |
| | $ | (597 | ) | | $ | 701,826 |
| | $ | (4,201 | ) |
GSE MBS | | — |
| | — |
| | 78,704 |
| | (234 | ) | | 78,704 |
| | (234 | ) |
Private-label RMBS | | — |
| | — |
| | 3,002 |
| | (263 | ) | | 3,002 |
| | (263 | ) |
Total impaired AFS securities | | $ | 525,722 |
|
| $ | (3,604 | ) |
| $ | 257,810 |
|
| $ | (1,094 | ) |
| $ | 783,532 |
|
| $ | (4,698 | ) |
Contractual Maturity.The amortized cost and estimated fair value of non-MBS AFS securities are presented below by contractual maturity. MBS are not presented by contractual maturity because their actual maturities will likely differ from their contractual maturities as borrowers have the right to prepay their obligations with or without prepayment fees.
|
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Amortized | | Estimated | | Amortized | | Estimated |
Year of Contractual Maturity | | Cost | | Fair Value | | Cost | | Fair Value |
Due in 1 year or less | | $ | 146,750 |
| | $ | 146,900 |
| | $ | 972,508 |
| | $ | 974,215 |
|
Due after 1 year through 5 years | | 2,356,721 |
| | 2,380,328 |
| | 1,841,488 |
| | 1,855,517 |
|
Due after 5 years through 10 years | | 1,763,264 |
| | 1,785,456 |
| | 1,734,156 |
| | 1,740,029 |
|
Due after 10 years | | 211,381 |
| | 212,289 |
| | 145,059 |
| | 144,873 |
|
Total non-MBS | | 4,478,116 |
| | 4,524,973 |
| | 4,693,211 |
| | 4,714,634 |
|
Total MBS | | 2,393,495 |
| | 2,459,023 |
| | 1,300,218 |
| | 1,345,201 |
|
Total AFS securities | | $ | 6,871,611 |
| | $ | 6,983,996 |
| | $ | 5,993,429 |
| | $ | 6,059,835 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Realized Gains and Losses. There were no sales of AFS securities during the three or nine months ended September 30, 2017. As of September 30, 2017, we had no intention of selling the AFS securities in an unrealized loss position nor did we consider it more likely than not that we will be required to sell these securities before our anticipated recovery of each security's remaining amortized cost basis. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Amortized | | Estimated | | Amortized | | Estimated |
Year of Contractual Maturity | | Cost | | Fair Value | | Cost | | Fair Value |
Due in 1 year or less | | $ | 130,639 | | | $ | 131,115 | | | $ | 581,801 | | | $ | 582,240 | |
Due after 1 through 5 years | | 1,552,666 | | | 1,572,748 | | | 1,494,109 | | | 1,523,600 | |
Due after 5 through 10 years | | 3,594,686 | | | 3,597,794 | | | 575,661 | | | 591,276 | |
| | | | | | | | |
Total non-MBS | | 5,277,991 | | | 5,301,657 | | | 2,651,571 | | | 2,697,116 | |
Total MBS | | 6,002,901 | | | 5,995,034 | | | 6,356,422 | | | 6,462,819 | |
Total AFS securities | | $ | 11,280,892 | | | $ | 11,296,691 | | | $ | 9,007,993 | | | $ | 9,159,935 | |
Note 4 - Held-to-Maturity Securities
Major Security Types.The following table presents our HTM securities by type of security. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Gross | | Gross | | |
| | | | | | | | Unrecognized | | Unrecognized | | |
| | Amortized | | Non-Credit | | Carrying | | Holding | | Holding | | Estimated |
September 30, 2017 | | Cost (1) | | OTTI | | Value | | Gains | | Losses | | Fair Value |
MBS and ABS: | | | | | | | | | | | | |
Other U.S. obligations -guaranteed MBS | | $ | 3,171,027 |
| | $ | — |
| | $ | 3,171,027 |
| | $ | 7,439 |
| | $ | (8,901 | ) | | $ | 3,169,565 |
|
GSE MBS | | 2,588,959 |
| | — |
| | 2,588,959 |
| | 36,752 |
| | (2,641 | ) | | 2,623,070 |
|
Private-label RMBS | | 39,315 |
| | — |
| | 39,315 |
| | 242 |
| | (266 | ) | | 39,291 |
|
Private-label ABS | | 7,852 |
| | (49 | ) | | 7,803 |
| | 35 |
| | (484 | ) | | 7,354 |
|
Total HTM securities | | $ | 5,807,153 |
| | $ | (49 | ) | | $ | 5,807,104 |
| | $ | 44,468 |
| | $ | (12,292 | ) | | $ | 5,839,280 |
|
| | | | | | | | | | | | |
December 31, 2016 | | | | | | | | | | | | |
MBS and ABS: | | | | | | | | | | | | |
Other U.S. obligations -guaranteed MBS | | $ | 2,678,437 |
| | $ | — |
| | $ | 2,678,437 |
| | $ | 5,412 |
| | $ | (12,720 | ) | | $ | 2,671,129 |
|
GSE MBS | | 3,082,343 |
| | — |
| | 3,082,343 |
| | 46,480 |
| | (8,841 | ) | | 3,119,982 |
|
Private-label RMBS | | 49,748 |
| | — |
| | 49,748 |
| | 61 |
| | (533 | ) | | 49,276 |
|
Private-label ABS | | 9,148 |
| | (103 | ) | | 9,045 |
| | 40 |
| | (780 | ) | | 8,305 |
|
Total HTM securities | | $ | 5,819,676 |
| | $ | (103 | ) | | $ | 5,819,573 |
| | $ | 51,993 |
| | $ | (22,874 | ) | | $ | 5,848,692 |
|
| |
(1)
| Includes adjustments made to the cost basis of an investment for accretion, amortization, collection of principal, and, if applicable, OTTI recognized in earnings (credit losses). |
Unrealized Loss Positions. The following table presents impaired HTM securities (i.e., in an unrealized loss position), aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or more | | Total |
| | Estimated | | Unrealized | | Estimated | | Unrealized | | Estimated | | Unrealized |
September 30, 2017 | | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses (1) |
MBS and ABS: | | | | | | | | | | | | |
Other U.S. obligations - guaranteed MBS | | $ | 722,599 |
| | $ | (5,868 | ) | | $ | 915,850 |
| | $ | (3,033 | ) | | $ | 1,638,449 |
| | $ | (8,901 | ) |
GSE MBS | | 545,539 |
| | (2,356 | ) | | 138,174 |
| | (285 | ) | | 683,713 |
| | (2,641 | ) |
Private-label RMBS | | 7,236 |
| | (5 | ) | | 11,904 |
| | (261 | ) | | 19,140 |
| | (266 | ) |
Private-label ABS | | — |
| | — |
| | 7,354 |
| | (498 | ) | | 7,354 |
| | (498 | ) |
Total impaired HTM securities | | $ | 1,275,374 |
| | $ | (8,229 | ) | | $ | 1,073,282 |
| | $ | (4,077 | ) | | $ | 2,348,656 |
| | $ | (12,306 | ) |
| | | | | | | | | | | | |
December 31, 2016 | | | | | | | | | | | | |
MBS and ABS: | | | | | | | | | | | | |
Other U.S. obligations - guaranteed MBS | | $ | 367,474 |
| | $ | (997 | ) | | $ | 1,426,182 |
| | $ | (11,723 | ) | | $ | 1,793,656 |
| | $ | (12,720 | ) |
GSE MBS | | 1,281,827 |
| | (7,915 | ) | | 320,141 |
| | (926 | ) | | 1,601,968 |
| | (8,841 | ) |
Private-label RMBS | | 18,166 |
| | (62 | ) | | 15,770 |
| | (471 | ) | | 33,936 |
| | (533 | ) |
Private-label ABS | | — |
| | — |
| | 8,304 |
| | (843 | ) | | 8,304 |
| | (843 | ) |
Total impaired HTM securities | | $ | 1,667,467 |
| | $ | (8,974 | ) | | $ | 1,770,397 |
| | $ | (13,963 | ) | | $ | 3,437,864 |
| | $ | (22,937 | ) |
| |
(1)
| For private-label ABS, the total of unrealized losses does not agree to total gross unrecognized holding losses at September 30, 2017 and December 31, 2016 of $484 and $780, respectively. Total unrealized losses include non-credit-related OTTI losses recorded in AOCI of $49 and $103, respectively, and gross unrecognized holding gains on previously OTTI securities of $35 and $40, respectively. |
Note 5 - Other-Than-Temporary Impairment
OTTI Evaluation Process and Results - Private-label RMBS and ABS. On a quarterly basis, we evaluate for OTTI our individual AFS and HTM investment securities that have been previously OTTI or are in an unrealized loss position.
Significant Inputs. The FHLBanks developed a short-term housing price forecast with projected changes ranging from a decrease of 6% to an increase of 13% over a twelve-month period. For the vast majority of housing markets, the changes range from an increase of 1% to an increase of 6%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.
The following table presents the significant modeling assumptions used to determine the amount of credit loss recognized in earnings during the three months ended September 30, 2017 on the two securities for which an OTTI was determined to have occurred, as well as the related current credit enhancement. |
| | | | | | | | | | | | |
| | | | | | | | |
| | Significant Modeling Assumptions for OTTI private-label RMBS for the three months ended September 30, 2017 | |
Year of Securitization | | Prepayment Rates | | Default Rates | | Loss Severities | | Current Credit Enhancement |
Prime - 2006 | | 9 | % | | 11 | % | | 26 | % | | 0 | % |
Subprime - 1998 (1) | | 8 | % | | 40 | % | | 42 | % | | 0 | % |
| |
(1)
| Modeling assumptions assume no payout from monoline bond insurers. |
Results of OTTI Evaluation Process - Private-label RMBS and ABS. As part of our evaluation, we consider whether we intend to sell each security and whether it is more likely than not that we will be required to sell the security before its anticipated recovery of amortized cost.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
If either of these conditions is met, we recognize an OTTI loss in earnings equal to the entire difference between the debt security's amortized cost and its estimated fair value at the statement of condition date. We did not have any such change in intent or likelihood during the three and nine months ended September 30, 2017.
For those remaining securities that meet neither of these conditions, we performed a cash flow analysis to determine whether we expect to recover the entire amortized cost of each security. As a result of our analysis, on two securities previously OTTI, credit losses were recognized for the three and nine months ended September 30, 2017 of $14 and $207, respectively. OTTI credit losses were recognized on one security for the three and nine months ended September 30, 2016 of $75 and $168, respectively. We determined that the unrealized losses on the remaining private-label RMBS and ABS were temporary as we expect to recover the entire amortized cost.
Evaluation Process and Results - All Other AFS and HTM Securities.
Other U.S. and GSE Obligations and TVA Debentures. For other U.S. obligations, GSE obligations, and TVA debentures, we determined that, based on current expectations, the strength of the issuers' guarantees through direct obligations of or support from the United States government is sufficient to protect us from any losses. As a result, all of the gross unrealized losses as of September 30, 2017 are considered temporary.Allowance for Credit Losses. At September 30, 2022 and December 31, 2021, 100% of our AFS securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from our internal ratings of the securities, if applicable.
At September 30, 2022 and December 31, 2021, certain of our AFS securities were in an unrealized loss position; however, we did not record an allowance for credit losses because those losses were considered temporary and we expected to recover the entire amortized cost basis on these securities at maturity.
Held-to-Maturity Securities.
Major Security Types. The following table presents our HTM securities by type of security.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Gross | | Gross | | |
| | | | Unrecognized | | Unrecognized | | |
| | Amortized | | Holding | | Holding | | Estimated |
September 30, 2022 | | Cost (1) | | Gains | | Losses | | Fair Value |
| | | | | | | | |
MBS: | | | | | | | | |
Other U.S. obligations - guaranteed single-family | | $ | 2,710,266 | | | $ | 46 | | | $ | (39,954) | | | $ | 2,670,358 | |
GSE single-family | | 635,066 | | | 455 | | | (31,544) | | | 603,977 | |
GSE multifamily | | 630,324 | | | — | | | (3,682) | | | 626,642 | |
Total HTM securities | | $ | 3,975,656 | | | $ | 501 | | | $ | (75,180) | | | $ | 3,900,977 | |
| | | | | | | | |
December 31, 2021 | | | | | | | | |
| | | | | | | | |
MBS: | | | | | | | | |
Other U.S. obligations - guaranteed single-family | | $ | 2,626,143 | | | $ | 7,384 | | | $ | (9,238) | | | $ | 2,624,289 | |
GSE single-family | | 815,924 | | | 14,424 | | | (4,773) | | | 825,575 | |
GSE multifamily | | 871,706 | | | 779 | | | (192) | | | 872,293 | |
Total HTM securities | | $ | 4,313,773 | | | $ | 22,587 | | | $ | (14,203) | | | $ | 4,322,157 | |
(1) Carrying value equals amortized cost, which includes adjustments made to the cost basis for purchase discount or premium and related accretion or amortization. Net unamortized premium at September 30, 2022 and December 31, 2021 totaled $23,548 and $28,440, respectively.
Realized Gains and Losses. During the three and nine months ended September 30, 2022, for operational reasons, we sold a portion of our HTM MBS. Proceeds from the sales totaled $63,111, resulting in net realized losses of $1,033 determined by the specific identification method. For each of these HTM securities, we had previously collected at least 85% of the principal outstanding at the time of acquisition. As such, the sales were considered maturities for purposes of security classification. There were no sales of HTM securities during the three or nine months ended September 30, 2021.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Allowance for Credit Losses. At September 30, 2022 and December 31, 2021, 100% of our HTM securities were rated single-A, or above, by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from our internal ratings of the securities, if applicable.
At September 30, 2022 and December 31, 2021, based on our evaluation, we did not record an allowance for credit losses on any of our HTM securities.
Note 64 - Advances
The following table presents advances outstanding by yearredemption term.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Redemption Term | | Amount | | WAIR % | | Amount | | WAIR % |
Overdrawn demand and overnight deposit accounts | | $ | 595 | | | 5.45 | | | $ | — | | | — | |
Due in 1 year or less | | 13,442,261 | | | 2.56 | | | 7,863,703 | | | 0.59 | |
Due after 1 through 2 years | | 2,885,580 | | | 2.54 | | | 2,684,996 | | | 2.02 | |
Due after 2 through 3 years | | 2,923,665 | | | 2.19 | | | 3,536,759 | | | 1.35 | |
Due after 3 through 4 years | | 1,939,319 | | | 2.23 | | | 2,931,260 | | | 1.29 | |
Due after 4 through 5 years | | 2,905,339 | | | 2.70 | | | 1,908,432 | | | 1.34 | |
Thereafter | | 7,746,294 | | | 2.20 | | | 8,384,458 | | | 0.82 | |
Total advances, par value | | 31,843,053 | | | 2.43 | | | 27,309,608 | | | 1.03 | |
| | | | | | | | |
Fair-value hedging basis adjustments, net | | (654,328) | | | | | 179,115 | | | |
Unamortized swap termination fees associated with modified advances, net of deferred prepayment fees | | 7,360 | | | | | 9,112 | | | |
Total advances (1) | | $ | 31,196,085 | | | | | $ | 27,497,835 | | | |
(1) Carrying value equals amortized cost, which excludes accrued interest receivable at September 30, 2022 and December 31, 2021 of contractual maturity.$27,271 and $13,075, respectively.
|
| | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Year of Contractual Maturity | | Amount | | WAIR % | | Amount | | WAIR % |
Overdrawn demand and overnight deposit accounts | | $ | 2,139 |
| | 2.50 |
| | $ | — |
| | — |
|
Due in 1 year or less | | 16,384,199 |
| | 1.31 |
| | 12,598,864 |
| | 0.91 |
|
Due after 1 year through 2 years | | 2,522,835 |
| | 1.78 |
| | 2,752,629 |
| | 1.74 |
|
Due after 2 years through 3 years | | 2,812,894 |
| | 1.78 |
| | 1,920,962 |
| | 2.10 |
|
Due after 3 years through 4 years | | 1,934,836 |
| | 1.65 |
| | 2,605,198 |
| | 1.38 |
|
Due after 4 years through 5 years | | 2,239,416 |
| | 1.74 |
| | 2,009,395 |
| | 1.47 |
|
Thereafter | | 7,108,276 |
| | 1.55 |
| | 6,244,912 |
| | 1.20 |
|
Total advances, par value | | 33,004,595 |
| | 1.48 |
| | 28,131,960 |
| | 1.22 |
|
Fair-value hedging adjustments | | (65,397 | ) | | |
| | (57,716 | ) | | |
|
Unamortized swap termination fees associated with modified advances, net of deferred prepayment fees | | 13,603 |
| | |
| | 21,709 |
| | |
|
Total advances | | $ | 32,952,801 |
| | |
| | $ | 28,095,953 |
| | |
|
The following table presents advances outstanding by the earlier of the year of contractual maturityredemption date or the next call date and next put date.
| | | | Year of Contractual Maturity or Next Call Date | | Year of Contractual Maturity or Next Put Date | | Earlier of Redemption or Next Call Date | | Earlier of Redemption or Next Put Date |
| | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
Overdrawn demand and overnight deposit accounts | | $ | 2,139 |
| | $ | — |
| | $ | 2,139 |
| | $ | — |
| Overdrawn demand and overnight deposit accounts | | $ | 595 | | | $ | — | | | $ | 595 | | | $ | — | |
Due in 1 year or less | | 24,015,209 |
| | 19,390,714 |
| | 16,549,199 |
| | 12,767,364 |
| Due in 1 year or less | | 18,255,785 | | | 12,547,866 | | | 16,879,466 | | | 13,452,703 | |
Due after 1 year through 2 years | | 2,468,685 |
| | 2,502,629 |
| | 2,522,835 |
| | 2,757,629 |
| |
Due after 2 years through 3 years | | 1,914,894 |
| | 1,856,463 |
| | 3,292,494 |
| | 1,915,962 |
| |
Due after 3 years through 4 years | | 1,111,436 |
| | 1,548,998 |
| | 2,242,836 |
| | 2,605,198 |
| |
Due after 4 years through 5 years | | 1,194,116 |
| | 900,095 |
| | 2,820,216 |
| | 2,535,895 |
| |
Due after 1 through 2 years | | Due after 1 through 2 years | | 2,409,080 | | | 2,578,396 | | | 3,561,580 | | | 3,090,101 | |
Due after 2 through 3 years | | Due after 2 through 3 years | | 2,191,965 | | | 2,127,759 | | | 3,694,565 | | | 3,636,259 | |
Due after 3 through 4 years | | Due after 3 through 4 years | | 1,425,944 | | | 1,997,060 | | | 1,939,319 | | | 3,007,160 | |
Due after 4 through 5 years | | Due after 4 through 5 years | | 1,649,489 | | | 1,530,307 | | | 2,817,339 | | | 1,485,332 | |
Thereafter | | 2,298,116 |
| | 1,933,061 |
| | 5,574,876 |
| | 5,549,912 |
| Thereafter | | 5,910,195 | | | 6,528,220 | | | 2,950,189 | | | 2,638,053 | |
Total advances, par value | | $ | 33,004,595 |
| | $ | 28,131,960 |
| | $ | 33,004,595 |
| | $ | 28,131,960 |
| Total advances, par value | | $ | 31,843,053 | | | $ | 27,309,608 | | | $ | 31,843,053 | | | $ | 27,309,608 | |
Advance Concentrations. At September 30, 2022 and December 31, 2021, our top five borrowers held 45% and 43%, respectively, of total advances outstanding at par.
Allowance for Credit Losses. Based upon the collateral held as security, our credit extension and collateral policies, our credit analysis and the repayment history on advances, we have not recorded an allowance for credit losses on advances.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
In accordance with the Final Membership Rule, captive insurance companies that were admitted as FHLBank members on orafter September 12, 2014 repaid all of their outstanding advances and had their memberships terminated by February 19, 2017.
Under the Final Membership Rule, captive insurance companies that were admitted as FHLBank members prior to September 12, 2014, and do not meet the new definition of "insurance company" or fall within another category of institution that is eligible for FHLBank membership, shall have their memberships terminated no later than February 19, 2021. Prior to termination, new or renewed extensions of credit to such members will be subject to certain restrictions relating to maturity dates and the ratio of advances to the captive insurer's total assets and may be subject to additional restrictions at our discretion. The outstanding advances to these captive insurers mature on various dates through 2025.
Credit Risk Exposure and Security Terms. At September 30, 2017 and December 31, 2016, our top five borrowers held 44% and 43%, respectively, of total advances outstanding, at par. We held sufficient collateral to secure the advances to these borrowers.
See Note 9 - Allowance for Credit Losses in our 2016 Form 10-K for information related to credit risk on advances and allowance methodology for credit losses.
Note 75 - Mortgage Loans Held for Portfolio
The following tables present information on mortgage loans held for portfolio by term type, and product.type.
| | Term | | September 30, 2017 | | December 31, 2016 | Term | | September 30, 2022 | | December 31, 2021 |
Fixed-rate long-term mortgages | | $ | 8,809,613 |
| | $ | 8,086,412 |
| Fixed-rate long-term mortgages | | $ | 6,600,345 | | | $ | 6,417,543 | |
Fixed-rate medium-term (1) mortgages | | 1,156,400 |
| | 1,206,978 |
| Fixed-rate medium-term (1) mortgages | | 889,402 | | | 1,016,851 | |
Total mortgage loans held for portfolio, UPB | | 9,966,013 |
| | 9,293,390 |
| Total mortgage loans held for portfolio, UPB | | 7,489,747 | | | 7,434,394 | |
Unamortized premiums | | 230,943 |
| | 210,116 |
| Unamortized premiums | | 171,166 | | | 181,172 | |
Unamortized discounts | | (2,493 | ) | | (2,383 | ) | Unamortized discounts | | (6,011) | | | (2,389) | |
Fair-value hedging adjustments | | 2,037 |
| | 1,124 |
| |
Allowance for loan losses | | (850 | ) | | (850 | ) | |
Total mortgage loans held for portfolio, net | | $ | 10,195,650 |
| | $ | 9,501,397 |
| |
| Hedging basis adjustments, net | | Hedging basis adjustments, net | | (5,483) | | | 3,157 | |
Total mortgage loans held for portfolio | | Total mortgage loans held for portfolio | | 7,649,419 | | | 7,616,334 | |
Allowance for credit losses | | Allowance for credit losses | | (200) | | | (200) | |
Total mortgage loans held for portfolio, net (2) | | Total mortgage loans held for portfolio, net (2) | | $ | 7,649,219 | | | $ | 7,616,134 | |
| |
(1)
| Defined as a term of 15 years or less at origination. |
|
| | | | | | | | |
Type | | September 30, 2017 | | December 31, 2016 |
Conventional | | $ | 9,525,624 |
| | $ | 8,796,407 |
|
Government-guaranteed or -insured | | 440,389 |
| | 496,983 |
|
Total mortgage loans held for portfolio, UPB | | $ | 9,966,013 |
| | $ | 9,293,390 |
|
(1) Defined as a term of 15 years or less at origination.(2) Excludes accrued interest receivable at September 30, 2022 and December 31, 2021 of $29,202 and $27,977, respectively. |
| | | | | | | | |
Product | | September 30, 2017 | | December 31, 2016 |
MPP | | $ | 9,646,276 |
| | $ | 8,930,194 |
|
MPF Program | | 319,737 |
| | 363,196 |
|
Total mortgage loans held for portfolio, UPB | | $ | 9,966,013 |
| | $ | 9,293,390 |
|
| | | | | | | | | | | | | | |
Type | | September 30, 2022 | | December 31, 2021 |
Conventional | | $ | 7,335,937 | | | $ | 7,254,056 | |
Government-guaranteed or -insured | | 153,810 | | | 180,338 | |
Total mortgage loans held for portfolio, UPB | | $ | 7,489,747 | | | $ | 7,434,394 | |
In December 2016, we agreed to sell a 90% participating interest in a $100 million MCC of certain newly acquired MPP loans to
Credit Quality Indicators for Conventional Mortgage Loans and Other Delinquency Statistics. The tables below present the FHLBank of Atlanta. Principal amounts settled in December 2016 totaled $72 million,key credit quality indicators and the remaining $18 million settled in January 2017.
See Note 8 - Allowanceother delinquency statistics for Credit Losses for information related to our credit risk on mortgage loans held for portfolio aggregated by (i) the most recent five origination years and allowance methodology for loan losses.(ii) all other prior origination years. Amounts are based on amortized cost, which excludes accrued interest receivable.
| | | | | | | | | | | | | | | | | | | | |
| | Origination Year | | |
Payment Status as of September 30, 2022 | | Prior to 2018 | | 2018 to 2022 | | Total |
Past due: | | | | | | |
30-59 days | | $ | 16,995 | | | $ | 13,374 | | | $ | 30,369 | |
60-89 days | | 4,253 | | | 1,513 | | | 5,766 | |
90 days or more | | 9,672 | | | 1,822 | | | 11,494 | |
Total past due | | 30,920 | | | 16,709 | | | 47,629 | |
Total current | | 2,505,288 | | | 4,940,983 | | | 7,446,271 | |
Total conventional mortgage loans, amortized cost | | $ | 2,536,208 | | | $ | 4,957,692 | | | $ | 7,493,900 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Origination Year | | |
Payment Status as of December 31, 2021 | | Prior to 2017 | | 2017 to 2021 | | Total |
Past due: | | | | | | |
30-59 days | | $ | 16,968 | | | $ | 12,662 | | | $ | 29,630 | |
60-89 days | | 4,175 | | | 1,767 | | | 5,942 | |
90 days or more | | 18,599 | | | 11,206 | | | 29,805 | |
Total past due | | 39,742 | | | 25,635 | | | 65,377 | |
Total current | | 2,447,420 | | | 4,921,101 | | | 7,368,521 | |
Total conventional mortgage loans, amortized cost | | $ | 2,487,162 | | | $ | 4,946,736 | | | $ | 7,433,898 | |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
| | | | | | | | | | | | | | | | | | | | |
Other Delinquency Statistics as of September 30, 2022 | | Conventional | | Government | | Total |
In process of foreclosure (1) | | $ | 2,441 | | | $ | — | | | $ | 2,441 | |
Serious delinquency rate (2) | | 0.15 | % | | 1.27 | % | | 0.18 | % |
Past due 90 days or more still accruing interest (3) | | $ | 7,221 | | | $ | 1,796 | | | $ | 9,017 | |
On non-accrual status (4) | | $ | 9,485 | | | $ | — | | | $ | 9,485 | |
| | | | | | |
Other Delinquency Statistics as of December 31, 2021 | | | | | | |
In process of foreclosure (1) | | $ | 1,999 | | | $ | — | | | $ | 1,999 | |
Serious delinquency rate (2) | | 0.40 | % | | 0.86 | % | | 0.41 | % |
Past due 90 days or more still accruing interest (3) | | $ | 15,725 | | | $ | 1,364 | | | $ | 17,089 | |
On non-accrual status (4) | | $ | 23,487 | | | $ | — | | | $ | 23,487 | |
Note 8 -
(1) Includes loans for which the decision of foreclosure or similar alternative, such as pursuit of deed-in-lieu of foreclosure, has been reported. Loans in process of foreclosure are included in past due categories depending on their delinquency status, but are not necessarily considered to be on non-accrual status.
(2) Represents loans 90 days or more past due (including loans in process of foreclosure) expressed as a percentage of the total mortgage loans.
(3) Although our past due scheduled/scheduled MPP loans are classified as loans past due 90 days or more based on the loan's delinquency status, we do not consider these loans to be on non-accrual status as they are well-secured and in the process of collection.
(4) As of September 30, 2022 and December 31, 2021, $2,716 and $11,701, respectively, of UPB of these conventional mortgage loans on non-accrual status did not have a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral, including any credit enhancements, exceeded the amortized cost of the loans.
Allowance for Credit Losses
A description of the allowance methodologies for our portfolio segments as well as our policy for impairing financing receivables and charging them off when necessary is disclosed in Note 1 - Summary of Significant Accounting Policies and Note 9 - Allowance for Credit Losses in our 2016 Form 10-K.
Conventional MortgageLoans.
Conventional MPP.Losses.The following table presents the activity in the LRA.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
LRA Activity | | 2017 | | 2016 | | 2017 | | 2016 |
Liability, beginning of period | | $ | 136,841 |
| | $ | 105,565 |
| | $ | 125,683 |
| | $ | 91,552 |
|
Additions | | 7,616 |
| | 11,722 |
| | 19,383 |
| | 27,140 |
|
Claims paid | | (87 | ) | | (301 | ) | | (335 | ) | | (786 | ) |
Distributions to PFIs | | (317 | ) | | (38 | ) | | (678 | ) | | (958 | ) |
Liability, end of period | | $ | 144,053 |
| | $ | 116,948 |
| | $ | 144,053 |
| | $ | 116,948 |
|
The following table presents the impact of credit enhancements on the allowance for MPP loan losses. |
| | | | | | | | |
MPP Credit Waterfall | | September 30, 2017 | | December 31, 2016 |
Estimated incurred losses remaining after borrower's equity, before credit enhancements (1) | | $ | 6,837 |
| | $ | 8,689 |
|
Portion of estimated incurred losses recoverable from PMI | | (1,417 | ) | | (1,981 | ) |
Portion of estimated incurred losses recoverable from LRA (2) | | (2,140 | ) | | (2,418 | ) |
Portion of estimated incurred losses recoverable from SMI | | (2,580 | ) | | (3,590 | ) |
Allowance for unrecoverable PMI/SMI | | 50 |
| | 50 |
|
Allowance for MPP loan losses | | $ | 750 |
| | $ | 750 |
|
| |
(1)
| Based on a loss emergence period of 24 months. |
| |
(2)
| Amounts recoverable are limited to (i) the estimated losses remaining after borrower's equity and PMI and (ii) the remaining balance in each pool's portion of the LRA. The remainder of the LRA balance is available to cover any losses not yet incurred and to distribute any excess funds to the PFIs. |
Credit Quality Indicators. The tables below present the key credit quality indicators for our mortgage loans held for portfolio.
|
| | | | | | | | | | | | |
Delinquency Status as of September 30, 2017 | | Conventional | | Government | | Total |
Past due: | | | | | | |
30-59 days | | $ | 36,588 |
| | $ | 9,867 |
| | $ | 46,455 |
|
60-89 days | | 8,396 |
| | 2,023 |
| | 10,419 |
|
90 days or more | | 22,241 |
| | 1,705 |
| | 23,946 |
|
Total past due | | 67,225 |
| | 13,595 |
| | 80,820 |
|
Total current | | 9,723,583 |
| | 434,276 |
| | 10,157,859 |
|
Total mortgage loans, recorded investment | | $ | 9,790,808 |
| | $ | 447,871 |
| | $ | 10,238,679 |
|
| | | | | | |
Other Delinquency Statistics as of September 30, 2017 | | | | | | |
In process of foreclosure (1) | | $ | 13,205 |
| | $ | — |
| | $ | 13,205 |
|
Serious delinquency rate (2) | | 0.23 | % | | 0.38 | % | | 0.23 | % |
Past due 90 days or more still accruing interest (3) | | $ | 18,203 |
| | $ | 1,705 |
| | $ | 19,908 |
|
On non-accrual status | | $ | 4,892 |
| | $ | — |
| | $ | 4,892 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | | | | | |
Delinquency Status as of December 31, 2016 | | Conventional | | Government | | Total |
Past due: | | | | | | |
30-59 days | | $ | 46,118 |
| | $ | 17,183 |
| | $ | 63,301 |
|
60-89 days | | 11,044 |
| | 3,548 |
| | 14,592 |
|
90 days or more | | 29,098 |
| | 2,350 |
| | 31,448 |
|
Total past due | | 86,260 |
| | 23,081 |
| | 109,341 |
|
Total current | | 8,949,441 |
| | 482,316 |
| | 9,431,757 |
|
Total mortgage loans, recorded investment | | $ | 9,035,701 |
| | $ | 505,397 |
| | $ | 9,541,098 |
|
| | | | | | |
Other Delinquency Statistics as of December 31, 2016 | | | | | | |
In process of foreclosure (1) | | $ | 17,749 |
| | $ | — |
| | $ | 17,749 |
|
Serious delinquency rate (2) | | 0.32 | % | | 0.46 | % | | 0.33 | % |
Past due 90 days or more still accruing interest (3) | | $ | 25,375 |
| | $ | 2,350 |
| | $ | 27,725 |
|
On non-accrual status | | $ | 4,699 |
| | $ | — |
| | $ | 4,699 |
|
| |
(1)
| Includes loans for which the decision of foreclosure or similar alternative, such as pursuit of deed-in-lieu of foreclosure, has been reported. Loans in process of foreclosure are included in past due categories depending on their delinquency status, but are not necessarily considered to be on non-accrual status. For additional discussion, see Note 1 - Summary of Significant Accounting Policies in our 2016 Form 10-K.
|
| |
(2)
| Represents loans 90 days or more past due (including loans in process of foreclosure) expressed as a percentage of the total recorded investment in mortgage loans. The percentage excludes principal and interest amounts previously paid in full by the servicers on conventional loans that are pending resolution of potential loss claims. Our servicers repurchase seriously delinquent government loans, including FHA loans, when certain criteria are met.
|
| |
(3)
| Although our past due scheduled/scheduled MPP loans are classified as loans past due 90 days or more based on the mortgagor's payment status, we do not consider these loans to be on non-accrual status. For additional discussion, see Note 1 - Summary of Significant Accounting Policies in our 2016 Form 10-K.
|
Allowance for Loan Losses on Mortgage Loans. The tables below presentpresents a rollforward of our allowance for loan losses, the allowance for loan losses by impairment methodology, and thecredit losses.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | |
Rollforward of Allowance | | 2022 | | 2021 | | 2022 | | 2021 |
Balance, beginning of period | | $ | 200 | | | $ | 325 | | | $ | 200 | | | $ | 350 | |
Charge-offs (1) | | 8 | | | 5 | | | 15 | | | (87) | |
Recoveries | | — | | | 11 | | | 53 | | | 34 | |
Provision for (reversal of) credit losses | | (8) | | | (16) | | | (68) | | | 28 | |
Balance, end of period | | $ | 200 | | | $ | 325 | | | $ | 200 | | | $ | 325 | |
(1) Includes receipts of LRA funds on certain loans that are recorded investment in mortgage loans by impairment methodology.as reversals of previous charge-offs.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Rollforward of Allowance for Loan Losses | | 2017 | | 2016 | | 2017 | | 2016 |
Balance, beginning of period | | $ | 850 |
| | $ | 850 |
| | $ | 850 |
| | $ | 1,125 |
|
Charge-offs | | (80 | ) | | (176 | ) | | (601 | ) | | (586 | ) |
Recoveries | | 170 |
| | 91 |
| | 410 |
| | 443 |
|
Provision for (reversal of) loan losses | | (90 | ) | | 85 |
| | 191 |
| | (132 | ) |
Balance, end of period | | $ | 850 |
| | $ | 850 |
| | $ | 850 |
| | $ | 850 |
|
|
| | | | | | | | |
Allowance for Loan Losses by Impairment Methodology | | September 30, 2017 | | December 31, 2016 |
Conventional loans collectively evaluated for impairment | | $ | 717 |
| | $ | 750 |
|
Conventional loans individually evaluated for impairment (1) | | 133 |
| | 100 |
|
Total allowance for loan losses | | $ | 850 |
| | $ | 850 |
|
| | | | |
Recorded Investment by Impairment Methodology | | September 30, 2017 | | December 31, 2016 |
Conventional loans collectively evaluated for impairment | | $ | 9,776,540 |
| | $ | 9,020,194 |
|
Conventional loans individually evaluated for impairment (1) | | 14,268 |
| | 15,507 |
|
Total recorded investment in conventional loans | | $ | 9,790,808 |
| | $ | 9,035,701 |
|
| |
(1)
| The recorded investment in our MPP conventional loans individually evaluated for impairment excludes principal previously paid in full by the servicers as of September 30, 2017 and December 31, 2016 of $2,095 and $2,814, respectively, that remains subject to potential claims by those servicers for any losses resulting from past or future liquidations of the underlying properties. However, the MPP allowance for loan losses as of September 30, 2017 and December 31, 2016 includes $99 and $70, respectively, for these potential claims. |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Individually Evaluated Impaired Loans. The tables below present the conventional loans individually evaluated for impairment with and without an allowance for loan losses. The first table presents the recorded investment, UPB and related allowance associated with these loans, while the next table presents the average recorded investment of these loans and related interest income recognized. Due to the minimal change in terms of modified loans (i.e., no principal forgiven), our pre-modification recorded investment in TDRs was not materially different than the post-modification recorded investment.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Individually Evaluated Impaired Loans | | Recorded Investment | | UPB | | Related Allowance for Loan Losses | | Recorded Investment | | UPB | | Related Allowance for Loan Losses |
MPP conventional loans without allowance for loan losses (1) | | $ | 12,685 |
| | $ | 12,762 |
| | $ | — |
| | $ | 15,158 |
| | $ | 15,219 |
| | $ | — |
|
MPP conventional loans with allowance for loan losses | | 1,583 |
| | 1,581 |
| | 34 |
| | 349 |
| | 358 |
| | 30 |
|
Total | | $ | 14,268 |
| | $ | 14,343 |
| | $ | 34 |
| | $ | 15,507 |
| | $ | 15,577 |
| | $ | 30 |
|
| |
(1)
| No allowance for loan losses was recorded on these impaired loans after consideration of the underlying loan-specific attribute data, estimated liquidation value of real estate collateral held, estimated costs associated with maintaining and disposing of the collateral, and credit enhancements. |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Three Months Ended |
| | September 30, 2017 | | September 30, 2016 |
Individually Evaluated Impaired Loans | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
MPP conventional loans without allowance for loan losses | | $ | 13,287 |
| | $ | 158 |
| | $ | 16,620 |
| | $ | 187 |
|
MPP conventional loans with allowance for loan losses | | 1,587 |
| | 24 |
| | 377 |
| | 6 |
|
Total | | $ | 14,874 |
| | $ | 182 |
| | $ | 16,997 |
| | $ | 193 |
|
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended | | Nine Months Ended |
| | September 30, 2017 | | September 30, 2016 |
Individually Evaluated Impaired Loans | | Average Recorded Investment | | Interest Income Recognized | | Average Recorded Investment | | Interest Income Recognized |
MPP conventional loans without allowance for loan losses | | $ | 13,827 |
| | $ | 512 |
| | $ | 16,929 |
| | $ | 574 |
|
MPP conventional loans with allowance for loan losses | | 1,594 |
| | 49 |
| | 380 |
| | 34 |
|
Total | | $ | 15,421 |
| | $ | 561 |
| | $ | 17,309 |
| | $ | 608 |
|
Note 96 - Derivatives and Hedging Activities
Managing Credit Risk on Derivatives. We are subject to credit risk due to the risk of nonperformance by the counterparties to our derivative transactions.
Uncleared Derivatives. There were no uncleared derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest on cash collateral) at September 30, 2022.
Cleared Derivatives.At September 30, 2022, we were not required by our clearing agents to post any margin in excess of the Clearinghouses' requirements.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Financial Statement Effect and Additional Financial Information.
Derivative Notional Amounts.We record derivative instruments, related cash collateral (including initial and variation margin received or pledged/posted)posted and associated accrued interest on a net basis by clearing agent and/or by counterparty when the netting requirements have been met. The following table presents the notional amount and estimated fair value of derivative assets and liabilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Notional | | Derivative | | Derivative | | Notional | | Derivative | | Derivative |
| | Amount | | Assets | | Liabilities | | Amount | | Assets | | Liabilities |
Derivatives designated as hedging instruments: | | | | | | | | | | | | |
Interest-rate swaps | | $ | 58,427,606 | | | $ | 945,270 | | | $ | 2,222,706 | | | $ | 46,395,451 | | | $ | 105,446 | | | $ | 413,324 | |
| | | | | | | | | | | | |
Derivatives not designated as hedging instruments: | | | | | | | | | | | | |
Economic hedges: | | | | | | | | | | | | |
Interest-rate swaps | | 7,200,000 | | | 1,395 | | | 1,259 | | | 8,595,000 | | | 357 | | | 148 | |
| | | | | | | | | | | | |
Interest-rate caps/floors | | 611,000 | | | 2,357 | | | — | | | 625,500 | | | 1,077 | | | — | |
Interest-rate forwards | | 44,300 | | | 967 | | | — | | | 98,200 | | | 1 | | | 199 | |
MDCs | | 43,868 | | | 40 | | | 583 | | | 96,424 | | | 45 | | | 105 | |
Total derivatives not designated as hedging instruments | | 7,899,168 | | | 4,759 | | | 1,842 | | | 9,415,124 | | | 1,480 | | | 452 | |
Total derivatives before adjustments | | $ | 66,326,774 | | | 950,029 | | | 2,224,548 | | | $ | 55,810,575 | | | 106,926 | | | 413,776 | |
Netting adjustments and cash collateral (1) | | | | (608,834) | | | (2,208,019) | | | | | 113,276 | | | (401,591) | |
Total derivatives, net, at estimated fair value | | | | $ | 341,195 | | | $ | 16,529 | | | | | $ | 220,202 | | | $ | 12,185 | |
(1) Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed, with the same clearing agent and/or counterparty. Cash collateral pledged to counterparties at September 30, 2022 and December 31, 2021, including accrued interest, totaled $1,790,630 and $515,761, respectively. Cash collateral received from counterparties and held at both September 30, 2022 and December 31, 2021, including accrued interest, totaled $191,445 and $894, respectively. At September 30, 2022 and December 31, 2021, no securities were pledged as collateral.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | | | | | |
| | Notional | | Estimated Fair Value | | Estimated Fair Value |
| | Amount of | | of Derivative | | of Derivative |
September 30, 2017 | | Derivatives | | Assets | | Liabilities |
Derivatives designated as hedging instruments: | | | | | | |
Interest-rate swaps | | $ | 27,909,622 |
| | $ | 215,255 |
| | $ | 81,191 |
|
Total derivatives designated as hedging instruments | | 27,909,622 |
| | 215,255 |
| | 81,191 |
|
Derivatives not designated as hedging instruments: | | |
| | |
| | |
|
Interest-rate swaps | | 326,777 |
| | 204 |
| | 47 |
|
Swaptions | | 250,000 |
| | — |
| | — |
|
Interest-rate caps/floors | | 254,500 |
| | 160 |
| | — |
|
Interest-rate forwards | | 134,800 |
| | 524 |
| | — |
|
MDCs | | 133,530 |
| | 23 |
| | 189 |
|
Total derivatives not designated as hedging instruments | | 1,099,607 |
| | 911 |
| | 236 |
|
Total derivatives before adjustments | | $ | 29,009,229 |
| | 216,166 |
| | 81,427 |
|
Netting adjustments (1) | | | | (80,004 | ) | | (80,004 | ) |
Cash collateral and variation margin for daily settled contracts (1) | | |
| | 5,565 |
| | (19 | ) |
Total derivatives, net | | |
| | $ | 141,727 |
| | $ | 1,404 |
|
| | | | | �� | |
December 31, 2016 | | | | | | |
Derivatives designated as hedging instruments: | | | | | | |
Interest-rate swaps | | $ | 23,998,498 |
| | $ | 230,705 |
| | $ | 102,201 |
|
Total derivatives designated as hedging instruments | | 23,998,498 |
| | 230,705 |
| | 102,201 |
|
Derivatives not designated as hedging instruments: | | |
| | |
| | |
|
Interest-rate swaps | | 901,344 |
| | 1,430 |
| | 31 |
|
Swaptions | | 350,000 |
| | 2 |
| | 50 |
|
Interest-rate caps/floors | | 364,500 |
| | 322 |
| | 2 |
|
Interest-rate forwards | | 99,100 |
| | 339 |
| | 352 |
|
MDCs | | 99,002 |
| | 303 |
| | 471 |
|
Total derivatives not designated as hedging instruments | | 1,813,946 |
| | 2,396 |
| | 906 |
|
Total derivatives before adjustments | | $ | 25,812,444 |
| | 233,101 |
| | 103,107 |
|
Netting adjustments (1) | | | | (133,089 | ) | | (133,089 | ) |
Cash collateral (1) | | |
| | 34,836 |
| | 55,207 |
|
Total derivatives, net | | |
| | $ | 134,848 |
| | $ | 25,225 |
|
| |
(1)
| Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed with the same clearing agent and/or counterparty (including fair value adjustments on derivatives for which variation margin payments are characterized as daily settled contracts). Cash collateral pledged to counterparties at September 30, 2017 and December 31, 2016 totaled $77,352 and $35,422, respectively. Cash collateral received from counterparties at September 30, 2017 and December 31, 2016 totaled $49,004 and $55,793, respectively. Variation margin for daily settled contracts totaled $22,764 at September 30, 2017. See Note 1 - Summary of Significant Accounting Policies for more information.
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
The following table presents separately the estimated fair value of derivative instruments meeting and not meeting netting requirements, including the effect of the related collateral received from or pledgedcollateral.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities |
Derivative instruments meeting netting requirements: | | | | | | | | |
Gross recognized amount | | | | | | | | |
Uncleared | | $ | 921,911 | | | $ | 2,222,074 | | | $ | 105,667 | | | $ | 411,886 | |
Cleared | | 27,111 | | | 1,891 | | | 1,213 | | | 1,586 | |
Total gross recognized amount | | 949,022 | | | 2,223,965 | | | 106,880 | | | 413,472 | |
Gross amounts of netting adjustments and cash collateral | | | | | | | | |
Uncleared | | (916,110) | | | (2,206,128) | | | (105,417) | | | (400,005) | |
Cleared | | 307,276 | | | (1,891) | | | 218,693 | | | (1,586) | |
Total gross amounts of netting adjustments and cash collateral | | (608,834) | | | (2,208,019) | | | 113,276 | | | (401,591) | |
Net amounts after netting adjustments and cash collateral | | | | | | | | |
Uncleared | | 5,801 | | | 15,946 | | | 250 | | | 11,881 | |
Cleared | | 334,387 | | | — | | | 219,906 | | | — | |
Total net amounts after netting adjustments and cash collateral | | 340,188 | | | 15,946 | | | 220,156 | | | 11,881 | |
Derivative instruments not meeting netting requirements (1) | | 1,007 | | | 583 | | | 46 | | | 304 | |
Total derivatives, net, at estimated fair value | | $ | 341,195 | | | $ | 16,529 | | | $ | 220,202 | | | $ | 12,185 | |
(1) Includes MDCs and certain interest-rate forwards.
The following table presents the impact of qualifying fair-value hedging relationships on net interest income by hedged item, excluding any offsetting interest income/expense of the associated hedged items.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Three Months Ended September 30, 2022 | | Advances | | AFS Securities | | CO Bonds | | Total |
Net impact of fair-value hedging relationships on net interest income: | | | | | | | | |
Net interest settlements on derivatives (1) | | $ | 27,902 | | | $ | 23,579 | | | $ | (58,110) | | | $ | (6,629) | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on derivatives (2) | | 253,211 | | | 172,199 | | | (716,889) | | | (291,479) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on hedged items (3) | | (253,803) | | | (190,174) | | | 713,132 | | | 269,155 | |
Net impact on net interest income | | $ | 27,310 | | | $ | 5,604 | | | $ | (61,867) | | | $ | (28,953) | |
| | | | | | | | |
Total interest income (expense) recorded in the Statement of Income (4) | | $ | 187,002 | | | $ | 88,443 | | | $ | (218,109) | | | $ | 57,336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2021 | | | | | | | | |
Net impact of fair-value hedging relationships on net interest income: | | | | | | | | |
Net interest settlements on derivatives (1) | | $ | (45,957) | | | $ | (25,658) | | | $ | 27,351 | | | $ | (44,264) | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on derivatives (2) | | 58,814 | | | 32,619 | | | (35,560) | | | 55,873 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on hedged items (3) | | (66,219) | | | (40,684) | | | 37,935 | | | (68,968) | |
Net impact on net interest income | | $ | (53,362) | | | $ | (33,723) | | | $ | 29,726 | | | $ | (57,359) | |
| | | | | | | | |
Total interest income (expense) recorded in the Statement of Income (4) | | $ | 20,432 | | | $ | 22,477 | | | $ | (46,601) | | | $ | (3,692) | |
Notes to counterpartiesFinancial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2022 | | Advances | | AFS Securities | | CO Bonds | | Total |
Net impact of fair-value hedging relationships on net interest income: | | | | | | | | |
Net interest settlements on derivatives (1) | | $ | (31,122) | | | $ | (10,549) | | | $ | 24,554 | | | $ | (17,117) | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on derivatives (2) | | 751,782 | | | 456,209 | | | (2,006,955) | | | (798,964) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on hedged items (3) | | (754,378) | | | (504,453) | | | 1,995,737 | | | 736,906 | |
Net impact on net interest income | | $ | (33,718) | | | $ | (58,793) | | | $ | 13,336 | | | $ | (79,175) | |
| | | | | | | | |
Total interest income (expense) recorded in the Statement of Income (4) | | $ | 289,605 | | | $ | 149,451 | | | $ | (369,000) | | | $ | 70,056 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2021 | | | | | | | | |
Net impact of fair-value hedging relationships on net interest income: | | | | | | | | |
Net interest settlements on derivatives (1) | | $ | (137,849) | | | $ | (86,438) | | | $ | 61,588 | | | $ | (162,699) | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on derivatives (2) | | 293,598 | | | 266,829 | | | (116,670) | | | 443,757 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net gains (losses) on hedged items (3) | | (299,251) | | | (275,315) | | | 122,157 | | | (452,409) | |
Net impact on net interest income | | $ | (143,502) | | | $ | (94,924) | | | $ | 67,075 | | | $ | (171,351) | |
| | | | | | | | |
Total interest income (expense) recorded in the Statement of Income (4) | | $ | 84,716 | | | $ | 73,497 | | | $ | (153,071) | | | $ | 5,142 | |
(1) Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.
(2) Includes for the three months ended September 30, 2022 and variation margin2021, increases (decreases) in estimated fair value totaling $(287,136) and $55,843, respectively, and price alignment interest of $(4,343) and $30, respectively. Includes for daily settled contracts.the nine months ended September 30, 2022 and 2021, increases (decreases) in estimated fair value totaling $(793,442) and $443,678, respectively, and price alignment interest of $(5,522) and $79, respectively. |
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Derivative Assets | | Derivative Liabilities | | Derivative Assets | | Derivative Liabilities |
Derivative instruments meeting netting requirements: | | | | | | | | |
Gross recognized amount | | | | | | | | |
Uncleared | | $ | 82,942 |
| | $ | 33,549 |
| | $ | 86,606 |
| | $ | 45,449 |
|
Cleared | | 132,677 |
| | 47,689 |
| | 145,853 |
| | 56,835 |
|
Total gross recognized amount | | 215,619 |
| | 81,238 |
| | 232,459 |
| | 102,284 |
|
Gross amounts of netting adjustments, cash collateral and variation margin for daily settled contracts | | | | | | | | |
Uncleared | | (75,246 | ) | | (32,334 | ) | | (76,255 | ) | | (21,047 | ) |
Cleared (1) | | 807 |
| | (47,689 | ) | | (21,998 | ) | | (56,835 | ) |
Total gross amounts of netting adjustments, cash collateral and variation margin for daily settled contracts | | (74,439 | ) | | (80,023 | ) | | (98,253 | ) | | (77,882 | ) |
Net amounts after netting adjustments, cash collateral and variation margin for daily settled contracts | | | | | | | | |
Uncleared | | 7,696 |
| | 1,215 |
| | 10,351 |
| | 24,402 |
|
Cleared | | 133,484 |
| | — |
| | 123,855 |
| | — |
|
Total net amounts after netting adjustments, cash collateral and variation margin for daily settled contracts | | 141,180 |
| | 1,215 |
| | 134,206 |
| | 24,402 |
|
Derivative instruments not meeting netting requirements (2) | | 547 |
| | 189 |
| | 642 |
| | 823 |
|
Total derivatives, at estimated fair value | | $ | 141,727 |
| | $ | 1,404 |
| | $ | 134,848 |
| | $ | 25,225 |
|
(3) Includes for the three months ended September 30, 2022 and 2021, increases (decreases) in estimated fair value totaling $290,473 and $(58,596), respectively, and amortization of net losses on ineffective and discontinued fair-value hedging relationships of $(21,318) and $(10,372), respectively. Includes for the nine months ended September 30, 2022 and 2021, increases (decreases) in estimated fair value totaling $791,973 and $(433,455), respectively, and amortization of net losses on ineffective and discontinued fair-value hedging relationships of $(55,067) and $(18,954), respectively.
(4) For advances, AFS securities and CO bonds only.
| |
(1)
| Variation margin for daily settled contracts totaled $22,764 at September 30, 2017. |
| |
(2)
| Includes MDCs and certain interest-rate forwards. |
The following table presents the components of net gains (losses) on derivatives and hedging activities reported in other income (loss).income.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Type of Hedge | | 2022 | | 2021 | | 2022 | | 2021 |
Net gains (losses) on derivatives not designated as hedging instruments: | | | | | | | | |
Economic hedges: | | | | | | | | |
Interest-rate swaps | | $ | (5,903) | | | $ | 175 | | | $ | 32,560 | | | $ | 8,369 | |
| | | | | | | | |
Interest-rate caps/floors | | 1,150 | | | (72) | | | 1,281 | | | (468) | |
Interest-rate forwards | | 1,428 | | | (459) | | | 8,454 | | | 2,353 | |
Net interest settlements (1) | | 14,018 | | | (1,333) | | | 12,881 | | | (9,571) | |
MDCs | | (1,709) | | | 328 | | | (8,995) | | | (2,696) | |
Net gains (losses) on derivatives in other income | | $ | 8,984 | | | $ | (1,361) | | | $ | 46,181 | | | $ | (2,013) | |
(1) Relates to derivatives that are not in qualifying fair-value hedging relationships. The interest income/expense of the associated hedged items is recorded in net interest income.
20
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Type of Hedge | | 2017 | | 2016 | | 2017 | | 2016 |
Net gain (loss) related to fair-value hedge ineffectiveness: | | | | | | | | |
Interest-rate swaps | | $ | (3,319 | ) |
| $ | (4,680 | ) | | $ | (11,152 | ) | | $ | (7,257 | ) |
Total net gain (loss) related to fair-value hedge ineffectiveness | | (3,319 | ) |
| (4,680 | ) | | (11,152 | ) | | (7,257 | ) |
Net gain (loss) on derivatives not designated as hedging instruments: | | |
| | | | | | |
Economic hedges: | | | | | | | | |
Interest-rate swaps | | (28 | ) | | 174 |
| | (116 | ) | | (1,239 | ) |
Swaptions | | (23 | ) | | — |
| | (200 | ) | | — |
|
Interest-rate caps/floors | | (30 | ) | | 7 |
| | (161 | ) | | (40 | ) |
Interest-rate forwards | | (1,145 | ) | | (1,411 | ) | | (2,086 | ) | | (6,748 | ) |
Net interest settlements | | (16 | ) | | (48 | ) | | (307 | ) | | (172 | ) |
MDCs | | 870 |
| | 1,132 |
| | 1,346 |
| | 5,740 |
|
Total net gain (loss) on derivatives not designated as hedging instruments | | (372 | ) | | (146 | ) | | (1,524 | ) | | (2,459 | ) |
Other (1) | | (54 | ) | | — |
| | (154 | ) | | — |
|
Net gains (losses) on derivatives and hedging activities | | $ | (3,745 | ) | | $ | (4,826 | ) | | $ | (12,830 | ) | | $ | (9,716 | ) |
| |
(1)
| Consists of price alignment amounts on derivatives for which variation margin payments are characterized as daily settled contracts. |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
The following table presents by typethe amortized cost of, hedged item, the gains (losses) on derivatives and the related cumulative basis adjustments on, hedged items in qualifying fair-value hedging relationshipsrelationships.
| | | | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | Advances | | AFS Securities | | CO Bonds | | |
Amortized cost of hedged items (1) | | $ | 16,575,806 | | | $ | 11,280,892 | | | $ | 26,971,919 | | | |
| | | | | | | | |
Cumulative basis adjustments included in amortized cost: | | | | | | | | |
For active fair-value hedging relationships (2) | | $ | (654,415) | | | $ | (1,494,461) | | | $ | (2,243,437) | | | |
For discontinued fair-value hedging relationships | | 87 | | | 335,763 | | | — | | | |
Total cumulative fair-value hedging basis adjustments on hedged items | | $ | (654,328) | | | $ | (1,158,698) | | | $ | (2,243,437) | | | |
| | | | | | | | | | | | | | | | | | | | |
December 31, 2021 | | | | | | |
Amortized cost of hedged items (1) | | $ | 17,374,515 | | | $ | 9,007,993 | | | $ | 20,902,714 | |
| | | | | | |
Cumulative basis adjustments included in amortized cost: | | | | | | |
For active fair-value hedging relationships (2) | | $ | 178,543 | | | $ | (184,724) | | | $ | (247,699) | |
For discontinued fair-value hedging relationships | | 572 | | | 390,923 | | | — | |
Total cumulative fair-value hedging basis adjustments on hedged items | | $ | 179,115 | | | $ | 206,199 | | | $ | (247,699) | |
(1) Includes the amortized cost of the hedged items in active or discontinued fair-value hedging relationships.
(2) Includes effective and theineffective fair-value hedging relationships. Excludes any offsetting effect of those derivatives onthe net interest income.
|
| | | | | | | | | | | | | | | | | |
| | Gain (Loss) | | Gain (Loss) | | Net Fair- | | | Effect on |
| | on | | on Hedged | | Value Hedge | | | Net Interest |
Three Months Ended September 30, 2017 | | Derivative | | Item | | Ineffectiveness | | | Income (1) |
Advances | | $ | 13,244 |
| | $ | (12,245 | ) | | $ | 999 |
| | | $ | (6,248 | ) |
AFS securities | | 1,139 |
| | (5,750 | ) | | (4,611 | ) | | | (9,697 | ) |
CO bonds | | (8,490 | ) | | 8,783 |
| | 293 |
| | | 3,529 |
|
Total | | $ | 5,893 |
| | $ | (9,212 | ) | | $ | (3,319 | ) |
| | $ | (12,416 | ) |
| | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | |
Advances | | $ | 63,062 |
| | $ | (63,144 | ) | | $ | (82 | ) | | | $ | (21,698 | ) |
AFS securities | | 46,587 |
| | (55,011 | ) | | (8,424 | ) | | | (23,443 | ) |
CO bonds | | (16,709 | ) | | 20,535 |
| | 3,826 |
| | | 4,365 |
|
Total | | $ | 92,940 |
| | $ | (97,620 | ) | | $ | (4,680 | ) | | | $ | (40,776 | ) |
| | | | | | | | | |
Nine Months Ended September 30, 2017 | | | | | | | | | |
Advances | | $ | 4,419 |
| | $ | (3,004 | ) | | $ | 1,415 |
| | | $ | (26,639 | ) |
AFS securities | | (24,193 | ) | | 14,314 |
| | (9,879 | ) | | | (40,490 | ) |
CO bonds | | (3,662 | ) | | 974 |
| | (2,688 | ) | | | 11,294 |
|
Total | | $ | (23,436 | ) | | $ | 12,284 |
| | $ | (11,152 | ) | | | $ | (55,835 | ) |
| | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | |
Advances | | $ | (56,653 | ) | | $ | 56,834 |
| | $ | 181 |
| | | $ | (75,602 | ) |
AFS securities | | (64,668 | ) | | 52,251 |
| | (12,417 | ) | | | (75,534 | ) |
CO bonds | | 4,087 |
| | 892 |
| | 4,979 |
| | | 14,632 |
|
Total | | $ | (117,234 | ) | | $ | 109,977 |
| | $ | (7,257 | ) | | | $ | (136,504 | ) |
| |
(1)
| Includes the effect of derivatives in fair-value hedging relationships on net interest income that is recorded in the interest income/expense line item of the respective hedged items. Excludes the interest income/expense of the respective hedged items, which fully offset the interest income/expense of the derivatives, except to the extent of any hedge ineffectiveness. Net interest settlements on derivatives that are not in fair-value hedging relationships are reported in other income (loss). These amounts do not include the effect of amortization/accretion related to fair value hedging activities. |
Managing Credit Risk on Derivatives. We are subject to credit risk due to the risk of nonperformance by the counterparties to our derivative transactions.
For certain of our uncleared derivatives, we have credit support agreements that contain provisions requiring us to post additional collateral with our counterparties if there is deterioration in our credit rating. If our credit rating is lowered by an NRSRO, we could be required to deliver additional collateral on uncleared derivative instruments in net liability positions. The aggregate estimated fair value of all uncleared derivative instruments with credit risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest on cash collateral) at September 30, 2017 was $1,234, for which we have posted collateral, including accrued interest, with an estimated fair value of $19 in the normal course of business. In addition, we held other derivative instruments in a net liability position of $189 that are not subject to credit support agreements containing credit risk-related contingent features. If our credit rating had been lowered by an NRSRO (from an S&P equivalent of AA+ to AA), we would not have been required to deliver additional collateral to our uncleared derivative counterparties at September 30, 2017.associated derivatives.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
For cleared derivatives, the clearinghouse is our counterparty. We use LCH and CME as clearinghouses for all cleared derivative transactions. Collateral is required to be posted daily for changes in the value of cleared derivatives to mitigate each counterparty's credit risk. The clearinghouse notifies the clearing agent of the required initial and variation margin, and the clearing agent notifies us. The requirement that we post initial and variation margin through the clearing agent for the benefit of the clearinghouse exposes us to institutional credit risk in the event that the clearing agent or clearinghouse fails to meet its obligations.
Effective January 3, 2017, CME made certain amendments to its rulebook, including changing the legal characterization of variation margin payments to be daily settled contracts, rather than cash collateral. Variation margin payments related to LCH contracts continue to be characterized as cash collateral. Initial margin continues to be considered by both clearinghouses as cash collateral.
For cleared derivatives, the clearinghouse determines margin requirements, into which credit ratings are not generally factored. However, clearing agents may require additional margin to be posted by us based on credit considerations, including but not limited to any credit rating downgrades. At September 30, 2017, we were not required by our clearing agents to post any additional margin.
Note 107 - Consolidated Obligations
In addition to being the primary obligor for all consolidated obligations issued on our behalf, we are jointly and severally liable with each of the other FHLBanks for the payment of the principal and interest on all FHLBank outstandingof the FHLBanks' consolidated obligations.obligations outstanding. The par values of the FHLBanks' outstanding consolidated obligations outstanding at September 30, 20172022 and December 31, 20162021 totaled $1.0 trillion and $989.3$652.9 billion,, respectively. As provided by the Bank Act and Finance Agency regulations, consolidated obligations are backed only by the financial resources of all FHLBanks.
Discount Notes. The following table presents our discount notes outstanding, all of which are due within one year of issuance.
| | | | | | | | | | | | | | |
Discount Notes | | September 30, 2022 | | December 31, 2021 |
Book value | | $ | 21,280,766 | | | $ | 12,116,358 |
Par value | | 21,343,253 | | | 12,117,846 |
| | | | |
Weighted average effective interest rate | | 2.73 | % | | 0.05 | % |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | |
Discount Notes | | September 30, 2017 | | December 31, 2016 |
Book value | | $ | 22,380,509 |
| | $ | 16,801,763 |
|
Par value | | 22,418,417 |
| | 16,819,659 |
|
| | | | |
Weighted average effective interest rate | | 1.05 | % | | 0.51 | % |
CO Bonds. The following table presents our CO bonds outstanding by contractual maturity.
| | | | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 |
Year of Contractual Maturity | | Amount | | WAIR% | | Amount | | WAIR% | Year of Contractual Maturity | | Amount | | WAIR% | | Amount | | WAIR% |
Due in 1 year or less | | $ | 14,378,240 |
| | 1.19 |
| | $ | 16,234,460 |
| | 0.85 |
| Due in 1 year or less | | $ | 9,975,210 | | | 2.37 | | | $ | 14,357,350 | | | 0.29 | |
Due after 1 year through 2 years | | 9,161,005 |
| | 1.38 |
| | 6,122,190 |
| | 0.96 |
| |
Due after 2 years through 3 years | | 4,195,195 |
| | 2.19 |
| | 2,718,945 |
| | 1.65 |
| |
Due after 3 years through 4 years | | 1,174,200 |
| | 2.25 |
| | 1,684,530 |
| | 3.17 |
| |
Due after 4 years through 5 years | | 1,183,500 |
| | 2.21 |
| | 1,040,000 |
| | 2.17 |
| |
Due after 1 through 2 years | | Due after 1 through 2 years | | 4,776,900 | | | 1.18 | | | 2,965,510 | | | 1.02 | |
Due after 2 through 3 years | | Due after 2 through 3 years | | 8,429,540 | | | 1.20 | | | 5,797,550 | | | 0.76 | |
Due after 3 through 4 years | | Due after 3 through 4 years | | 6,363,250 | | | 1.20 | | | 3,947,300 | | | 0.83 | |
Due after 4 through 5 years | | Due after 4 through 5 years | | 3,356,320 | | | 1.57 | | | 6,587,600 | | | 1.14 | |
Thereafter | | 5,852,500 |
| | 2.95 |
| | 5,708,000 |
| | 2.92 |
| Thereafter | | 8,567,220 | | | 2.25 | | | 8,894,940 | | | 2.09 | |
Total CO bonds, par value | | 35,944,640 |
| | 1.71 |
| | 33,508,125 |
| | 1.44 |
| Total CO bonds, par value | | 41,468,440 | | | 1.73 | | | 42,550,250 | | | 0.96 | |
Unamortized premiums | | 27,943 |
| | |
| | 27,462 |
| | |
| Unamortized premiums | | 52,245 | | | | | 77,035 | | | |
Unamortized discounts | | (12,604 | ) | | |
| | (12,059 | ) | | |
| Unamortized discounts | | (10,379) | | | | | (11,268) | | | |
Unamortized concessions | | (14,147 | ) | | | | (13,705 | ) | | | Unamortized concessions | | (7,171) | | | (6,746) | | |
Fair-value hedging adjustments | | (43,407 | ) | | |
| | (42,544 | ) | | |
| |
Fair-value hedging basis adjustments, net | | Fair-value hedging basis adjustments, net | | (2,243,437) | | | | | (247,699) | | | |
Total CO bonds | | $ | 35,902,425 |
| | |
| | $ | 33,467,279 |
| | |
| Total CO bonds | | $ | 39,259,698 | | | | | $ | 42,361,572 | | | |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
The following tables present the par value of our CO bonds outstanding by redemption feature and the earlier of the year of contractual maturity or next call date.
| | | | | | | | | | | | | | |
Redemption Feature | | September 30, 2022 | | December 31, 2021 |
Non-callable / non-putable | | $ | 11,300,940 | | | $ | 20,346,750 | |
Callable | | 30,167,500 | | | 22,203,500 | |
Total CO bonds, par value | | $ | 41,468,440 | | | $ | 42,550,250 | |
| | | | | | | | | | | | | | |
Year of Contractual Maturity or Next Call Date | | September 30, 2022 | | December 31, 2021 |
Due in 1 year or less | | $ | 36,546,710 | | | $ | 36,028,850 | |
Due after 1 through 2 years | | 1,232,900 | | | 3,122,510 | |
Due after 2 through 3 years | | 987,540 | | | 586,550 | |
Due after 3 through 4 years | | 801,750 | | | 577,300 | |
Due after 4 through 5 years | | 181,320 | | | 415,100 | |
Thereafter | | 1,718,220 | | | 1,819,940 | |
Total CO bonds, par value | | $ | 41,468,440 | | | $ | 42,550,250 | |
The following table presents the par value of our CO bonds outstanding by interest-rate payment type.
| | | | | | | | | | | | | | |
Interest-Rate Payment Type | | September 30, 2022 | | December 31, 2021 |
Fixed-rate | | $ | 35,068,940 | | | $ | 36,717,750 | |
Step-up | | 2,268,500 | | | 898,500 | |
Simple variable-rate | | 4,131,000 | | | 4,934,000 | |
| | | | |
| | | | |
| | | | |
Total CO bonds, par value | | $ | 41,468,440 | | | $ | 42,550,250 | |
|
| | | | | | | | |
Redemption Feature | | September 30, 2017 | | December 31, 2016 |
Non-callable / non-putable | | $ | 26,802,640 |
| | $ | 25,627,125 |
|
Callable | | 9,142,000 |
| | 7,881,000 |
|
Total CO bonds, par value | | $ | 35,944,640 |
| | $ | 33,508,125 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | |
Year of Contractual Maturity or Next Call Date | | September 30, 2017 | | December 31, 2016 |
Due in 1 year or less | | $ | 22,787,240 |
|
| $ | 23,825,460 |
|
Due after 1 year through 2 years | | 8,673,005 |
| | 4,675,190 |
|
Due after 2 years through 3 years | | 2,533,195 |
| | 2,240,945 |
|
Due after 3 years through 4 years | | 563,200 |
| | 1,257,530 |
|
Due after 4 years through 5 years | | 339,500 |
| | 474,000 |
|
Thereafter | | 1,048,500 |
| | 1,035,000 |
|
Total CO bonds, par value | | $ | 35,944,640 |
| | $ | 33,508,125 |
|
Note 118 - Affordable Housing Program
The following table summarizes the activity in our AHP funding obligation.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
AHP Activity | | 2022 | | 2021 | | 2022 | | 2021 |
Liability at beginning of period | | $ | 28,953 | | | $ | 30,765 | | | $ | 31,049 | | | $ | 34,402 | |
Assessment | | 5,218 | | | 2,250 | | | 12,046 | | | 7,702 | |
Subsidy usage, net (1) | | (2,978) | | | (2,549) | | | (11,902) | | | (11,638) | |
Liability at end of period | | $ | 31,193 | | | $ | 30,466 | | | $ | 31,193 | | | $ | 30,466 | |
(1) Subsidies disbursed are reported net of returns/recaptures of previously disbursed subsidies.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
AHP Activity | | 2017 | | 2016 | | 2017 | | 2016 |
Liability at beginning of period | | $ | 24,629 |
| | $ | 25,923 |
| | $ | 26,598 |
| | $ | 31,103 |
|
Assessment (expense) | | 4,724 |
| | 2,786 |
| | 12,814 |
| | 8,603 |
|
Subsidy usage, net (1) | | (1,545 | ) | | (5,040 | ) | | (11,604 | ) | | (16,037 | ) |
Liability at end of period | | $ | 27,808 |
| | $ | 23,669 |
| | $ | 27,808 |
| | $ | 23,669 |
|
| |
(1)
| Subsidies disbursed are reported net of returns/recaptures of previously disbursed subsidies. |
We had no outstanding principal in AHP-related advances at September 30, 2017 or December 31, 2016.
Note 129 - Capital
Classes of Capital Stock. The following table presents the capital stock outstanding by sub-series.
| | | | | | | | | | | | | | |
Capital Stock Outstanding | | September 30, 2022 | | December 31, 2021 |
Class B-1 | | $ | 784,568 | | | $ | 931,517 | |
Class B-2 | | 1,540,966 | | | 1,314,684 | |
| | | | |
Total Class B | | $ | 2,325,534 | | | $ | 2,246,201 | |
Mandatorily Redeemable Capital Stock.The following table presents the activity in our MRCS.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
MRCS Activity | | 2017 | | 2016 | | 2017 | | 2016 | MRCS Activity | | 2022 | | 2021 | | 2022 | | 2021 |
Liability at beginning of period | | $ | 166,835 |
| | $ | 177,603 |
| | $ | 170,043 |
| | $ | 14,063 |
| Liability at beginning of period | | $ | 45,583 | | | $ | 232,893 | | | $ | 50,422 | | | $ | 250,768 | |
Reclassification from capital stock | | — |
| | 4,158 |
| | — |
| | 183,056 |
| Reclassification from capital stock | | — | | | 4,449 | | | — | | | 4,730 | |
| Redemptions/repurchases | | (1,674 | ) | | (2,576 | ) | | (4,882 | ) | | (18,972 | ) | Redemptions/repurchases | | (2,293) | | | (186,900) | | | (7,132) | | | (205,056) | |
Accrued distributions | | — |
| | 34 |
| | — |
| | 1,072 |
| |
| Liability at end of period | | $ | 165,161 |
| | $ | 179,219 |
| | $ | 165,161 |
| | $ | 179,219 |
| Liability at end of period | | $ | 43,290 | | | $ | 50,442 | | | $ | 43,290 | | | $ | 50,442 | |
As a result of, and effective with, the Final Membership Rule in February 2016, we reclassified all of the outstanding Class B stock of our captive insurance company members totaling $178,898 to MRCS.
In accordance with the Final Membership Rule, captive insurance companies that were admitted as FHLBank members on orafter September 12, 2014 had their memberships terminated by February 19, 2017. As a result, all of their outstanding Class B stock, totaling $3,021 at December 31, 2016, was repurchased on or before February 19, 2017.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Captive insurance companies that were admitted as FHLBank members prior to September 12, 2014, and do not meet the new definition of "insurance company" or fall within another category of institution that is eligible for FHLBank membership, shall have their memberships terminated no later than February 19, 2021. Upon termination, all of their outstanding Class B stock shall be repurchased, or redeemed after a five-year redemption period.
The following table presents MRCS by contractual year of redemption. The year of redemption is the later of:of (i) the final year of the five-year5-year redemption period, or (ii) the first year in which a non-member no longer has an activity-based stock requirement.
| | | | | | | | | | | | | | |
| | | | |
MRCS Contractual Year of Redemption | | September 30, 2022 | | December 31, 2021 |
Past contractual redemption date (1) | | $ | 517 | | | $ | 577 | |
Year 1 (2) | | 10,048 | | | 11,835 | |
Year 2 | | 9,872 | | | 471 | |
Year 3 | | 3,530 | | | 9,873 | |
Year 4 | | 19,323 | | | 23,218 | |
Year 5 | | — | | | 4,448 | |
| | | | |
Total MRCS | | $ | 43,290 | | | $ | 50,422 | |
(1) Balance represents Class B stock that will not be redeemed until the associated credit products and other obligations are no longer outstanding.
(2) Balance at September 30, 2022 and December 31, 2021 includes $9,585 and $11,835, respectively of Class B stock held by one captive insurance company whose membership was terminated on February 19, 2021, but will not be redeemed until the associated credit products and other obligations are no longer outstanding.
|
| | | | | | | | |
MRCS Contractual Year of Redemption | | September 30, 2017 | | December 31, 2016 |
Year 1 (1) | | $ | 8,802 |
| | $ | 8,630 |
|
Year 2 | | 13 |
| | 5,054 |
|
Year 3 | | — |
| | 13 |
|
Year 4 | | 4,158 |
| | — |
|
Year 5 | | — |
| | 4,158 |
|
Thereafter (2) | | 152,188 |
| | 152,188 |
|
Total MRCS | | $ | 165,161 |
| | $ | 170,043 |
|
| |
(1)Notes to Financial Statements, continued (Unaudited, $ amounts in thousands unless otherwise indicated) | Balances at September 30, 2017 and December 31, 2016 include $3,748 and $5,609, respectively, of Class B stock that had reached the end of the five-year redemption period but will not be redeemed until the associated credit products and other obligations are no longer outstanding. |
| |
(2)
| Represents the five-year redemption period of outstanding Class B stock held by certain captive insurance companies which begins immediately upon their termination of memberships no later than February 19, 2021, in accordance with the Final Membership Rule. |
The following table presents the distributions related to MRCS.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
MRCS Distributions | | 2017 | | 2016 | | 2017 | | 2016 | MRCS Distributions | | 2022 | | 2021 | | 2022 | | 2021 |
Recorded as interest expense | | $ | 1,768 |
| | $ | 1,880 |
| | $ | 5,277 |
| | $ | 4,748 |
| Recorded as interest expense | | $ | 408 | | | $ | 312 | | | $ | 922 | | | $ | 2,345 | |
Recorded as distributions from retained earnings | | — |
| | 34 |
| | — |
| | 1,072 |
| Recorded as distributions from retained earnings | | — | | | 13 | | | — | | | 97 | |
Total | | $ | 1,768 |
| | $ | 1,914 |
| | $ | 5,277 |
| | $ | 5,820 |
| Total | | $ | 408 | | | $ | 325 | | | $ | 922 | | | $ | 2,442 | |
Capital Requirements. We are subject to three capital requirements under our capital plan and Finance Agency regulations as disclosed in Note 1512 - Capital in our 20162021 Form 10-K. As presented in the following table, we were in compliance with thethese Finance Agency's capital requirements at September 30, 20172022 and December 31, 2016. For regulatory purposes, AOCI is not considered capital; MRCS, however, is considered capital.2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Regulatory Capital Requirements | | Required | | Actual | | Required | | Actual |
Risk-based capital | | $ | 1,238,896 | | $ | 3,608,589 | | $ | 1,091,337 | | $ | 3,473,695 |
| | | | | | | | |
Total regulatory capital | | $ | 2,615,818 | | $ | 3,608,589 | | $ | 2,400,184 | | $ | 3,473,695 |
Total regulatory capital-to-assets ratio | | 4.00% | | 5.52% | | 4.00% | | 5.79% |
| | | | | | | | |
Leverage capital | | $ | 3,269,773 | | $ | 5,412,883 | | $ | 3,000,230 | | $ | 5,210,543 |
Leverage ratio | | 5.00% | | 8.28% | | 5.00% | | 8.69% |
Note 10 - Accumulated Other Comprehensive Income
The following table presents a summary of the changes in the components of AOCI.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Rollforward for the Three Months Ended September 30 | | Unrealized Gains (Losses) on AFS Securities | | Pension Benefits | | Total AOCI |
Balance, June 30, 2022 | | $ | 32,251 | | | $ | (18,095) | | | $ | 14,156 | |
| | | | | | |
OCI before reclassifications: | | | | | | |
Net change in unrealized gains (losses) | | (16,452) | | | — | | | (16,452) | |
| | | | | | |
Reclassifications from OCI to net income: | | | | | | |
| | | | | | |
Pension benefits, net | | — | | | 609 | | | 609 | |
Total other comprehensive income (loss) | | (16,452) | | | 609 | | | (15,843) | |
| | | | | | |
Balance, September 30, 2022 | | $ | 15,799 | | | $ | (17,486) | | | $ | (1,687) | |
| | | | | | |
| | | | | | |
Balance, June 30, 2021 | | $ | 214,952 | | | $ | (21,528) | | | $ | 193,424 | |
| | | | | | |
OCI before reclassifications: | | | | | | |
Net change in unrealized gains (losses) | | (36,864) | | | — | | | (36,864) | |
| | | | | | |
Reclassifications from OCI to net income: | | | | | | |
| | | | | | |
Pension benefits, net | | — | | | (5,093) | | | (5,093) | |
Total other comprehensive income (loss) | | (36,864) | | | (5,093) | | | (41,957) | |
| | | | | | |
Balance, September 30, 2021 | | $ | 178,088 | | | $ | (26,621) | | | $ | 151,467 | |
24
|
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Regulatory Capital Requirements | | Required | | Actual | | Required | | Actual |
Risk-based capital | | $ | 826,409 |
| | $ | 2,892,854 |
| | $ | 760,946 |
| | $ | 2,549,871 |
|
| | | | | | | | |
Regulatory permanent capital-to-asset ratio | | 4.00 | % | | 4.65 | % | | 4.00 | % | | 4.73 | % |
Regulatory permanent capital | | $ | 2,487,112 |
| | $ | 2,892,854 |
| | $ | 2,156,296 |
| | $ | 2,549,871 |
|
| | | | | | | | |
Leverage ratio | | 5.00 | % | | 6.98 | % | | 5.00 | % | | 7.10 | % |
Leverage capital | | $ | 3,108,890 |
| | $ | 4,339,281 |
| | $ | 2,695,370 |
| | $ | 3,824,806 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Rollforward for the Nine Months Ended September 30 | | Unrealized Gains (Losses) on AFS Securities | | Pension Benefits | | Total AOCI |
Balance, December 31, 2021 | | $ | 151,942 | | | $ | (18,884) | | | $ | 133,058 | |
| | | | | | |
OCI before reclassifications: | | | | | | |
Net change in unrealized gains (losses) | | (136,143) | | | — | | | (136,143) | |
| | | | | | |
Reclassifications from OCI to net income: | | | | | | |
| | | | | | |
Pension benefits, net | | — | | | 1,398 | | | 1,398 | |
Total other comprehensive income (loss) | | (136,143) | | | 1,398 | | | (134,745) | |
| | | | | | |
Balance, September 30, 2022 | | $ | 15,799 | | | $ | (17,486) | | | $ | (1,687) | |
| | | | | | |
| | | | | | |
Balance, December 31, 2020 | | $ | 136,921 | | | $ | (31,519) | | | $ | 105,402 | |
| | | | | | |
OCI before reclassifications: | | | | | | |
Net change in unrealized gains | | 41,167 | | | — | | | 41,167 | |
| | | | | | |
Reclassifications from OCI to net income: | | | | | | |
| | | | | | |
Pension benefits, net | | — | | | 4,898 | | | 4,898 | |
Total other comprehensive income | | 41,167 | | | 4,898 | | | 46,065 | |
| | | | | | |
Balance, September 30, 2021 | | $ | 178,088 | | | $ | (26,621) | | | $ | 151,467 | |
Note 13 - Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the components of AOCI. |
| | | | | | | | | | | | | | | | | | | | |
AOCI Rollforward | | Unrealized Gains (Losses) on AFS Securities | | Non-Credit OTTI on AFS Securities | | Non-Credit OTTI on HTM Securities | | Pension Benefits | | Total AOCI |
Balance, June 30, 2016 | | $ | (809 | ) | | $ | 24,077 |
| | $ | (116 | ) | | $ | (7,932 | ) | | $ | 15,220 |
|
| | | | | | | | | | |
OCI before reclassifications: | | | | | | | | | |
|
Net change in unrealized gains (losses) | | 24,784 |
| | 564 |
| | — |
| | — |
| | 25,348 |
|
Net change in fair value | | — |
| | (131 | ) | | — |
| | — |
| | (131 | ) |
Accretion of non-credit losses | | — |
| | — |
| | 6 |
| | — |
| | 6 |
|
Reclassifications from OCI to net income: | | | | | | | | | |
|
Non-credit portion of OTTI losses | | — |
| | 75 |
| | — |
| | — |
| | 75 |
|
Pension benefits, net | | — |
| | — |
| | — |
| | (310 | ) | | (310 | ) |
Total other comprehensive income (loss) | | 24,784 |
| | 508 |
| | 6 |
| | (310 | ) | | 24,988 |
|
| | | | | | | | | | |
Balance, September 30, 2016 | | $ | 23,975 |
| | $ | 24,585 |
| | $ | (110 | ) | | $ | (8,242 | ) | | $ | 40,208 |
|
| | | | | | | | | | |
Balance, June 30, 2017 | | $ | 77,078 |
| | $ | 28,677 |
| | $ | (53 | ) | | $ | (9,282 | ) | | $ | 96,420 |
|
| | | | | | | | | | |
OCI before reclassifications: | | | | | | | | | |
|
Net change in unrealized gains (losses) | | 5,007 |
| | 1,617 |
| | — |
| | — |
| | 6,624 |
|
Net change in fair value | | — |
| | (5 | ) | | — |
| | — |
| | (5 | ) |
Accretion of non-credit losses | | — |
| | — |
| | — |
| | — |
| | — |
|
Reclassifications from OCI to net income: | | | | | | | | | |
|
Non-credit portion of OTTI losses | | — |
| | 11 |
| | 4 |
| | — |
| | 15 |
|
Pension benefits, net | | — |
| | — |
| | — |
| | 340 |
| | 340 |
|
Total other comprehensive income (loss) | | 5,007 |
| | 1,623 |
| | 4 |
| | 340 |
| | 6,974 |
|
| | | | | | | | | | |
Balance, September 30, 2017 | | $ | 82,085 |
| | $ | 30,300 |
| | $ | (49 | ) | | $ | (8,942 | ) | | $ | 103,394 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
|
| | | | | | | | | | | | | | | | | | | | |
AOCI Rollforward | | Unrealized Gains (Losses) on AFS Securities | | Non-Credit OTTI on AFS Securities | | Non-Credit OTTI on HTM Securities | | Pension Benefits | | Total AOCI |
Balance, December 31, 2015 | | $ | 97 |
| | $ | 30,229 |
| | $ | (132 | ) | | $ | (7,316 | ) | | $ | 22,878 |
|
| | | | | | | | | | |
OCI before reclassifications: | | | | | | | | | | |
Net change in unrealized gains (losses) | | 23,878 |
| | (5,733 | ) | | — |
| | — |
| | 18,145 |
|
Net change in fair value | | — |
| | (79 | ) | | — |
| | — |
| | (79 | ) |
Accretion of non-credit losses | | — |
| | — |
| | 22 |
| | — |
| | 22 |
|
Reclassifications from OCI to net income: | | | | | | | | | |
|
|
Non-credit portion of OTTI losses | | — |
| | 168 |
| | — |
| | — |
| | 168 |
|
Pension benefits, net | | — |
| | — |
| | — |
| | (926 | ) | | (926 | ) |
Total other comprehensive income (loss) | | 23,878 |
| | (5,644 | ) | | 22 |
| | (926 | ) | | 17,330 |
|
| | | | | | | | | | |
Balance, September 30, 2016 | | $ | 23,975 |
| | $ | 24,585 |
| | $ | (110 | ) | | $ | (8,242 | ) | | $ | 40,208 |
|
| | | | | | | | | |
|
Balance, December 31, 2016 | | $ | 39,468 |
| | $ | 26,938 |
| | $ | (103 | ) | | $ | (9,935 | ) | | $ | 56,368 |
|
| | | | | | | | | | |
OCI before reclassifications: | | | | | | | | | |
|
Net change in unrealized gains (losses) | | 42,617 |
| | 3,199 |
| | — |
| | — |
| | 45,816 |
|
Net change in fair value | | — |
| | (3 | ) | | — |
| | — |
| | (3 | ) |
Accretion of non-credit losses | | — |
| | — |
| | 12 |
| | — |
| | 12 |
|
Reclassifications from OCI to net income: | | | | | | | | | |
|
Non-credit portion of OTTI losses | | — |
| | 166 |
| | 42 |
| | — |
| | 208 |
|
Pension benefits, net | | — |
| | — |
| | — |
| | 993 |
| | 993 |
|
Total other comprehensive income (loss) | | 42,617 |
| | 3,362 |
| | 54 |
| | 993 |
| | 47,026 |
|
| | | | | | | | | | |
Balance, September 30, 2017 | | $ | 82,085 |
| | $ | 30,300 |
| | $ | (49 | ) | | $ | (8,942 | ) | | $ | 103,394 |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Note 1411 - Segment Information
The following table presents our financial performance by operating segment.
| | | | Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 | | Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 |
| | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total |
Net interest income | | $ | 51,584 |
| | $ | 17,140 |
| | $ | 68,724 |
| | $ | 38,109 |
| | $ | 11,421 |
| | $ | 49,530 |
| Net interest income | | $ | 59,854 | | | $ | 12,721 | | | $ | 72,575 | | | $ | 49,655 | | | $ | 8,306 | | | $ | 57,961 | |
Provision for (reversal of) credit losses | | — |
| | (90 | ) | | (90 | ) | | — |
| | 85 |
| | 85 |
| Provision for (reversal of) credit losses | | — | | | (8) | | | (8) | | | — | | | (16) | | | (16) | |
Other income (loss) | | (2,738 | ) | | (250 | ) | | (2,988 | ) | | (3,927 | ) | | (243 | ) | | (4,170 | ) | Other income (loss) | | 7,367 | | | (167) | | | 7,200 | | | (8,779) | | | (88) | | | (8,867) | |
Other expenses | | 17,163 |
| | 3,192 |
| | 20,355 |
| | 16,357 |
| | 2,942 |
| | 19,299 |
| Other expenses | | 23,879 | | | 4,134 | | | 28,013 | | | 23,016 | | | 3,902 | | | 26,918 | |
Income before assessments | | 31,683 |
| | 13,788 |
| | 45,471 |
| | 17,825 |
| | 8,151 |
| | 25,976 |
| Income before assessments | | 43,342 | | | 8,428 | | | 51,770 | | | 17,860 | | | 4,332 | | | 22,192 | |
Affordable Housing Program assessments | | 3,345 |
| | 1,379 |
| | 4,724 |
| | 1,971 |
| | 815 |
| | 2,786 |
| Affordable Housing Program assessments | | 4,375 | | | 843 | | | 5,218 | | | 1,816 | | | 434 | | | 2,250 | |
Net income | | $ | 28,338 |
| | $ | 12,409 |
| | $ | 40,747 |
| | $ | 15,854 |
| | $ | 7,336 |
| | $ | 23,190 |
| Net income | | $ | 38,967 | | | $ | 7,585 | | | $ | 46,552 | | | $ | 16,044 | | | $ | 3,898 | | | $ | 19,942 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 | | Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2021 |
| | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total | | Traditional | | Mortgage Loans | | Total |
Net interest income | | $ | 140,375 |
| | $ | 52,417 |
| | $ | 192,792 |
| | $ | 103,599 |
| | $ | 40,901 |
| | $ | 144,500 |
| Net interest income | | $ | 163,325 | | | $ | 37,656 | | | $ | 200,981 | | | $ | 177,792 | | | $ | 12,006 | | | $ | 189,798 | |
Provision for (reversal of) credit losses | | — |
| | 191 |
| | 191 |
| | — |
| | (132 | ) | | (132 | ) | Provision for (reversal of) credit losses | | — | | | (68) | | | (68) | | | — | | | 28 | | | 28 | |
Other income (loss) | | (9,741 | ) | | (745 | ) | | (10,486 | ) | | (6,387 | ) | | (868 | ) | | (7,255 | ) | Other income (loss) | | (1,575) | | | (325) | | | (1,900) | | | (31,388) | | | (223) | | | (31,611) | |
Other expenses | | 49,989 |
| | 9,263 |
| | 59,252 |
| | 47,583 |
| | 8,516 |
| | 56,099 |
| Other expenses | | 68,081 | | | 11,529 | | | 79,610 | | | 71,356 | | | 12,130 | | | 83,486 | |
Income before assessments | | 80,645 |
| | 42,218 |
| | 122,863 |
| | 49,629 |
| | 31,649 |
| | 81,278 |
| |
Affordable Housing Program assessments | | 8,592 |
| | 4,222 |
| | 12,814 |
| | 5,438 |
| | 3,165 |
| | 8,603 |
| |
Net income | | $ | 72,053 |
| | $ | 37,996 |
| | $ | 110,049 |
| | $ | 44,191 |
| | $ | 28,484 |
| | $ | 72,675 |
| |
Income (loss) before assessments | | Income (loss) before assessments | | 93,669 | | | 25,870 | | | 119,539 | | | 75,048 | | | (375) | | | 74,673 | |
Affordable Housing Program assessments (credits) | | Affordable Housing Program assessments (credits) | | 9,459 | | | 2,587 | | | 12,046 | | | 7,739 | | | (37) | | | 7,702 | |
Net income (loss) | | Net income (loss) | | $ | 84,210 | | | $ | 23,283 | | | $ | 107,493 | | | $ | 67,309 | | | $ | (338) | | | $ | 66,971 | |
We measure the performance of each segment based upon the net interest spread of the underlying portfolio(s). Therefore, each segment's performance begins with net interest income. Direct other income and expense items also affect each segment's results. Direct other income/expense related to the Traditional segment includes the direct earnings impact of derivatives and hedging activities related to advances and investments as well as all other income and expense not associated with mortgage loans. The Mortgage Loans segment includes the direct earnings impact of derivatives and hedging activities as well as direct compensation, benefits and other expenses (including an allocation for indirect overhead) associated with operating the MPP and MPF Program and volume-driven costs associated with master servicing and quality control fees. The assessments related to AHP have been allocated to each segment based upon its proportionate share of income before assessments.
The following table presents our asset balances by operating segment.
|
| | | | | | | | | | | | |
By Date | | Traditional | | Mortgage Loans | | Total |
September 30, 2017 | | $ | 51,982,149 |
| | $ | 10,195,650 |
| | $ | 62,177,799 |
|
December 31, 2016 | | 44,406,003 |
| | 9,501,397 |
| | 53,907,400 |
|
| | | | | | | | | | | | | | | | | | | | |
By Date | | Traditional | | Mortgage Loans | | Total |
September 30, 2022 | | $ | 57,746,242 | | | $ | 7,649,219 | | | $ | 65,395,461 | |
December 31, 2021 | | 52,388,469 | | | 7,616,134 | | | 60,004,603 | |
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Note 1512 - Estimated Fair Values
The following tables present the carrying value and estimated fair value of each of our financial instruments. The total of the estimated fair values does not represent an estimate of our overall market value as a going concern, which would take into account, among other considerations, future business opportunities and the net profitability of assets and liabilities.
| | | | September 30, 2017 | | September 30, 2022 |
| | | | Estimated Fair Value | | | Estimated Fair Value |
| | Carrying | | | | | | | | | | Netting | | Carrying | | | Netting |
Financial Instruments | | Value | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustment (1) | Financial Instruments | | Value | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustments (1) |
Assets: | | | | | | | | | | | | | Assets: | | | | | | | | | | | | |
Cash and due from banks | | $ | 69,564 |
| | $ | 69,564 |
| | $ | 69,564 |
| | $ | — |
| | $ | — |
| | $ | — |
| Cash and due from banks | | $ | 22,361 | | | $ | 22,361 | | | $ | 22,361 | | | $ | — | | | $ | — | | | $ | — | |
Interest-bearing deposits | | 301,459 |
| | 301,459 |
| | 301,028 |
| | 431 |
| | — |
| | — |
| Interest-bearing deposits | | 478,042 | | | 478,042 | | | 478,000 | | | 42 | | | — | | | — | |
Securities purchased under agreements to resell | | 2,720,698 |
| | 2,720,700 |
| | — |
| | 2,720,700 |
| | — |
| | — |
| Securities purchased under agreements to resell | | 2,500,000 | | | 2,500,000 | | | — | | | 2,500,000 | | | — | | | — | |
Federal funds sold | | 2,835,000 |
| | 2,835,000 |
| | — |
| | 2,835,000 |
| | — |
| | — |
| Federal funds sold | | 4,607,000 | | | 4,607,000 | | | — | | | 4,607,000 | | | — | | | — | |
Trading securities | | Trading securities | | 3,114,789 | | | 3,114,789 | | | — | | | 3,114,789 | | | — | | | — | |
AFS securities | | 6,983,996 |
| | 6,983,996 |
| | — |
| | 6,752,227 |
| | 231,769 |
| | — |
| AFS securities | | 11,296,691 | | | 11,296,691 | | | — | | | 11,296,691 | | | — | | | — | |
HTM securities | | 5,807,104 |
| | 5,839,280 |
| | — |
| | 5,792,635 |
| | 46,645 |
| | — |
| HTM securities | | 3,975,656 | | | 3,900,977 | | | — | | | 3,900,977 | | | — | | | — | |
Advances | | 32,952,801 |
| | 32,921,166 |
| | — |
| | 32,921,166 |
| | — |
| | — |
| Advances | | 31,196,085 | | | 30,996,835 | | | — | | | 30,996,835 | | | — | | | — | |
Mortgage loans held for portfolio, net | | 10,195,650 |
| | 10,322,485 |
| | — |
| | 10,307,585 |
| | 14,900 |
| | — |
| Mortgage loans held for portfolio, net | | 7,649,219 | | | 6,722,040 | | | — | | | 6,712,113 | | | 9,927 | | | — | |
Accrued interest receivable | | 96,910 |
| | 96,910 |
| | — |
| | 96,910 |
| | — |
| | — |
| Accrued interest receivable | | 105,135 | | | 105,135 | | | — | | | 105,135 | | | — | | | — | |
Derivative assets, net | | 141,727 |
| | 141,727 |
| | — |
| | 216,166 |
| | — |
| | (74,439 | ) | Derivative assets, net | | 341,195 | | | 341,195 | | | — | | | 950,029 | | | — | | | (608,834) | |
Grantor trust assets (included in other assets) | | 20,995 |
| | 20,995 |
| | 20,995 |
| | — |
| | — |
| | — |
| |
Grantor trust assets (2) | | Grantor trust assets (2) | | 50,383 | | | 50,383 | | | 50,383 | | | — | | | — | | | — | |
| | | |
|
| | | | | | | | | |
Liabilities: | | | |
|
| | | | | | | | | Liabilities: | |
Deposits | | 489,911 |
| | 489,911 |
| | — |
| | 489,911 |
| | — |
| | — |
| Deposits | | 538,280 | | | 538,280 | | | — | | | 538,280 | | | — | | | — | |
Consolidated Obligations: | | | |
|
| | | | | | | | | |
Consolidated obligations: | | Consolidated obligations: | |
Discount notes | | 22,380,509 |
| | 22,418,417 |
| | — |
| | 22,418,417 |
| | — |
| | — |
| Discount notes | | 21,280,766 | | | 21,275,448 | | | — | | | 21,275,448 | | | — | | | — | |
Bonds | | 35,902,425 |
| | 36,074,208 |
| | — |
| | 36,074,208 |
| | — |
| | — |
| Bonds | | 39,259,698 | | | 38,059,223 | | | — | | | 38,059,223 | | | — | | | — | |
Accrued interest payable | | 115,966 |
| | 115,966 |
| | — |
| | 115,966 |
| | — |
| | — |
| Accrued interest payable | | 129,753 | | | 129,753 | | | — | | | 129,753 | | | — | | | — | |
Derivative liabilities, net | | 1,404 |
| | 1,404 |
| | — |
| | 81,427 |
| | — |
| | (80,023 | ) | Derivative liabilities, net | | 16,529 | | | 16,529 | | | — | | | 2,224,548 | | | — | | | (2,208,019) | |
MRCS | | 165,161 |
| | 165,161 |
| | 165,161 |
| | — |
| | — |
| | — |
| MRCS | | 43,290 | | | 43,290 | | | 43,290 | | | — | | | — | | | — | |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | | | Estimated Fair Value |
| | Carrying | | | | | | | | | | Netting |
Financial Instruments | | Value | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustments (1) |
Assets: | | | | | | | | | | | | |
Cash and due from banks | | $ | 867,880 | | | $ | 867,880 | | | $ | 867,880 | | | $ | — | | | $ | — | | | $ | — | |
Interest-bearing deposits | | 100,041 | | | 100,041 | | | 100,000 | | | 41 | | | — | | | — | |
Securities purchased under agreements to resell | | 3,500,000 | | | 3,500,000 | | | — | | | 3,500,000 | | | — | | | — | |
Federal funds sold | | 2,580,000 | | | 2,580,000 | | | — | | | 2,580,000 | | | — | | | — | |
Trading securities | | 3,946,799 | | | 3,946,799 | | | — | | | 3,946,799 | | | — | | | — | |
AFS securities | | 9,159,935 | | | 9,159,935 | | | — | | | 9,159,935 | | | — | | | — | |
HTM securities | | 4,313,773 | | | 4,322,157 | | | — | | | 4,322,157 | | | — | | | — | |
Advances | | 27,497,835 | | | 27,462,295 | | | — | | | 27,462,295 | | | — | | | — | |
Mortgage loans held for portfolio, net | | 7,616,134 | | | 7,810,378 | | | — | | | 7,787,334 | | | 23,044 | | | — | |
Accrued interest receivable | | 80,758 | | | 80,758 | | | — | | | 80,758 | | | — | | | — | |
Derivative assets, net | | 220,202 | | | 220,202 | | | — | | | 106,926 | | | — | | | 113,276 | |
Grantor trust assets (2) | | 62,640 | | | 62,640 | | | 62,640 | | | — | | | — | | | — | |
| | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | |
Deposits | | 1,366,397 | | | 1,366,397 | | | — | | | 1,366,397 | | | — | | | — | |
Consolidated obligations: | | | | | | | | | | | | |
Discount notes | | 12,116,358 | | | 12,115,318 | | | — | | | 12,115,318 | | | — | | | — | |
Bonds | | 42,361,572 | | | 42,643,536 | | | — | | | 42,643,536 | | | — | | | — | |
Accrued interest payable | | 88,068 | | | 88,068 | | | — | | | 88,068 | | | — | | | — | |
Derivative liabilities, net | | 12,185 | | | 12,185 | | | — | | | 413,776 | | | — | | | (401,591) | |
MRCS | | 50,422 | | | 50,422 | | | 50,422 | | | — | | | — | | | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | | | Estimated Fair Value |
| | Carrying | | | | | | | | | | Netting |
Financial Instruments | | Value | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustment (1) |
Assets: | | | | | | | | | | | | |
Cash and due from banks | | $ | 546,612 |
| | $ | 546,612 |
| | $ | 546,612 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Interest-bearing deposits | | 150,225 |
| | 150,225 |
| | 150,072 |
| | 153 |
| | — |
| | — |
|
Securities purchased under agreements to resell | | 1,781,309 |
| | 1,781,309 |
| | — |
| | 1,781,309 |
| | — |
| | — |
|
Federal funds sold | | 1,650,000 |
| | 1,650,000 |
| | — |
| | 1,650,000 |
| | — |
| | — |
|
AFS securities | | 6,059,835 |
| | 6,059,835 |
| | — |
| | 5,790,716 |
| | 269,119 |
| | — |
|
HTM securities | | 5,819,573 |
| | 5,848,692 |
| | — |
| | 5,791,111 |
| | 57,581 |
| | — |
|
Advances | | 28,095,953 |
| | 28,059,477 |
| | — |
| | 28,059,477 |
| | — |
| | — |
|
Mortgage loans held for portfolio, net | | 9,501,397 |
| | 9,587,394 |
| | — |
| | 9,567,140 |
| | 20,254 |
| | — |
|
Accrued interest receivable | | 93,716 |
| | 93,716 |
| | — |
| | 93,716 |
| | — |
| | — |
|
Derivative assets, net | | 134,848 |
| | 134,848 |
| | — |
| | 233,101 |
| | — |
| | (98,253 | ) |
Grantor trust assets (included in other assets) | | 18,117 |
| | 18,117 |
| | 18,117 |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | |
Deposits | | 524,073 |
| | 524,073 |
| | — |
| | 524,073 |
| | — |
| | — |
|
Consolidated Obligations: | | | | | | | | | | | | |
Discount notes | | 16,801,763 |
| | 16,819,659 |
| | — |
| | 16,819,659 |
| | — |
| | — |
|
Bonds | | 33,467,279 |
| | 33,614,346 |
| | — |
| | 33,614,346 |
| | — |
| | — |
|
Accrued interest payable | | 98,411 |
| | 98,411 |
| | — |
| | 98,411 |
| | — |
| | — |
|
Derivative liabilities, net | | 25,225 |
| | 25,225 |
| | — |
| | 103,107 |
| | — |
| | (77,882 | ) |
MRCS | | 170,043 |
| | 170,043 |
| | 170,043 |
| | — |
| | — |
| | — |
|
(1) Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed with the same clearing agent and/or counterparty.
| |
(1)
| Represents the application of the netting requirements that allow the settlement of (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed, with the same clearing agent and/or counterparty (includes fair value adjustments on derivatives of $22,764 at September 30, 2017 for which variation margin payments are characterized as daily settled contracts). |
(2) Included in other assets on the statement of condition.
Summary of Valuation Techniques and Significant Inputs. A description of the valuation techniques, significant inputs, and levels of fair value hierarchy is disclosed in Note 1916 - Estimated Fair Values in our 20162021 Form 10-K. No significant changes have been made in the current year.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Estimated Fair Value Measurements. The following tables present, by level within the fair value hierarchy, the estimated fair value of our financial assets and liabilities that are recorded at estimated fair value on a recurring or non-recurring basis on our statement of condition.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Netting |
September 30, 2022 | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustments (1) |
Trading securities: | | | | | | | | | | |
U.S. Treasury obligations | | $ | 3,114,789 | | | $ | — | | | $ | 3,114,789 | | | $ | — | | | $ | — | |
Total trading securities | | 3,114,789 | | | — | | | 3,114,789 | | | — | | | — | |
AFS securities: | | | | | | | | | | |
U.S. Treasury obligations | | 3,401,541 | | | — | | | 3,401,541 | | | — | | | — | |
GSE and TVA debentures | | 1,900,116 | | | — | | | 1,900,116 | | | — | | | — | |
GSE multifamily MBS | | 5,995,034 | | | — | | | 5,995,034 | | | — | | | — | |
Total AFS securities | | 11,296,691 | | | — | | | 11,296,691 | | | — | | | — | |
Derivative assets: | | | | | | | | | | |
Interest-rate related | | 341,155 | | | — | | | 949,989 | | | — | | | (608,834) | |
MDCs | | 40 | | | — | | | 40 | | | — | | | — | |
Total derivative assets, net | | 341,195 | | | — | | | 950,029 | | | — | | | (608,834) | |
Other assets: | | | | | | | | | | |
Grantor trust assets | | 50,383 | | | 50,383 | | | — | | | — | | | — | |
Total assets at recurring estimated fair value | | $ | 14,803,058 | | | $ | 50,383 | | | $ | 15,361,509 | | | $ | — | | | $ | (608,834) | |
| | | | | | | | | | |
Derivative liabilities: | | | | | | | | | | |
Interest-rate related | | $ | 15,946 | | | $ | — | | | $ | 2,223,965 | | | $ | — | | | $ | (2,208,019) | |
MDCs | | 583 | | | — | | | 583 | | | — | | | — | |
Total derivative liabilities, net | | 16,529 | | | — | | | 2,224,548 | | | — | | | (2,208,019) | |
Total liabilities at recurring estimated fair value | | $ | 16,529 | | | $ | — | | | $ | 2,224,548 | | | $ | — | | | $ | (2,208,019) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
29
|
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Netting |
September 30, 2017 | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustment (1) |
AFS securities: | | | | | | | | | | |
GSE and TVA debentures | | $ | 4,524,973 |
| | $ | — |
| | $ | 4,524,973 |
| | $ | — |
| | $ | — |
|
GSE MBS | | 2,227,254 |
| | — |
| | 2,227,254 |
| | — |
| | — |
|
Private-label RMBS | | 231,769 |
| | — |
| | — |
| | 231,769 |
| | — |
|
Total AFS securities | | 6,983,996 |
| | — |
| | 6,752,227 |
| | 231,769 |
| | — |
|
Derivative assets: | | |
| | |
| | |
| | |
| | |
|
Interest-rate related | | 141,180 |
| | — |
| | 215,619 |
| | — |
| | (74,439 | ) |
Interest-rate forwards | | 524 |
| | — |
| | 524 |
| | — |
| | — |
|
MDCs | | 23 |
| | — |
| | 23 |
| | — |
| | — |
|
Total derivative assets, net | | 141,727 |
| | — |
| | 216,166 |
| | — |
| | (74,439 | ) |
Grantor trust assets (included in other assets) | | 20,995 |
| | 20,995 |
| | — |
| | — |
| | — |
|
Total assets at recurring estimated fair value | | $ | 7,146,718 |
| | $ | 20,995 |
| | $ | 6,968,393 |
| | $ | 231,769 |
| | $ | (74,439 | ) |
| | |
| | |
| | |
| | |
| | |
|
Derivative liabilities: | | |
| | |
| | |
| | |
| | |
|
Interest-rate related | | $ | 1,215 |
| | $ | — |
| | $ | 81,238 |
| | $ | — |
| | $ | (80,023 | ) |
Interest-rate forwards | | — |
| | — |
| | — |
| | — |
| | — |
|
MDCs | | 189 |
| | — |
| | 189 |
| | — |
| | — |
|
Total derivative liabilities, net | | 1,404 |
| | — |
| | 81,427 |
| | — |
| | (80,023 | ) |
Total liabilities at recurring estimated fair value | | $ | 1,404 |
| | $ | — |
| | $ | 81,427 |
| | $ | — |
| | $ | (80,023 | ) |
| | | | | | | | | | |
Mortgage loans held for portfolio (2) | | $ | 3,593 |
| | $ | — |
| | $ | — |
| | $ | 3,593 |
| | $ | — |
|
Total assets at non-recurring estimated fair value | | $ | 3,593 |
| | $ | — |
| | $ | — |
| | $ | 3,593 |
| | $ | — |
|
| | | | | | | | | | |
December 31, 2016 | | | | | | | | | | |
AFS securities: | | | | | | | | | | |
GSE and TVA debentures | | $ | 4,714,634 |
| | $ | — |
| | $ | 4,714,634 |
| | $ | — |
| | $ | — |
|
GSE MBS | | 1,076,082 |
| | — |
| | 1,076,082 |
| | — |
| | — |
|
Private-label RMBS | | 269,119 |
| | — |
| | — |
| | 269,119 |
| | — |
|
Total AFS securities | | 6,059,835 |
| | — |
| | 5,790,716 |
| | 269,119 |
| | — |
|
Derivative assets: | | |
| | |
| | |
| | |
| | |
|
Interest-rate related | | 134,206 |
| | — |
| | 232,459 |
| | — |
| | (98,253 | ) |
Interest-rate forwards | | 339 |
| | — |
| | 339 |
| | — |
| | — |
|
MDCs | | 303 |
| | — |
| | 303 |
| | — |
| | — |
|
Total derivative assets, net | | 134,848 |
| | — |
| | 233,101 |
| | — |
| | (98,253 | ) |
Grantor trust assets (included in other assets) | | 18,117 |
| | 18,117 |
| | — |
| | — |
| | — |
|
Total assets at recurring estimated fair value | | $ | 6,212,800 |
| | $ | 18,117 |
| | $ | 6,023,817 |
| | $ | 269,119 |
| | $ | (98,253 | ) |
| | |
| | |
| | |
| | |
| | |
|
Derivative liabilities: | | |
| | |
| | |
| | |
| | |
|
Interest-rate related | | $ | 24,402 |
| | $ | — |
| | $ | 102,284 |
| | $ | — |
| | $ | (77,882 | ) |
Interest-rate forwards | | 352 |
| | — |
| | 352 |
| | — |
| | — |
|
MDCs | | 471 |
| | — |
| | 471 |
| | — |
| | — |
|
Total derivative liabilities, net | | 25,225 |
| | — |
| | 103,107 |
| | — |
| | (77,882 | ) |
Total liabilities at recurring estimated fair value | | $ | 25,225 |
| | $ | — |
| | $ | 103,107 |
| | $ | — |
| | $ | (77,882 | ) |
| | | | | | | | | | |
Mortgage loans held for portfolio (3) | | $ | 3,492 |
| | $ | — |
| | $ | — |
| | $ | 3,492 |
| | $ | — |
|
Total assets at non-recurring estimated fair value | | $ | 3,492 |
| | $ | — |
| | $ | — |
| | $ | 3,492 |
| | $ | — |
|
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
| |
(1)
| Represents the application of the netting requirements that allow us to settle (i) positive and negative positions and (ii) cash collateral and related accrued interest held or placed, with the same clearing agent and/or counterparty (includes fair value adjustments on derivatives of $22,764 at September 30, 2017 for which variation margin payments are characterized as daily settled contracts). |
| |
(2)
| Amounts are as of the date the fair value adjustment was recorded during the nine months ended September 30, 2017. |
| |
(3)
| Amounts are as of the date the fair value adjustment was recorded during the year ended December 31, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Netting |
December 31, 2021 | | Total | | Level 1 | | Level 2 | | Level 3 | | Adjustments (1) |
Trading securities: | | | | | | | | | | |
U.S. Treasury obligations | | $ | 3,946,799 | | | $ | — | | | $ | 3,946,799 | | | $ | — | | | $ | — | |
Total trading securities | | 3,946,799 | | | — | | | 3,946,799 | | | — | | | — | |
AFS securities: | | | | | | | | | | |
| | | | | | | | | | |
GSE and TVA debentures | | 2,697,116 | | | — | | | 2,697,116 | | | — | | | — | |
GSE MBS | | 6,462,819 | | | — | | | 6,462,819 | | | — | | | — | |
Total AFS securities | | 9,159,935 | | | — | | | 9,159,935 | | | — | | | — | |
Derivative assets: | | | | | | | | | | |
Interest-rate related | | 220,157 | | | — | | | 106,881 | | | — | | | 113,276 | |
MDCs | | 45 | | | — | | | 45 | | | — | | | — | |
Total derivative assets, net | | 220,202 | | | — | | | 106,926 | | | — | | | 113,276 | |
Other assets: | | | | | | | | | | |
Grantor trust assets | | 62,640 | | | 62,640 | | | — | | | — | | | — | |
Total assets at recurring estimated fair value | | $ | 13,389,576 | | | $ | 62,640 | | | $ | 13,213,660 | | | $ | — | | | $ | 113,276 | |
| | | | | | | | | | |
Derivative liabilities: | | | | | | | | | | |
Interest-rate related | | $ | 12,080 | | | $ | — | | | $ | 413,671 | | | $ | — | | | $ | (401,591) | |
MDCs | | 105 | | | — | | | 105 | | | — | | | — | |
Total derivative liabilities, net | | 12,185 | | | — | | | 413,776 | | | — | | | (401,591) | |
Total liabilities at recurring estimated fair value | | $ | 12,185 | | | $ | — | | | $ | 413,776 | | | $ | — | | | $ | (401,591) | |
| | | | | | | | | | |
Mortgage loans held for portfolio (2) | | $ | 1,141 | | | $ | — | | | $ | — | | | $ | 1,141 | | | $ | — | |
Total assets at non-recurring estimated fair value | | $ | 1,141 | | | $ | — | | | $ | — | | | $ | 1,141 | | | $ | — | |
Level 3 Disclosures for All Assets
(1) Represents the application of the netting requirements that allow us to settle (i) positive and Liabilities thatnegative positions and (ii) cash collateral and related accrued interest held or placed with the same clearing agent and/or counterparty.
(2) Amounts are Measured at Fair Value on a Recurring Basis. The table below presents a rollforwardas of our AFS private-label RMBS measured at estimated fair value on a recurring basis using level 3 significant inputs. The estimated fair values were determined using a pricing source, such as a dealer quote or comparable security price, for which the significant unobservable inputs used to determinedate the price were not readily available.most recent fair-value adjustment was recorded.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Level 3 Rollforward - AFS private-label RMBS | | 2017 | | 2016 | | 2017 | | 2016 |
Balance, beginning of period | | $ | 244,263 |
| | $ | 288,143 |
| | $ | 269,119 |
| | $ | 319,186 |
|
Total realized and unrealized gains (losses): | | | | | | | | |
Accretion of credit losses in interest income | | 1,644 |
| | 2,064 |
| | 5,300 |
| | 7,364 |
|
Net losses on changes in fair value in other income (loss) | | (11 | ) | | (75 | ) | | (166 | ) | | (168 | ) |
Net change in fair value not in excess of cumulative non-credit losses in OCI | | (5 | ) | | (131 | ) | | (3 | ) | | (79 | ) |
Unrealized gains (losses) in OCI | | 1,617 |
| | 564 |
| | 3,199 |
| | (5,733 | ) |
Reclassification of non-credit portion in OCI to other income (loss) | | 11 |
| | 75 |
| | 166 |
| | 168 |
|
Purchases, issuances, sales and settlements: | | | | | | | | |
Settlements | | (15,750 | ) | | (10,957 | ) | | (45,846 | ) | | (41,055 | ) |
Balance, end of period | | $ | 231,769 |
| | $ | 279,683 |
| | $ | 231,769 |
| | $ | 279,683 |
|
| | | | | | | | |
Net gains (losses) included in earnings attributable to changes in fair value relating to assets still held at end of period | | $ | 1,633 |
| | $ | 1,989 |
| | $ | 5,134 |
| | $ | 6,336 |
|
Note 1613 - Commitments and Contingencies
The following table presents our off-balance-sheet commitments at their notional amounts.
| | | | September 30, 2017 | | September 30, 2022 |
Type of Commitment | | Expire within one year | | Expire after one year | | Total | Type of Commitment | | Expire within one year | | Expire after one year | | Total |
Letters of credit outstanding | | $ | 83,851 |
| | $ | 168,773 |
| | $ | 252,624 |
| |
Standby letters of credit outstanding | | Standby letters of credit outstanding | | $ | 48,732 | | | $ | 600,170 | | | $ | 648,902 | |
Unused lines of credit (1) | | 1,028,459 |
| | — |
| | 1,028,459 |
| Unused lines of credit (1) | | 953,254 | | | — | | | 953,254 | |
Commitments to fund additional advances (2) | | 10,500 |
| | — |
| | 10,500 |
| Commitments to fund additional advances (2) | | 54,888 | | | — | | | 54,888 | |
Commitments to fund or purchase mortgage loans, net (3) | | 133,530 |
| | — |
| | 133,530 |
| Commitments to fund or purchase mortgage loans, net (3) | | 43,868 | | | — | | | 43,868 | |
Unsettled CO bonds, at par | | 615,000 |
| | — |
| | 615,000 |
| Unsettled CO bonds, at par | | 19,700 | | | — | | | 19,700 | |
Unsettled discount notes, at par | | 20,362 |
| | — |
| | 20,362 |
| Unsettled discount notes, at par | | 23,959 | | | — | | | 23,959 | |
| |
(1)
| Maximum line of credit amount per member is $50,000. |
| |
(2)
| Generally for periods up to six months. |
| |
(3)
| Generally for periods up to 91 days. |
(1) Maximum line of credit amount per member is $100,000.
(2) Generally for periods up to six months.
(3) Generally for periods up to 91 days.
Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)
Pledged Collateral.At September 30, 20172022 and December 31, 2016,2021, we had pledged cash collateral at par, of $77,339$1,787,757 and $35,421,$515,740, respectively, to counterparties and clearing agents. Additionally, at September 30, 2017, variation margin for daily settled contracts totaled $22,764.agents. At September 30, 20172022 and December 31, 2016,2021, we had not pledged any securities as collateral.
Legal Proceedings. We are subject to legal proceedings arising in the normal course of business. We record an accrual for a loss contingency when it is probable that a loss for which we could be liable has been incurred and the amount can be reasonably estimated. After consultation with legal counsel, management doesis not anticipate thataware of any such proceedings where the ultimate liability, if any, arising out of these proceedings could have a material effect on our financial condition, results of operations or cash flows.
In 2010, we filed a complaint asserting claims against several entities for negligent misrepresentation and violations of state and federal securities law occurring in connection with the sale of private-label RMBS to us. In 2013, 2014 and 2015, we executed confidential settlement agreements with certain defendants in this litigation, pursuant to which we have dismissed all pending claims against, and provided legal releases to, certain entities with respect to all applicable securities at issue in the litigation, in consideration of our receipt of cash payments from or on behalf of those defendants. We had previously dismissed the complaint as to the other named defendants. As a result, all proceedings in the RMBS litigation we filed have been concluded. Cash settlement payments, net of legal fees and litigation expenses, totaled $134 and $312 for the three and nine months ended September 30, 2017, respectively, compared to $0 and $60 for the three and nine months ended September 30, 2016, respectively, and were recorded in other income.
Additional discussion of other commitments and contingencies is provided inNote 64 - Advances; Advances; Note 75 - Mortgage Loans Held for Portfolio; Portfolio; Note 96 - Derivatives and Hedging Activities; Activities; Note 107 - Consolidated Obligations; Obligations; Note 9 - Capital; and Note 12 - Capital; and Note 15 - Estimated Fair Values.
Note 1714 - Related Party and Other Transactions
Transactions with Related Parties. Directors Financial Institutions. The following table presents the aggregate outstanding balances with directors' financial institutions and their balance as a percent of the total balance on our statement of condition.
|
| | | | | | | | | | | | | | |
| | Capital Stock and MRCS | | Advances |
Date | | Par value | | % of Total | | Par value | | % of Total |
September 30, 2017 | | $ | 40,317 |
| | 2 | % | | $ | 555,508 |
| | 2 | % |
December 31, 2016 | | 50,810 |
| | 3 | % | | 627,105 |
| | 2 | % |
The par values at September 30, 2017 reflect changes in the composition of directors' financial institutions effective January 1, 2017, due to changes in board membership resulting from the 2016 director election.
The following table presents transactions with directors' financial institutions, taking into account the beginning and ending dates of the directors' terms, merger activity and other changes in the composition of directors' financial institutions.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | |
Transactions with Directors' Financial Institutions | | Transactions with Directors' Financial Institutions | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2022 | | 2021 | | 2022 | | 2021 |
Net capital stock issuances (redemptions and repurchases) | | $ | 90 |
| | $ | 887 |
| | $ | 3,664 |
| | $ | 1,516 |
| Net capital stock issuances (redemptions and repurchases) | | $ | 6,839 | | | $ | — | | | $ | (40,144) | | | $ | — | |
Net advances (repayments) | | (17,700 | ) | | 36,681 |
| | 47,151 |
| | 200,642 |
| Net advances (repayments) | | 519,393 | | | (146,031) | | | 1,754,096 | | | (2,189,295) | |
Mortgage loans purchases | | 11,187 |
| | 10,891 |
| | 25,234 |
| | 29,887 |
| |
Mortgage loan purchases | | Mortgage loan purchases | | 1,736 | | | 18,293 | | | 14,483 | | | 47,915 | |
The following table presents the aggregate balances of capital stock and advances outstanding for directors' financial institutions and their balances as a percent of the total balances on our statement of condition.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Balances with Directors' Financial Institutions | | Par Value | | % of Total | | Par Value | | % of Total |
Capital stock | | $ | 371,940 | | | 16 | % | | $ | 440,949 | | | 19 | % |
Advances | | 5,134,139 | | | 16 | % | | 3,854,856 | | | 14 | % |
The composition of directors' financial institutions changed effective January 1, 2022, due to changes in board membership resulting from the 2021 director election, and August 5, 2022 due to a director resignation.
Transactions with Other FHLBanks. Occasionally, we loan or borrow short-term funds to/from other FHLBanks. There were no loans to or borrowings from other FHLBanks that remained outstanding at September 30, 2022 or December 31, 2021.
Transactions with Other FHLBanks. In December 2016, we agreed to sell a 90% participating interest in a $100 million MCC of certain newly acquired MPP loans to the FHLBank of Atlanta. Principal amounts settled in December 2016 totaled $72 million, and the remaining $18 million settled in January 2017.
DEFINED TERMS
2005 SERP: Federal Home Loan Bank of Indianapolis 2005 Supplemental Executive Retirement Plan, as amended and restated
advance: Secured loan to members, former members or Housing Associates
AFS: Available-for-Sale
Agency: GSE and Ginnie Mae
AHP: Affordable Housing Program
AMA: Acquired Member Assets
AOCI: Accumulated Other Comprehensive Income (Loss)
Bank Act: Federal Home Loan Bank Act of 1932, as amended
bps: basis points
CDFI: Community Development Financial Institution
CFI: Community Financial Institution, an FDIC-insured depository institution with average total assets below an annually- adjusted limit established by the Finance Agency Director based on the Consumer Price Index
CFPB: Bureau of Consumer Financial Protection
CFTC: United States Commodity Futures Trading Commission
Clearinghouse: A United States Commodity Futures Trading Commission-registered derivatives clearing organization
CME: CME Clearing
CMO: Collateralized Mortgage Obligation
CO bond: Consolidated Obligation bond
COVID-19: Coronavirus Disease 2019 and its variants
DB Plan: Pentegra Defined Benefit Pension Plan for Financial Institutions, as amended
DC Plan:Collectively, the Pentegra Defined Contribution Retirement Savings Plan for Financial Institutions, as amended, in effect through October 1, 2020 and the Federal Home Loan Bank of Indianapolis Retirement Savings Plan, commencing October 2, 2020
DDCP: Directors' Deferred Compensation Plan
EFFR: Effective Federal Funds Rate
Exchange Act: Securities Exchange Act of 1934, as amended
Fannie Mae: Federal National Mortgage Association
FASB: Financial Accounting Standards Board
FCA: United Kingdom Financial Conduct Authority
FDIC: Federal Deposit Insurance Corporation
FHA: Federal Housing Administration
FHLBank: A Federal Home Loan Bank
FHLBanks: The 11 Federal Home Loan Banks or a subset thereof
FHLBank System: The 11 Federal Home Loan Banks and the Office of Finance
FICO®: Fair Isaac Corporation, the creators of the FICO credit score
Final Membership Rule: Final Rule on FHLBank Membership issued by the Finance Agency effective February 19, 2016
Finance Agency: Federal Housing Finance Agency
FINRA: Financial Industry Regulatory Authority
FLA: First Loss Account
FOMC: Federal Open Market Committee
Form 8-K: Current Report on Form 8-K as filed with the SEC under the Exchange Act
Form 10-K: Annual Report on Form 10-K as filed with the SEC under the Exchange Act
Form 10-Q: Quarterly Report on Form 10-Q as filed with the SEC under the Exchange Act
Freddie Mac: Federal Home Loan Mortgage Corporation
Frozen SERP: Federal Home Loan Bank of Indianapolis Supplemental Executive Retirement Plan, frozen effective December 31, 2004
GAAP: Generally Accepted Accounting Principles in the United States of America
Ginnie Mae: Government National Mortgage Association
GLB Act: Gramm-Leach-Bliley Act of 1999, as amended
GSE: United States Government-Sponsored Enterprise
Housing Associate: Approved lender under Title II of the National Housing Act of 1934 that is either a government agency or is chartered under federal or state law with rights and powers similar to those of a corporation
HTM: Held-to-Maturity
JCE Agreement: Joint Capital Enhancement Agreement, as amended, among the 11 FHLBanks
LCH: LCH.Clearnet LLC
LIBOR: London Interbank Offered Rate
LRA: Lender Risk Account
LTV: Loan-to-Value
MBS: Mortgage-Backed Securities
MCC: Master Commitment Contract
MDC: Mandatory Delivery Commitment
Moody's: Moody's Investor Services
MPF: Mortgage Partnership Finance®
MPP: Mortgage Purchase Program, including Original and Advantage unless indicated otherwise
MRCS: Mandatorily Redeemable Capital Stock
MVE: Market Value of Equity
NRSRO: Nationally Recognized Statistical Rating Organization
OCC: Office of the Comptroller of the Currency
OCI: Other Comprehensive Income (Loss)
OIS: Overnight-Indexed Swap
ORERC: Other Real Estate-Related Collateral
OTTI: Other-Than-Temporary Impairment or -Temporarily Impaired (as the context indicates)
PFI: Participating Financial Institution
PMI: Primary Mortgage Insurance
REO: Real Estate Owned
RMBS: Residential Mortgage-Backed Securities
S&P: Standard & Poor's Rating Service
SBA: Small Business Administration
SEC: Securities and Exchange Commission
Securities Act: Securities Act of 1933, as amended
SERP: Collectively, the 2005 SERP and the Frozen SERP
SETP: Federal Home Loan Bank of Indianapolis 2016 Supplemental Executive Thrift Plan, as amended and restated
SMI: Supplemental Mortgage Insurance
SOFR: Secured Overnight Financing Rate
TBA: To Be Announced, a forward contract for the purchase or sale of MBS at a future agreed-upon date for an established price
TDR: Troubled Debt Restructuring
TVA: Tennessee Valley Authority
UPB: Unpaid Principal Balance
VaR: Value at Risk
WAIR: Weighted-Average Interest Rate
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Presentation
This discussion and analysis by management of the Bank's financial condition and results of operations should be read in conjunction with our 20162021 Form 10-K and the interim Financial Statements and related Notes to Financial Statements contained in Item 1. Financial Statements.
As used in this Item, unless the context otherwise requires, the terms "Bank," "we," "us," and "our" refer to the Federal Home Loan Bank of Indianapolis or its management. We use certain acronyms and terms throughout this Item that are defined in the Glossary of Terms.
Unless otherwise stated, amounts disclosed in this Item are rounded to the nearest million; therefore, dollar amounts of less than one million may not be reflected and,or, due to rounding, may not appear to agree to the amounts presented in thousands in the Financial Statements and related Notes to Financial Statements. Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations based upon the disclosed amounts (millions) may not produce the same results.
Executive Summary
Overview. WeAs an FHLBank, we are a regional wholesale bank that: makesthat serves as a financial intermediary between the capital markets and our members. The Bank is structured as a financial cooperative. Therefore, it is generally designed to expand and contract in asset size as the needs of our members and their communities change. We primarily make secured loans in the form of advances to our members; purchasesmembers and purchase whole mortgage loans from our members; purchasesmembers. Additionally, we purchase other investments;investments and providesprovide other financial services to our members.
We are wholly owned by our member institutions. All members are required to purchase a minimum amount of our Class B capital stock as a condition of membership. Pursuant to our capital plan, members may be required to purchase additional stock to support their use of our products and services.
Our principal source of funding is the proceeds from the sale to the public of FHLBank debt instruments, called consolidated obligations, which are the joint and several obligation of all FHLBanks. We obtain additional funds from deposits, other borrowings, and the sale ofby issuing capital stock to our members.
Our primary source of revenue is interest earned on advances,advances, mortgage loans, and long- and short-term investments.investments, including MBS.
Our net interest income is primarily determined by the interest spread between the interest rate earned on our assets and the interest rate paid on our share of the consolidated obligations. A substantial portion of net interest income may also be derived from deploying our interest-free capital. We use funding and hedging strategies to manage the related interest-rate risk.
Due to our cooperative structure and wholesale nature, we typically earn a narrow interest spread. Accordingly, our net income is relatively low compared to our total assets and capital.
We group our products and services within two operating segments:
Traditional, which consists of (i) credit products (including advances, letters of credit,traditional and lines of credit), (ii) investments (including federal funds sold, securities purchased under agreements to resell, AFS securities and HTM securities) and (iii) correspondent services and deposits; and
Mortgage loans, which consist of (i) mortgage loans purchased from our members through our MPP and (ii) participating interests purchased in 2012 - 2014 from the FHLBank of Topeka in mortgage loans originated by certain of its PFIs under the MPF Program.
EconomicBusiness Environment. The Bank’s financial performance is influenced by several key national economic and market factors, including fiscal and monetary policies, the strength of the housing markets and the level and volatility of market interest rates.
Economy and Financial Markets.The U.S. economy faces significant challenges with the existence of slowing growth and rising prices.
The first quarter 2022 U.S. real gross domestic product (GDP) was the weakest since the spring of 2020, when the COVID-19 pandemic and related shutdowns drove the U.S. economy into a deep-albeit short-recession. Second quarter 2022 GDP declined at an annual inflation and seasonally adjusted rate of 0.6%, the second consecutive quarter of negative growth. The two straight quarters of declining economic output in 2022 met a commonly used definition of a recession.
GDP increased in the third quarter of 2022 at a rate of 2.6%, according to the advance estimate reported by the Bureau of Economic Analysis, but showed signs of a broad slowdown as consumer and business spending faltered under the weight of high inflation and rising interest rates.
Consumer-spending growth, the economy's main engine, cooled in the third quarter compared with the previous quarter, as Americans reduced their spending on goods. They boosted their spending on services, albeit at a slower pace. Businesses' investment in buildings and fixed assets also were reduced.
Many economists are worried about the possibility of a recession within the next 12 months. They expect the Federal Reserve's efforts to combat high inflation by raising interest rates nationalto further weigh on the economy.
Inflation. High inflation has clearly cut into households' purchasing power.
According to the Bureau of Labor Statistics, consumer inflation, excluding energy and regionalfood prices, accelerated to a new four-decade high in September, a sign that strong and broad price pressures are persisting. The so-called core consumer-price-index rose 6.6% in September from a year earlier, the largest increase since August 1982.
The overall consumer price index increased 8.2% in September from a year ago, pulled down by a drop in gasoline prices that was partially offset by higher food costs. Prices rose in September for housing, medical care, airline fares and other services, threatening to keep inflation high for a while. Housing costs rose by the most since the early 1980s, as a strong labor market continues to push up rental rates.
Federal Reserve officials believed last year that prices were being driven up by supply-chain bottlenecks and strong demand fueled by government stimulus. But they are concerned now that tight U.S. labor markets could sustain higher prices in the years to come.
Labor Market. The U.S. labor market lost some momentum in September but remained tight and a key source of economic conditions,strength, as high inflation and rising interest rates weighed on the strengtheconomy.
The Bureau of Labor Statistics reported that job growth has slowed but the unemployment rate fell to 3.5%, matching a half-century low that was last reached in July. Such rate is comfortably in the range that is considered full employment.
The number of people in the labor force fell in September after increasing in the prior month. The labor-force participation rate eased slightly to a seasonally adjusted rate of 62.3% in September and has remained stubbornly below where it stood before the pandemic, contributing to labor shortages that continue to pose challenges for the economy. This is keeping upward pressure on wages and inflation as employers compete for fewer available workers.
Average hourly earnings have increased year-over-year by more than 5%, helping to partially insulate consumers from the rise in inflation, but the pace of wage gains in September was the slowest since December 2021.
Conditions in U.S. Housing Markets. In the third quarter 2022, the housing markets.market continued to rapidly cool as record prices and higher mortgage rates weighed on home sales.
According to the National Association of Realtors (NAR), existing-home sales fell for the eighth straight month in September 2022, the longest streak of declines in 15 years, as the once-booming housing market has become a bigger drag on the U.S. economy. Year-over-year sales in September fell 23.8%.
Despite the sharp decline in sales, home prices have risen on a year-over-year basis, in part because supply remained tight. But price growth has slowed from its red-hot pace earlier in the year. According to the NAR, the median sales price of an existing home climbed in September by 8.4% from a year earlier, the third straight month of single-digit percentage increases following 23 months of double-digit percentage annual price growth.
Residential construction in the U.S. continued to slow and showed signs of weakness, as housing starts fell 8.1% in September from August and 4.7% year-over-year, according to the U.S. Commerce Department. A measure of U.S. home builder confidence fell for the 10th straight month in October to half of what it was six months ago and to the lowest level since May 2020.
Total housing inventory at the end of September was enough to cover over three months of sales, the highest in nearly two years but still historically low.
The Federal Reserve's rate increases have fueled higher mortgage rates. The average rate on a 30-year fixed-rate mortgage, according to Freddie Mac, increased to 7.08% for the week ending October 27, significantly higher than last year when it was 3.09%, and it reached its highest level in two decades. As a result, mortgage applications have reached their lowest level in 25 years.
With sustained price appreciation and higher mortgage rates, affordability continues to be a challenge for potential home buyers.
Interest Rate Levels and Volatility. The Federal Reserve seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals, on September 2017,21, 2022, the FOMC maintaineddecided to raise the target range for the federal funds rate of 1%by 75 bps to 1.25%3.0% to 3.25%. Positive economic growth measures, including job gains, rising economic activity, a low unemployment rate, increasing household spending, and expanding business fixed investment were noted as supporting an increase toIn addition, the federal funds target range. However, measures of inflation have declined and are below the 2 percent benchmark, leading to the FOMC’s decision to maintain the federal funds target range. The FOMC intends to maintain its policy of reinvesting principal payments fromstated that it will continue reducing its holdings of Treasury securities and agency debt and agency MBS into agency MBS. However,mortgage-backed securities.
The following table presents certain key interest rates.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Average for Three Months Ended | | Average for Nine Months Ended | | Period End |
| | September 30, | | September 30, | | September 30, | | December 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Federal Funds Effective | | 2.20 | % | | 0.09 | % | | 1.04 | % | | 0.08 | % | | 3.08 | % | | 0.07 | % |
SOFR | | 2.15 | % | | 0.05 | % | | 0.99 | % | | 0.04 | % | | 2.98 | % | | 0.05 | % |
Overnight LIBOR | | 2.18 | % | | 0.08 | % | | 1.04 | % | | 0.08 | % | | 3.07 | % | | 0.06 | % |
1-week OIS | | 2.31 | % | | 0.09 | % | | 1.10 | % | | 0.08 | % | | 3.08 | % | | 0.08 | % |
3-month LIBOR | | 3.00 | % | | 0.13 | % | | 1.70 | % | | 0.16 | % | | 3.76 | % | | 0.21 | % |
3-month U.S. Treasury yield | | 2.67 | % | | 0.04 | % | | 1.36 | % | | 0.04 | % | | 3.27 | % | | 0.04 | % |
2-year U.S Treasury yield | | 3.38 | % | | 0.22 | % | | 2.53 | % | | 0.18 | % | | 4.28 | % | | 0.73 | % |
10-year U.S. Treasury yield | | 3.10 | % | | 1.32 | % | | 2.66 | % | | 1.41 | % | | 3.83 | % | | 1.51 | % |
Source: Bloomberg
The level and volatility of interest rates, including the shape of the yield curve, during October 2017,the three and nine months ended September 30, 2022 were affected by several factors, principally efforts by the Federal Reserve to raise interest rates and tighten monetary policy to combat high inflation.
In 2022, as the FOMC initiated a balance sheet normalization, which is designed to gradually reducehas raised short-term rates, portions of the Federal Reserve’s balance of securities by decreasing the amount of principal payments reinvested. Yields on U.S. Treasuries were fairly stable during the third quarter of 2017, withTreasury yield curve have become increasingly inverted. Investors use the 10-year Treasury yield ranging from 2.06% to 2.39%,as an indicator of investor confidence. In recent months, the 2-year rate has been consistently higher than the 10-year rate and, endingmost recently, the quarter at 2.33%.
U.S. GDP increased at an annual3-month rate of 3.0% duringnudged above the third quarter of 2017 based on10-year rate for the advance estimate byfirst time since before the Bureau of Economic Analysis. The third quarter increase in real GDP reflected growth from personal consumption expenditures, private inventory investment, nonresidential fixed investment and exports, partially offset by negative contributions from residential fixed investment and state and local government spending.
The U.S. Bureau of Labor Statistics reported that the unemployment rate declined to 4.2% in September, 2017, despite job losses related to hurricanes in southeast U.S. andCovid-19 pandemic. That change inverted what many regard as a slight decline in nonfarm payroll employment. Health care, transportation and warehousing, professional and business services, social assistance, and financial activities were cited as contributors to employment growth. Indiana and Michigan’s preliminary unemployment rates for September 2017 were 3.8% and 4.3%, respectively.
Freddie Mac’s October, 2017 Outlook focused on the impact of the three recent major hurricanes on the housing market. Prior to the hurricanes, concerns were raised about the slow pace of home construction activity. With many homes damaged or destroyedcritical relationship in the aftermath ofU.S. yield curve, signaling a coming recession.
At its meeting on November 2, 2022, the hurricanes, thereFOMC decided to raise the target range for the federal funds rate by another 75 bps to 3.75% to 4.0%. The FOMC anticipates that ongoing increases in the target range will be more pressure on the already tight housing inventory. Further, the construction labor marketappropriate in order to attain a stance of monetary policy that is also tight, which could slowsufficiently restrictive to return inflation to 2% over time. In determining the pace of repairing or replacing houses affected by the hurricanes. The potential for a growing number of mortgage delinquencies and defaultsfuture increases in the affected regions was also cited as a potential concern. However, this assessmenttarget range, the FOMC will take into account the cumulative tightening of monetary policy, the housing market concludedlags with a reminder thatwhich monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the hurricanes directly impacted a relatively small segmentFOMC will continue reducing its holdings of the U.S. housing market.Treasury securities and agency debt and agency mortgage-backed securities. The FOMC is strongly committed to returning inflation to its 2% objective.
Indiana University’s Center for Economic Model Research projects an annual income growth rate for Indiana of 4.2% through 2020, slightly lower than its 4.3% projection for the national income growth rate. Indiana’s unemployment rate is projected to increase from 3.3% for the second quarter of 2017 to 4.3% by the end of 2020. The University of Michigan Research Seminar in Quantitative Economics projects Michigan’s job growth rate to range between 0.6% and 1.1% during 2017 and 2018, following a peak of 3.0% for the fourth quarter of 2016. Professional and business services, along with leisure and hospitality, and transportation are expected to drive job growth overcoming modest declines projected in the manufacturing sector.
Impact on Operating Results.Market interest rates and trends affect yields and margins on earning assets, including advances, purchased mortgage loans, and our investment portfolio, which contribute to our overall profitability. Additionally, market interest rates drive mortgage origination and prepayment activity, which can lead to both favorable and unfavorablenet interest margin volatility in our MPP and MBS portfolios. A flat or inverted yield curve, in which the difference between short-term interest rates and long-term interest rates is low, or negative, respectively, can have an unfavorable impact on our net interest margins. A steep yield curve, in which the difference between short-term and long-term interest rates is high, can have a favorable impact on our net interest margins. The level of interest rates also directly affects our earnings on assets funded by our interest-free capital.
Lending and investing activity by our member institutions is a key driver for our balance sheet and income growth. Such activity is a function of both prevailing interest rates and economic activity.activity, including local economic factors, particularly relating to the housing and mortgage markets. Positive economic trends can be expected to drive interest rates higher, which couldcan impair growth of the mortgage market. A less active mortgage market couldcan affect demand for advances and activity levels in our Advantage MPP. However, borrowing patterns between our insurance company members and depository members tend tocan differ during various economic and market conditions, thereby easing the potential magnitude of our core business fluctuations during business cycles. Member demand for liquidity during stressed market conditions can lead to growth in advances. Local economic factors relating to the housing market, including interest rates and housing affordability, may also influence demand for advances and MPP sales activity by our member financial institutions in Indiana and Michigan.
See Results of Operations and Changes in Financial Condition herein for a detailed discussion of our results.
growth.
Selected Financial Data
The following table presents a summary of selected financial information ($ amounts in millions).
|
| | | | | | | | | | | | | | | | | | | | |
| | As of and for the Three Months Ended |
| | September 30, 2017 | | June 30, 2017 | | March 31, 2017 | | December 31, 2016 | | September 30, 2016 |
Statement of Condition: | | | | | | | | | | |
Advances | | $ | 32,953 |
| | $ | 32,253 |
| | $ | 29,671 |
| | $ | 28,096 |
| | $ | 26,473 |
|
Mortgage loans held for portfolio, net | | 10,196 |
| | 9,894 |
| | 9,633 |
| | 9,501 |
| | 9,270 |
|
Cash and investments (1) | | 18,718 |
| | 18,234 |
| | 17,059 |
| | 16,008 |
| | 16,864 |
|
Total assets | | 62,178 |
| | 60,712 |
| | 56,669 |
| | 53,907 |
| | 52,909 |
|
Discount notes | | 22,381 |
| | 21,036 |
| | 18,399 |
| | 16,802 |
| | 16,393 |
|
CO bonds | | 35,902 |
| | 35,282 |
| | 34,470 |
| | 33,467 |
| | 32,740 |
|
Total consolidated obligations | | 58,283 |
| | 56,318 |
| | 52,869 |
| | 50,269 |
| | 49,133 |
|
MRCS | | 165 |
| | 167 |
| | 167 |
| | 170 |
| | 179 |
|
Capital stock | | 1,779 |
| | 1,702 |
| | 1,554 |
| | 1,493 |
| | 1,438 |
|
Retained earnings (2) | | 949 |
| | 925 |
| | 903 |
| | 887 |
| | 862 |
|
AOCI | | 103 |
| | 96 |
| | 80 |
| | 56 |
| | 40 |
|
Total capital | | 2,831 |
| | 2,723 |
| | 2,537 |
| | 2,436 |
| | 2,340 |
|
| | | | | | | | | | |
Statement of Income: | | | | | | | | | | |
Net interest income | | $ | 69 |
| | $ | 64 |
| | $ | 59 |
| | $ | 54 |
| | $ | 49 |
|
Provision for (reversal of) credit losses | | — |
| | — |
| | — |
| | — |
| | — |
|
Other income (loss) | | (3 | ) | | (4 | ) | | (3 | ) | | 13 |
| | (4 | ) |
Other expenses | | 20 |
| | 19 |
| | 20 |
| | 22 |
| | 19 |
|
AHP assessments | | 5 |
| | 4 |
| | 4 |
| | 5 |
| | 3 |
|
Net income | | $ | 41 |
| | $ | 37 |
| | $ | 32 |
| | $ | 40 |
| | $ | 23 |
|
| | | | | | | | | | |
Selected Financial Ratios: | | | | | | | | | | |
Net interest margin (3) | | 0.45 | % | | 0.44 | % | | 0.43 | % | | 0.41 | % | | 0.38 | % |
Return on average equity (4) | | 5.95 | % | | 5.77 | % | | 5.18 | % | | 6.73 | % | | 4.03 | % |
Return on average assets (4) | | 0.26 | % | | 0.25 | % | | 0.23 | % | | 0.30 | % | | 0.18 | % |
Weighted average dividend rate (5) | | 4.25 | % | | 4.25 | % | | 4.25 | % | | 4.25 | % | | 4.25 | % |
Dividend payout ratio (6) | | 42.67 | % | | 41.98 | % | | 49.21 | % | | 37.14 | % | | 63.28 | % |
Total capital ratio (7) | | 4.55 | % | | 4.49 | % | | 4.48 | % | | 4.52 | % | | 4.42 | % |
Total regulatory capital ratio (8) | | 4.65 | % | | 4.60 | % | | 4.63 | % | | 4.73 | % | | 4.69 | % |
Average equity to average assets | | 4.44 | % | | 4.41 | % | | 4.46 | % | | 4.51 | % | | 4.41 | % |
| |
(1)
| Consists of cash, interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, AFS securities, and HTM securities. |
| |
(2)
| Includes restricted and unrestricted retained earnings. |
| |
(3)
| Annualized net interest income expressed as a percentage of average interest-earning assets. |
| |
(5)
| Annualized dividends paid in cash during the period divided by the average amount of Class B capital stock eligible for dividends under our capital plan, excluding MRCS. |
| |
(6)
| Dividends paid in cash during the period divided by net income for the period. By dividing dividends paid in cash during the period by the net income for the prior period, the dividend payout ratios for each of the three months ended September 30, 2017, June 30, 2017, March 31, 2017, December 31, 2016 and September 30, 2016, would be 46%, 50%, 39%, 65% and 65%, respectively. |
| |
(7)
| Capital stock plus retained earnings and AOCI expressed as a percentage of total assets. |
| |
(8)
| Capital stock plus retained earnings and MRCS expressed as a percentage of total assets. |
Results of Operations and Changes in Financial Condition
Results of Operations for the Three and Nine Months Ended September 30, 20172022 and 2016.2021. The following table presents the comparative highlights of our results of operations ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
Comparative Highlights | | 2017 | | 2016 | | $ Change | | % Change | | 2017 | | 2016 | | $ Change | | % Change | |
Condensed Statements of Comprehensive Income | | Condensed Statements of Comprehensive Income | | 2022 | | 2021 | | $ Change | | % Change | | 2022 | | 2021 | | $ Change | | % Change |
Net interest income | | $ | 69 |
| | $ | 49 |
| | $ | 20 |
| | 39 | % | | $ | 192 |
| | $ | 144 |
| | $ | 48 |
| | 33 | % | Net interest income | | $ | 73 | | | $ | 58 | | | $ | 15 | | | 25 | % | | $ | 201 | | | $ | 190 | | | $ | 11 | | | 6 | % |
Provision for (reversal of) credit losses | | — |
| | — |
| | — |
| | | | — |
| | — |
| | — |
| | | Provision for (reversal of) credit losses | | — | | | — | | | — | | | — | | | — | | | — | | |
Net interest income after provision for credit losses | | 69 |
| | 49 |
| | 20 |
| | 39 | % | | 192 |
|
| 144 |
| | 48 |
| | 33 | % | Net interest income after provision for credit losses | | 73 | | | 58 | | | 15 | | | 25 | % | | 201 | | | 190 | | | 11 | | | 6 | % |
Other income (loss) | | (3 | ) | | (4 | ) | | 1 |
| | | | (10 | ) | | (7 | ) | | (3 | ) | | | Other income (loss) | | 7 | | | (9) | | | 16 | | | (2) | | | (32) | | | 30 | | |
Other expenses | | 20 |
| | 19 |
| | 1 |
| | | | 59 |
| | 56 |
| | 3 |
| | | Other expenses | | 28 | | | 27 | | | 1 | | | 80 | | | 83 | | | (3) | | |
Income before assessments | | 46 |
| | 26 |
| | 20 |
| | 75 | % | | 123 |
|
| 81 |
| | 42 |
| | 51 | % | Income before assessments | | 52 | | | 22 | | | 30 | | | 133 | % | | 119 | | | 75 | | | 44 | | | 60 | % |
AHP assessments | | 5 |
| | 3 |
| | 2 |
| | | | 13 |
| | 8 |
| | 5 |
| | | AHP assessments | | 5 | | | 2 | | | 3 | | | 12 | | | 8 | | | 4 | | |
Net income | | 41 |
| | 23 |
| | 18 |
| | 76 | % | | 110 |
| | 73 |
| | 37 |
| | 51 | % | Net income | | 47 | | | 20 | | | 27 | | | 133 | % | | 107 | | | 67 | | | 40 | | | 61 | % |
Total other comprehensive income (loss) | | 7 |
| | 25 |
| | (18 | ) | | | | 47 |
| | 17 |
| | 30 |
| | | Total other comprehensive income (loss) | | (16) | | | (42) | | | 26 | | | (135) | | | 46 | | | (181) | | |
Total comprehensive income | | $ | 48 |
| | $ | 48 |
| | $ | — |
| | (1 | %) | | $ | 157 |
| | $ | 90 |
| | $ | 67 |
| | 75 | % | |
| Total comprehensive income (loss) | | Total comprehensive income (loss) | | $ | 31 | | | $ | (22) | | | $ | 53 | | | 239 | % | | $ | (28) | | | $ | 113 | | | $ | (141) | | | (124) | % |
The increase in net income for the three months ended September 30, 20172022 compared to the respectivecorresponding period in 2016the prior year was primarily due to higher netearnings on the portion of the Bank's assets funded by its capital, and lower amortization of mortgage purchase premiums resulting from lower principal prepayments, each driven by the increase in market interest income as a result of asset growth and higher spreads. rates.
The increase in net income for the nine months ended September 30, 20172022 compared to the respectivecorresponding period in 2016the prior year was also primarily due to lower amortization of mortgage purchase premiums resulting from lower principal prepayments, and higher earnings on the portion of the Bank's assets funded by its capital, each driven by the increase in market interest rates, but partially offset by declines in the fair values of the investments indirectly funding the liabilities under certain employee benefit plans.
The changes in total OCI for the three and nine months ended September 30, 2022 compared to the corresponding periods in the prior year were substantially due to unrealized losses on AFS securities, in particular investments in MBS, driven by the increase in market interest rates. However, our AFS securities remained in a net interestunrealized gain position at September 30, 2022.
The following table presents the returns on average assets and returns on average equity.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Ratios | | 2022 | | 2021 | | 2022 | | 2021 |
Return on average assets | | 0.28 | % | | 0.13 | % | | 0.23 | % | | 0.14 | % |
Return on average equity | | 5.23 | % | | 2.22 | % | | 4.07 | % | | 2.52 | % |
Adjusted Net Income, a Non-GAAP Financial Measure. The Bank reports its results of operations in accordance with GAAP. Management believes that a non-GAAP financial measure may also be useful to shareholders and other stakeholders as a key measure of its operating performance. Such measure can also provide additional insights into period-to-period comparisons of the Bank's operating results beyond its GAAP results, which are impacted by temporary changes in fair value and other factors driven by market volatility that hinder consistent performance measurement. As a result, the Bank is reporting adjusted net income as a resultnon-GAAP financial measure.
Adjusted net income represents GAAP net income adjusted to exclude: (i) the mark-to-market adjustments and higher spreads, but was partially offset by higher expensesother transitory effects from derivatives and nettrading/hedging activities, (ii) interest expense on MRCS, (iii) realized gains and losses on derivativessales of investment securities, and (iv) at the discretion of management, other eligible non-routine transactions. These adjustments reflect (i) the temporary nature of fair-value and certain other hedging activities.gains (losses) due to the Bank's practice of holding its financial instruments to maturity, (ii) the reclassification of interest on MRCS as dividends, (iii) the sale of investment securities, primarily for liquidity purposes or to reduce exposure to LIBOR-indexed instruments, the gains (losses) on which arise from accelerating the recognition of future income (expense), and (iv) any other eligible non-routine transactions that management determines can provide additional insights into period-to-period comparisons of the Bank’s operating results beyond its GAAP results.
Non-GAAP financial measures are not audited. In addition, non-GAAP financial measures have no standardized measurement prescribed by GAAP and may not be comparable to similar non-GAAP financial measures used by other companies. While management believes that adjusted net income is helpful in understanding the Bank's performance, this measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for analyses of earnings reported in accordance with GAAP.
The decreasefollowing table presents a reconciliation of the Bank's GAAP net income to adjusted net income ($ amounts in total OCImillions).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | | |
Reconciliation of Net Income | | 2022 | | 2021 | | 2022 | | 2021 |
GAAP net income | | $ | 46.6 | | | $ | 19.9 | | | $ | 107.5 | | | $ | 67.0 | |
Adjustments to exclude: | | | | | | | | |
Fair-value hedging (gains) losses (1) | | (3.3) | | | 2.8 | | | 1.5 | | | (10.2) | |
Amortization of losses on ineffective and discontinued fair-value hedging relationships (2) | | 21.5 | | | 11.5 | | | 55.6 | | | 24.4 | |
Trading losses, net of economic hedging impact (3) | | 4.6 | | | 7.7 | | | 4.0 | | | 26.9 | |
Net unrealized (gains) losses on other economic hedges | | (0.5) | | | 0.4 | | | (0.2) | | | 0.8 | |
Net realized losses on sales of investment securities | | 1.0 | | | — | | | 1.0 | | | — | |
Interest expense on MRCS | | 0.4 | | | 0.3 | | | 0.9 | | | 2.3 | |
Total adjustments | | 23.7 | | | 22.7 | | | 62.8 | | | 44.2 | |
| | | | | | | | |
AHP assessments on adjustments | | (2.4) | | | (2.2) | | | (6.2) | | | (4.2) | |
| | | | | | | | |
Adjusted net income (non-GAAP measure) | | $ | 67.9 | | | $ | 40.4 | | | $ | 164.1 | | | $ | 107.0 | |
(1) Changes in fair value of hedged items (attributable to the risk being hedged) and associated derivatives in qualifying hedging relationships.
(2) Gains (losses) resulting from cumulative basis adjustments to hedged items.
(3) Includes both (i) unrealized (gains) losses on trading securities and (ii) realized (gains) losses on maturities and sales of trading securities.
Adjusted net income for the three months ended September 30, 20172022 was $67.9 million, an increase of $27.5 million compared to the respectivecorresponding period in 2016the prior year. The increase was primarily due to higher earnings on the portion of the Bank's assets funded by its capital and lower unrealized gains on non-OTTI AFS securities. The increase in total OCIamortization of mortgage purchase premiums.
Adjusted net income for the nine months ended September 30, 20172022 was $164.1 million, an increase of $57.1 million compared to the respectivecorresponding period in 2016the prior year. The increase was primarily due to a increaselower amortization of mortgage purchase premiums, higher adjusted earnings from certain hedging activities, and higher earnings on the portion of the Bank's assets funded by its capital, partially offset by lower adjusted earnings on trading securities and declines in the unrealized gains on AFS securities.fair values of the investments indirectly funding the liabilities under certain employee benefit plans.
Changes in Financial Condition for the Nine Months Ended September 30, 2017. 2022. The following table presents the comparative highlights of theour changes in our financial condition ($ amounts in millions). |
| | | | | | | | | | | | | | | |
Condensed Statements of Condition | | September 30, 2017 | | December 31, 2016 | | $ Change | | % Change |
Advances | | $ | 32,953 |
| | $ | 28,096 |
| | $ | 4,857 |
| | 17 | % |
Mortgage loans held for portfolio, net | | 10,196 |
| | 9,501 |
| | 695 |
| | 7 | % |
Cash and investments (1) | | 18,718 |
| | 16,008 |
| | 2,710 |
| | 17 | % |
Other assets | | 311 |
| | 302 |
| | 9 |
| | 3 | % |
Total assets | | $ | 62,178 |
| | $ | 53,907 |
| | $ | 8,271 |
| | 15 | % |
| | | | | | | | |
Consolidated obligations | | $ | 58,283 |
| | $ | 50,269 |
| | $ | 8,014 |
| | 16 | % |
MRCS | | 165 |
| | 170 |
| | (5 | ) | | (3 | %) |
Other liabilities | | 899 |
| | 1,032 |
| | (133 | ) | | (13 | %) |
Total liabilities | | 59,347 |
| | 51,471 |
| | 7,876 |
| | 15 | % |
Capital stock, Class B putable | | 1,779 |
| | 1,493 |
| | 286 |
| | 19 | % |
Retained earnings (2) | | 949 |
| | 887 |
| | 62 |
| | 7 | % |
AOCI | | 103 |
| | 56 |
| | 47 |
| | 83 | % |
Total capital | | 2,831 |
| | 2,436 |
| | 395 |
| | 16 | % |
Total liabilities and capital | | $ | 62,178 |
| | $ | 53,907 |
| | $ | 8,271 |
| | 15 | % |
| | | | | | | | |
Total regulatory capital (3) | | $ | 2,893 |
| | $ | 2,550 |
| | $ | 343 |
| | 13 | % |
| |
(1)
| Consists of cash, interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, AFS securities, and HTM securities. |
| |
(2)
| Includes restricted retained earnings at September 30, 2017 and December 31, 2016 of $174 million and $152 million, respectively. |
| |
(3)
| Total capital less AOCI plus MRCS. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Condensed Statements of Condition | | September 30, 2022 | | December 31, 2021 | | $ Change | | % Change |
Advances | | $ | 31,196 | | | $ | 27,498 | | | $ | 3,698 | | | 13 | % |
Mortgage loans held for portfolio, net | | 7,649 | | | 7,616 | | | 33 | | | — | % |
Cash and short-term investments (1) | | 7,607 | | | 7,048 | | | 559 | | | 8 | % |
Investment securities and other assets (2) | | 18,943 | | | 17,843 | | | 1,100 | | | 6 | % |
Total assets | | $ | 65,395 | | | $ | 60,005 | | | $ | 5,390 | | | 9 | % |
| | | | | | | | |
Consolidated obligations | | $ | 60,540 | | | $ | 54,478 | | | $ | 6,062 | | | 11 | % |
MRCS | | 43 | | | 50 | | | (7) | | | (14) | % |
Other liabilities | | 1,248 | | | 1,921 | | | (673) | | | (35) | % |
Total liabilities | | 61,831 | | | 56,449 | | | 5,382 | | | 10 | % |
| | | | | | | | |
Capital stock | | 2,326 | | | 2,246 | | | 80 | | | 4 | % |
Retained earnings (3) | | 1,240 | | | 1,177 | | | 63 | | | 5 | % |
AOCI | | (2) | | | 133 | | | (135) | | | (101) | % |
Total capital | | 3,564 | | | 3,556 | | | 8 | | | — | % |
| | | | | | | | |
Total liabilities and capital | | $ | 65,395 | | | $ | 60,005 | | | $ | 5,390 | | | 9 | % |
| | | | | | | | |
Total regulatory capital (4) | | $ | 3,609 | | | $ | 3,473 | | | $ | 136 | | | 4 | % |
40
(2) Includes trading, AFS and HTM securities.
(3) Includes restricted retained earnings at September 30, 2022 and December 31, 2021 of Contents
$309 million and $287 million, respectively.
(4) Total capital less AOCI plus MRCS.
The increase in totalTotal assets at September 30, 2017 compared to2022 were $65.4 billion, a net increase of $5.4 billion, or 9%, from December 31, 2016 was2021, driven primarily driven by ana net increase in advances outstanding. The increase in total liabilities
Advances outstanding at September 30, 2017 compared to December 31, 2016 was attributable to2022, at carrying value, totaled $31.2 billion, a net increase inof $3.7 billion, or 13%, from December 31, 2021. The par value of advances to depository institutions - comprising commercial banks, savings institutions and credit unions - and insurance companies increased by 28% and 3%, respectively.
Mortgage loans held for portfolio at September 30, 2022 totaled $7.6 billion, a net increase of $33 million, or 0.4%, from December 31, 2021, as the Bank's purchases from its members slightly exceeded principal repayments by borrowers.
The liquidity portfolio, which consists of cash and short-term investments as well as U.S. Treasury obligations, at September 30, 2022 totaled $10.7 billion, a net decrease of $273 million, or 2%, from December 31, 2021. Cash and short-term investments increased by $559 million, or 8%, to $7.6 billion. U.S. Treasury obligations, classified as trading securities, decreased by $832 million, or 21%, to $3.1 billion. As a result, cash and short-term investments represented 71% of the liquidity portfolio at September 30, 2022, while U.S. Treasury obligations represented 29%.
FHLBank Indianapolis' consolidated obligations to fund our asset growth. Theoutstanding at September 30, 2022 totaled $60.5 billion, a net increase of $6.1 billion, or 11%, from December 31, 2021, which reflected increased funding needs associated with the net increase in the Bank's total assets.
Total capital at September 30, 2017 compared to2022 was $3.6 billion, a net increase of $8 million, or 0.2%, from December 31, 2016 was primarily a result of additional2021. The increases in capital stock issued to membersoutstanding and retained earnings were substantially offset by other comprehensive losses, which substantially resulted from unrealized losses on investments in connection withMBS driven by the increase in advances.market interest rates.
The Bank's regulatory capital-to-assets ratio at September 30, 2022 was 5.52%, which exceeds all applicable regulatory capital requirements.
Outlook. We believe that our financial performance will continue to provide reasonable, risk-adjusted returns for our members across a wide range of business, financial, and economic environments.
During 2022, demand by our members for advances has increased in response to loan growth outpacing their deposit growth, rising market interest rates, including the adverse impact on their investment portfolios, and the availability of suitable products to assist our members in managing their balance sheets in the current economic environment. However, the anticipated merger of Flagstar Bank, historically one of our largest and most active borrowers, into a non-member depository institution may result in repayment of their outstanding advances this year. In any event, we expect total advances outstanding at December 31, 2022 to approximate or exceed the balance outstanding at December 31, 2021.
Our net income for the nine months ended September 30, 2022 was $107.5 million, an increase of $40.5 million compared to the corresponding period in the prior year. Based primarily on lower amortization of mortgage purchase premium, resulting from lower loan prepayments, and higher earnings on the portion of the Bank's assets funded by its capital, each driven by the increase in market interest rates, we continue to expect that earnings for the year 2022 will be significantly higher than earnings in 2021, and will lead to significantly higher allocations to our AHP.
However, the ultimate effects of economic and financial markets activity, including fiscal and monetary policies, the strength of the housing markets and the level and volatility of market interest rates continue to evolve and are highly uncertain and, therefore, the future impact on our business is difficult to predict.
Analysis of Results of Operations for the Three and Nine Months Ended September 30, 20172022 and 2016.2021.
Net Interest Income.Income.The following table presents average daily balances, interest income/expense, and average yieldsyields/cost of funds of our major categories of interest-earning assets and their funding sources ($ amounts in millions).
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| 2017 | | 2016 | | 2022 | | 2021 |
| Average Balance | | Interest Income/ Expense | | Average Yield (1) | | Average Balance | | Interest Income/ Expense | | Average Yield (1) | | Average Balance | | Interest Income/ Expense (1) | | Average Yield/ Cost of Funds (1) (2) | | Average Balance | | Interest Income/ Expense (1) | | Average Yield/ Cost of Funds (1) (2) |
Assets: | | | | | | | | | | | | Assets: | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | $ | 5,126 |
| | $ | 15 |
| | 1.17 | % | | $ | 4,245 |
| | $ | 4 |
| | 0.41 | % | Federal funds sold and securities purchased under agreements to resell | $ | 7,491 | | | $ | 43 | | | 2.21 | % | | $ | 6,344 | | | $ | 2 | | | 0.08 | % |
Investment securities (2)(3) | 12,790 |
| | 66 |
| | 2.03 | % | | 12,241 |
| | 49 |
| | 1.59 | % | 18,365 | | | 109 | | | 2.38 | % | | 19,218 | | | 41 | | | 0.84 | % |
Advances (3)(4) | 32,183 |
| | 113 |
| | 1.39 | % | | 25,972 |
| | 55 |
| | 0.85 | % | 30,921 | | | 187 | | | 2.40 | % | | 28,378 | | | 20 | | | 0.29 | % |
Mortgage loans held for portfolio (3) | 10,066 |
| | 79 |
| | 3.13 | % | | 9,015 |
| | 68 |
| | 3.00 | % | |
Mortgage loans held for portfolio (4) (5) | | Mortgage loans held for portfolio (4) (5) | 7,676 | | | 53 | | | 2.73 | % | | 7,660 | | | 44 | | | 2.28 | % |
Other assets (interest-earning) (4)(6) | 424 |
| | 1 |
| | 1.36 | % | | 382 |
| | 1 |
| | 0.71 | % | 2,022 | | | 11 | | | 2.14 | % | | 671 | | | — | | | 0.08 | % |
Total interest-earning assets | 60,589 |
| | 274 |
| | 1.79 | % | | 51,855 |
| | 177 |
| | 1.36 | % | Total interest-earning assets | 66,475 | | | 403 | | | 2.40 | % | | 62,271 | | | 107 | | | 0.68 | % |
Other assets (5)(7) | 397 |
| | | | | | 38 |
| | | | | (868) | | | 476 | | |
Total assets | $ | 60,986 |
| | | | | | $ | 51,893 |
| | | | | Total assets | $ | 65,607 | | | $ | 62,747 | | |
| | | | | | | | | | | | | | | | |
Liabilities and Capital: | | | | | | | | | | | | Liabilities and Capital: | |
Interest-bearing deposits | $ | 546 |
| | 1 |
| | 0.96 | % | | $ | 645 |
| | — |
| | 0.12 | % | Interest-bearing deposits | $ | 806 | | | 4 | | | 1.90 | % | | $ | 1,677 | | | — | | | 0.01 | % |
Discount notes | 21,014 |
| | 55 |
| | 1.03 | % | | 16,154 |
| | 17 |
| | 0.41 | % | Discount notes | 21,159 | | | 108 | | | 2.02 | % | | 13,350 | | | 2 | | | 0.05 | % |
CO bonds (3)(4) | 35,840 |
| | 147 |
| | 1.63 | % | | 31,879 |
| | 109 |
| | 1.36 | % | 39,393 | | | 218 | | | 2.20 | % | | 43,282 | | | 47 | | | 0.43 | % |
MRCS | 166 |
| | 2 |
| | 4.22 | % | | 176 |
| | 2 |
| | 4.24 | % | MRCS | 44 | | | — | | | 3.69 | % | | 174 | | | — | | | 0.71 | % |
Other borrowings | — |
| | — |
| | — | % | | — |
| | — |
| | — | % | |
| Total interest-bearing liabilities | 57,566 |
| | 205 |
| | 1.41 | % | | 48,854 |
| | 128 |
| | 1.04 | % | Total interest-bearing liabilities | 61,402 | | | 330 | | | 2.13 | % | | 58,483 | | | 49 | | | 0.33 | % |
Other liabilities | 710 |
| | | | | | 749 |
| | | | | Other liabilities | 676 | | | | | 707 | | | | |
Total capital | 2,710 |
| | | | | | 2,290 |
| | | | | Total capital | 3,529 | | | 3,557 | | |
Total liabilities and capital | $ | 60,986 |
| | | | | | $ | 51,893 |
| | | | | Total liabilities and capital | $ | 65,607 | | | $ | 62,747 | | |
| | | | | | | | | | | | | | | | |
Net interest income | | | $ | 69 |
| |
| | | | $ | 49 |
| |
| Net interest income | | $ | 73 | | | $ | 58 | | |
| | | | | | | | | | | | | | | | |
Net spread on interest-earning assets less interest-bearing liabilities(2) | | | | | 0.38 | % | | | | | | 0.32 | % | | 0.27 | % | | 0.35 | % |
| | | | | | | | | | | | |
Net interest margin (6)(8) | | | | | 0.45 | % | | | | | | 0.38 | % | | 0.43 | % | | 0.37 | % |
| | | | | | | | | | | | |
Average interest-earning assets to interest-bearing liabilities | 1.05 |
| | | | | | 1.06 |
| | | | | Average interest-earning assets to interest-bearing liabilities | 1.08 | | | 1.06 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| Average Balance | | Interest Income/ Expense (1) | | Average Yield/ Cost of Funds (1) (2) | | Average Balance | | Interest Income/ Expense (1) | | Average Yield/Cost of Funds (1) (2) |
Assets: | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | $ | 6,925 | | | $ | 57 | | | 1.10 | % | | $ | 7,281 | | | $ | 3 | | | 0.06 | % |
Investment securities (3) | 18,008 | | | 201 | | | 1.50 | % | | 19,615 | | | 140 | | | 0.95 | % |
Advances (4) | 28,296 | | | 290 | | | 1.37 | % | | 29,000 | | | 85 | | | 0.39 | % |
Mortgage loans held for portfolio (4) (5) | 7,690 | | | 152 | | | 2.65 | % | | 7,937 | | | 125 | | | 2.10 | % |
Other assets (interest-earning) (6) | 1,435 | | | 14 | | | 1.29 | % | | 767 | | | — | | | 0.07 | % |
Total interest-earning assets | 62,354 | | | 714 | | | 1.53 | % | | 64,600 | | | 353 | | | 0.73 | % |
Other assets (7) | (339) | | | | | | | 653 | | | | | |
Total assets | $ | 62,015 | | | | | | | $ | 65,253 | | | | | |
| | | | | | | | | | | |
Liabilities and Capital: | | | | | | | | | | | |
Interest-bearing deposits | $ | 1,121 | | | 5 | | | 0.66 | % | | $ | 1,628 | | | — | | | 0.01 | % |
Discount notes | 17,061 | | | 138 | | | 1.08 | % | | 16,187 | | | 8 | | | 0.06 | % |
CO bonds (4) | 39,653 | | | 369 | | | 1.24 | % | | 42,943 | | | 153 | | | 0.48 | % |
MRCS | 46 | | | 1 | | | 2.68 | % | | 216 | | | 2 | | | 1.45 | % |
| | | | | | | | | | | |
Total interest-bearing liabilities | 57,881 | | | 513 | | | 1.18 | % | | 60,974 | | | 163 | | | 0.36 | % |
Other liabilities | 606 | | | | | | | 720 | | | | | |
Total capital | 3,528 | | | | | | | 3,559 | | | | | |
Total liabilities and capital | $ | 62,015 | | | | | | | $ | 65,253 | | | | | |
| | | | | | | | | | | |
Net interest income | | | $ | 201 | | | | | | | $ | 190 | | | |
| | | | | | | | | | | |
Net spread on interest-earning assets less interest-bearing liabilities (2) | | | | | 0.35 | % | | | | | | 0.37 | % |
| | | | | | | | | | | |
Net interest margin (8) | | | | | 0.43 | % | | | | | | 0.39 | % |
| | | | | | | | | | | |
Average interest-earning assets to interest-bearing liabilities | 1.08 | | | | | | | 1.06 | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| Average Balance | | Interest Income/ Expense | | Average Yield (1) | | Average Balance | | Interest Income/ Expense | | Average Yield (1) |
Assets: | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | $ | 5,013 |
| | $ | 36 |
| | 0.96 | % | | $ | 4,228 |
| | $ | 12 |
| | 0.38 | % |
Investment securities (2) | 12,560 |
| | 173 |
| | 1.84 | % | | 11,836 |
| | 132 |
| | 1.49 | % |
Advances (3) | 30,439 |
| | 282 |
| | 1.24 | % | | 25,772 |
| | 156 |
| | 0.81 | % |
Mortgage loans held for portfolio (3) | 9,793 |
| | 233 |
| | 3.19 | % | | 8,583 |
| | 205 |
| | 3.19 | % |
Other assets (interest-earning) (4) | 357 |
| | 3 |
| | 1.23 | % | | 325 |
| | 2 |
| | 0.75 | % |
Total interest-earning assets | 58,162 |
| | 727 |
| | 1.67 | % | | 50,744 |
| | 507 |
| | 1.33 | % |
Other assets (5) | 445 |
| | | | | | 280 |
| | | | |
Total assets | $ | 58,607 |
| | | | | | $ | 51,024 |
| | | | |
| | | | | | | | | | | |
Liabilities and Capital: | | | | | | | | | | | |
Interest-bearing deposits | $ | 555 |
| | 3 |
| | 0.76 | % | | $ | 598 |
| | — |
| | 0.09 | % |
Discount notes | 19,743 |
| | 122 |
| | 0.83 | % | | 16,251 |
| | 48 |
| | 0.39 | % |
CO bonds (3) | 34,835 |
| | 405 |
| | 1.55 | % | | 31,085 |
| | 310 |
| | 1.33 | % |
MRCS | 167 |
| | 5 |
| | 4.22 | % | | 144 |
| | 5 |
| | 4.41 | % |
Other borrowings | — |
| | — |
| | — | % | | — |
| | — |
| | — | % |
Total interest-bearing liabilities | 55,300 |
| | 535 |
| | 1.29 | % | | 48,078 |
| | 363 |
| | 1.01 | % |
Other liabilities | 708 |
| | | | | | 676 |
| | | | |
Total capital | 2,599 |
| | | | | | 2,270 |
| | | | |
Total liabilities and capital | $ | 58,607 |
| | | | | | $ | 51,024 |
| | | | |
| | | | | | | | | | | |
Net interest income | | | $ | 192 |
| |
|
| | | | $ | 144 |
| |
|
|
| | | | | | | | | | | |
Net spread on interest-earning assets less interest-bearing liabilities | | | | | 0.38 | % | | | | | | 0.32 | % |
| | | | | | | | | | | |
Net interest margin (6) | | | | | 0.44 | % | | | | | | 0.38 | % |
| | | | | | | | | | | |
Average interest-earning assets to interest-bearing liabilities | 1.05 |
| | | | | | 1.06 |
| | | | |
(1) Includes hedging gains (losses) on qualifying fair-value hedging relationships. Excludes impact of purchase discount (premium) recorded through mark-to-market gains (losses) on trading securities and net interest settlements on derivatives hedging trading securities.
(2) Annualized.
| |
(3) Consists of trading, AFS and HTM securities. The average balances of AFS securities are based on amortized cost; therefore, the resulting yields do not reflect changes in the estimated fair value that are a component of OCI. Interest income/expense and average yield/cost of funds includes all other components of interest, including the impact of net interest payments or receipts on derivatives in qualifying hedging relationships and amortization of hedge accounting basis adjustments. Excludes net interest payments or receipts on derivatives in economic hedging relationships. (4) Interest income/expense and average yield/cost of funds include all other components of interest, including the impact of net interest payments or receipts on derivatives in qualifying hedge relationships, amortization of hedge accounting basis adjustments, and prepayment fees on advances. Excludes net interest payments or receipts on derivatives in economic hedging relationships. (5) Includes non-accrual loans. (6) Consists of interest-bearing deposits and loans to other FHLBanks (if applicable). Includes the rights or obligations to cash collateral, except for variation margin payments characterized as daily settled contracts. (7) Includes changes in the estimated fair value of AFS securities and grantor trust assets. (8) Annualized net interest income expressed as a percentage of the average balance of interest-earning assets. (1)
| Annualized. |
| |
(2)
| Consists of AFS and HTM securities. The average balances of investment securities are based on amortized cost; therefore, the resulting yields do not reflect changes in the estimated fair value of AFS securities that are included as a component of OCI, nor do they reflect OTTI-related non-credit losses. Interest income/expense includes the effect of associated derivative transactions. |
| |
(3)
| Interest income/expense and average yield include all other components of interest, including the impact of net interest payments or receipts on derivatives in qualifying hedge relationships, amortization of hedge accounting adjustments, and prepayment fees on advances. |
| |
(4)
| Consists of interest-bearing deposits, loans to other FHLBanks (if applicable), and grantor trust assets that are carried at estimated fair value. Includes the rights or obligations to cash collateral, except for variation margin payments characterized as daily settled contracts. |
| |
(5)
| Includes changes in the estimated fair value of AFS securities and the effect of OTTI-related non-credit losses on AFS and HTM securities. |
| |
(6)
| Annualized net interest income expressed as a percentage of the average balance of interest-earning assets. |
Interest income on trading securities is recorded in net interest income, while the impact of purchase discount (premium) is recorded in other income through mark-to-market gains (losses) on trading securities. Net interest settlements on derivatives hedging trading securities are also recorded in other income.
The increase in net interest income for the three months ended September 30, 2022 compared to the corresponding period in 2021 was primarily due to higher earnings on the portion of the Bank's assets funded by its capital and lower amortization of mortgage purchase premium, resulting from lower principal prepayments, each driven by the increase in market interest rates, but partially offset by lower net interest income on trading securities. Net interest income for the three months ended September 30, 2022 included net hedging gains of $3 million, compared to net hedging losses for the corresponding period in 2021 of $3 million.
The increase in net interest income for the nine months ended September 30, 20172022 compared to the respective periodscorresponding period in 20162021 was primarily due to asset growthlower amortization of mortgage purchase premium, resulting from lower principal prepayments, and higher spreads.earnings on the portion of the Bank's assets funded by its capital, each driven by the increase in market interest rates, but partially offset by lower net interest income on trading securities. Net interest income for the nine months ended September 30, 2022 included net hedging losses of $1 million, compared to net hedging gains for the corresponding period in 2021 of $10 million.
Yields.In general, the Bank holds the derivatives and associated hedged items to the maturity, call, or put date. As a result, nearly all of the gains and losses on these financial instruments are expected to reverse over the remaining contractual terms of the hedged items.
Yields/Cost of Funds.The average yield on total interest-earning assets, including the impact of hedging gains/losses but excluding certain impacts of trading securities, for the three months ended September 30, 2022 was 2.40%, an increase of 172 bps compared to the corresponding period in 2021. The yield on advances and investment securities increased due primarily to increasing market interest rates. The yield on mortgage loans held for portfolio increased due primarily to lower amortization of purchase premium resulting from lower principal prepayments on mortgage loans. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses but excluding certain impacts of trading securities, for the three months ended September 30, 2022 was 2.13%, an increase of 180 bps due primarily to an increase in market interest rates. The net effect was a decrease in the overall net interest spread under GAAP compared to the corresponding period in 2021.
The average yield on total interest-earning assets, including the impact of hedging gains/losses but excluding certain impacts of trading securities, for the nine months ended September 30, 2022 was 1.53%, an increase of 80 bps compared to the corresponding period in 2021. The yield on advances and investment securities increased due primarily to an increase in market interest rates. The yield on mortgage loans held for portfolio increased due primarily to lower amortization of purchase premium resulting from lower prepayments on mortgage loans. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses but excluding certain impacts of trading securities, for the nine months ended September 30, 2022 was 1.18%, an increase of 82 bps due primarily to an increase in market interest rates, and hedging losses, on our consolidated obligations. The net effect was a slight decrease in the overall net interest spread under GAAP compared to the corresponding period in 2021.
Average Balances. The average balances outstanding of interest-earning assets for the three months ended September 30, 2017 was 1.79%, an increase of 43 bps2022 increased by 7% compared to the samecorresponding period in 2016, resulting primarily from higher yields on advances and investment securities.2021. The average costbalances of advances increased by 9%, reflecting higher member utilization of advances. The increase in average interest-bearing assets exceeded the increase in average interest-earning liabilities. The average balances of total interest-earning assets, net of interest-bearing liabilities, for the three months ended September 30, 2017 was 1.41%, an increase of 37 bps from the prior year period due to higher funding costs on consolidated obligations. The net effect was an increase in the net interest spread to 0.38% for the three months ended September 30, 2017 from 0.32% for the three months ended September 30, 2016.increased by 34%.
The average yield on totalbalances outstanding of interest-earning assets for the nine months ended September 30, 2017 was 1.67%, an increase of 34 bps2022 decreased by 3% compared to the samecorresponding period in 2016, resulting primarily from higher yields on advances and investment securities.2021. The average cost of total interest-bearing liabilities for the nine months ended September 30, 2017 was 1.29%, an increase of 28 bps from the prior year period due to higher funding costs on consolidated obligations. The net effect was an increase in the net interest spread to 0.38% for the nine months ended September 30, 2017 from 0.32% for the nine months ended September 30, 2016.
Average Balances. The average balances of interest-earning assets for both the three and nine months ended September 30, 2017 increased compared to the respective periods in 2016, largely due to advances, mortgage loans and investment securities. The average amount of advances outstanding increased for the three and nine months ended September 30, 2017 by 24% and 18%, respectively, generally driven by member funding needs. The average outstanding amount of mortgage loans held for portfolio increased for the three and nine months ended September 30, 2017 by 12% and 14%, respectively, due to strong demand by our members for MPP Advantage. The increase in the average balances of investment securities was due primarily to purchases of GSE MBS in 2017 and purchases of GSE debentures in 2016.advances decreased by 8% and 2%, respectively, reflecting net principal paydowns. The increasedecrease in average interest-bearing liabilities was due to an increaseexceeded the decrease in consolidated obligations to fund the increases in theaverage interest-earning assets. The average balances of alltotal interest-earning assets.assets, net of interest-bearing liabilities, increased by 23%.
Provision for (Reversal of) Credit Losses.Losses. The change in the provisionprovisions for (reversal of) credit losses for the three and nine months ended September 30, 20172022 compared to the respectivecorresponding periods in 20162021 was insignificant.
Other Income (Loss).Income.The following table presents a comparison of the components of other income ($ amounts in millions).
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Components | | 2017 | | 2016 | | 2017 | | 2016 |
Total OTTI losses | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Non-credit portion reclassified to (from) other comprehensive income | | — |
| | — |
| | — |
| | — |
|
Net OTTI credit losses | | — |
| | — |
| | — |
| | — |
|
Net gains (losses) on derivatives and hedging activities | | (4 | ) | | (5 | ) | | (13 | ) | | (10 | ) |
Other | | 1 |
| | 1 |
| | 3 |
| | 3 |
|
Total other income (loss) | | $ | (3 | ) | | $ | (4 | ) | | $ | (10 | ) | | $ | (7 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Components | | 2022 | | 2021 | | 2022 | | 2021 |
Net realized losses from sales of HTM securities | | $ | (1) | | | $ | — | | | $ | (1) | | | $ | — | |
| | | | | | | | |
Net unrealized gains (losses) on trading securities (1) | | 3 | | | 6 | | | (16) | | | (23) | |
Net realized gains (losses) on trading securities (2) | | (2) | | | (14) | | | (22) | | | (13) | |
Net gains (losses) on trading securities | | 1 | | | (8) | | | (38) | | | (36) | |
| | | | | | | | |
Net gains (losses) on derivatives hedging trading securities | | (5) | | | 1 | | | 36 | | | 9 | |
Net interest settlements on economic derivatives (3) | | 14 | | | (2) | | | 13 | | | (10) | |
Net gains (losses) on other derivatives not designated as hedging instruments | | — | | | — | | | (3) | | | (1) | |
Net gains (losses) on derivatives | | 9 | | | (1) | | | 46 | | | (2) | |
| | | | | | | | |
Change in fair value of investments indirectly funding the liabilities under the SERP | | (2) | | | — | | | (11) | | | 3 | |
Other, net | | — | | | — | | | 2 | | | 3 | |
| | | | | | | | |
Total other income (loss) | | $ | 7 | | | $ | (9) | | | $ | (2) | | | $ | (32) | |
(1) Includes impact of purchase discount (premium) recorded through mark-to-market gains (losses), as well as the reversal of the cumulative unrealized gain (loss) on any maturities or sales. Excludes impact of associated derivatives.
(2) Includes, at maturity, 100% of original discount (premium) as gain (loss). Excludes impact of associated derivatives.
(3) Generally offsetting interest income on trading securities is included in interest income.
The changesincrease in total other income for the three and nine months ended September 30, 20172022 compared to the respective periodscorresponding period in 20162021 was due primarily due to fluctuationshigher net interest settlements received, particularly on swaps hedging trading securities.
The decrease in the net losses on derivatives and hedging activities.
Net Gains (Losses) on Derivatives and Hedging Activities. Our net gains (losses) on derivatives and hedging activities fluctuate due tovolatility in the overall interest rate environment as we hedge our asset and liability risk exposures. In general, we hold derivatives and associated hedged items to the maturity, call, or put date. Therefore, due to timing, nearly all of the cumulative net gains and losses for these financial instruments will generally reverse over the remaining contractual terms of the hedged items. However, there may be instances when we terminate these instruments prior to the maturity, call or put date. Terminating the financial instrument or hedging relationship may result in a realized gain or loss. See Notes to Financial Statements - Note 9 - Derivatives and Hedging Activities for more information.
For those hedging relationships that qualified for hedge accounting, the differences between the changes in the estimated fair value of the hedged items and the changes in the estimated fair value of the associated interest rate swaps, i.e., hedge ineffectiveness, resulted in a nettotal other loss for the three and nine months ended September 30, 2017 of $3 million and $11 million, respectively, compared to a net loss of $5 million and $8 million, respectively, for the same periods in 2016. The increase in losses for the nine months ended September 30, 20172022 compared to the samecorresponding period in 2016 is2021 was primarily due to marginal mismatchesincreases in durations on,the fair values of swaps hedging trading securities, and the increase in volume of, swapped GSE MBS, particularly FNMA Delegated Underwriting and Servicing (DUS) MBS. There is less offsetting hedge ineffectiveness on the related funding due to the increased issuance of floating rate notes.
For derivatives not qualifying for hedge accounting (economic hedges), the net interest settlements and the changesreceived, particularly on swaps hedging trading securities, partially offset by declines in the estimated fair valuevalues of the derivativesinvestments indirectly funding the liabilities under the SERP. The assets are recordedheld in net gains (losses)a grantor trust and consist of a diversified portfolio of mutual funds that are invested in equity securities, bonds and alternative investments.
Net Gains (Losses) on derivatives and hedging activities. For economic hedges, the Bank recorded a net loss of $1 million and $2 million for the three and nine months ended September 30, 2017, respectively, compared to net losses of $146 thousand and $2 million, respectively, for the same periods in 2016.
Trading Securities. The tables below presentfollowing table presents the net effectimpact of derivativestrading securities on net interest income and other income (loss), within the net gains (losses) on derivatives and hedging activities, by type of hedge and hedged itembefore assessments ($ amounts in millions). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2017 | | Advances | | Investments | | Mortgage Loans | | CO Bonds | | Discount Notes | | Other | | Total |
Net interest income: | | | | | | | | | | | | | | |
Amortization/accretion of hedging activities (1) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Net interest settlements (2) | | (7 | ) | | (9 | ) | | — |
| | 3 |
| | — |
| | — |
| | (13 | ) |
Total net interest income | | (7 | ) | | (9 | ) | | — |
| | 3 |
| | — |
| | — |
| | (13 | ) |
Net gains (losses) on derivatives and hedging activities: | | | | | | | | | | | | | | |
Gains (losses) on fair-value hedges | | 1 |
| | (5 | ) | | — |
| | 1 |
| | — |
| | — |
| | (3 | ) |
Gains (losses) on derivatives not qualifying for hedge accounting (3) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Other (4) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net gains (losses) on derivatives and hedging activities | | 1 |
| | (5 | ) | | — |
| | 1 |
| | (1 | ) | | — |
| | (4 | ) |
Total net effect of derivatives and hedging activities | | $ | (6 | ) | | $ | (14 | ) | | $ | — |
| | $ | 4 |
| | $ | (1 | ) | | $ | — |
| | $ | (17 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
Earnings Components of Trading Securities | | 2022 | | 2021 | | 2022 | | 2021 |
Net interest income (1) | | $ | (12) | | | $ | 10 | | | $ | (6) | | | $ | 38 | |
| | | | | | | | |
Other income: | | | | | | | | |
Net unrealized gains (losses) | | 3 | | | 6 | | | (16) | | | (23) | |
Net realized gains (losses) | | (2) | | | (14) | | | (22) | | | (13) | |
Net interest settlements on derivatives | | 15 | | | (1) | | | 15 | | | (9) | |
Change in fair value of derivatives | | (5) | | | 1 | | | 36 | | | 9 | |
| | | | | | | | |
Other income (loss), net | | 11 | | | (8) | | | 13 | | | (36) | |
| | | | | | | | |
Net impact of trading securities on income before assessments | | $ | (1) | | | $ | 2 | | | $ | 7 | | | $ | 2 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | Advances | | Investments | | Mortgage Loans | | CO Bonds | | Discount Notes | | Total |
Net interest income: | | | | | | | | | | | | |
Amortization/accretion of hedging activities (1) | | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Net interest settlements (2) | | (22 | ) | | (24 | ) | | — |
| | 5 |
| | — |
| | (41 | ) |
Total net interest income | | (22 | ) | | (23 | ) | | — |
| | 5 |
| | — |
| | (40 | ) |
Net gains (losses) on derivatives and hedging activities: | | | | | | | | | | | | |
Gains (losses) on fair-value hedges | | — |
| | (9 | ) | | — |
| | 4 |
| | — |
| | (5 | ) |
Gains (losses) on derivatives not qualifying for hedge accounting (3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net gains (losses) on derivatives and hedging activities | | — |
| | (9 | ) | | — |
| | 4 |
| | — |
| | (5 | ) |
Total net effect of derivatives and hedging activities | | $ | (22 | ) | | $ | (32 | ) | | $ | — |
| | $ | 9 |
| | $ | — |
| | $ | (45 | ) |
(1) Includes an estimated allocation of interest expense.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017 | | Advances | | Investments | | Mortgage Loans | | CO Bonds | | Discount Notes | | Other | | Total |
Net interest income: | | | | | | | | | | | | | | |
Amortization/accretion of hedging activities (1) | | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Net interest settlements (2) | | (27 | ) | | (40 | ) | | — |
| | 11 |
| | — |
| | — |
| | (56 | ) |
Total net interest income | | (27 | ) | | (39 | ) | | — |
| | 11 |
| | — |
| | — |
| | (55 | ) |
Net gains (losses) on derivatives and hedging activities: | | | | | | | | | | | | | | |
Gains (losses) on fair-value hedges | | 1 |
| | (10 | ) | | — |
| | (2 | ) | | — |
| | — |
| | (11 | ) |
Gains (losses) on derivatives not qualifying for hedge accounting (3) | | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) | | — |
| | (2 | ) |
Other (4) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net gains (losses) on derivatives and hedging activities | | 1 |
| | (10 | ) | | (1 | ) | | (2 | ) | | (1 | ) | | — |
| | (13 | ) |
Total net effect of derivatives and hedging activities | | $ | (26 | ) | | $ | (49 | ) | | $ | (1 | ) | | $ | 9 |
| | $ | (1 | ) | | $ | — |
| | $ | (68 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | Advances | | Investments | | Mortgage Loans | | CO Bonds | | Discount Notes | | Total |
Net interest income: | | | | | | | | | | | | |
Amortization/accretion of hedging activities (1) | | $ | — |
| | $ | 7 |
| | $ | (1 | ) | | $ | — |
| | $ | — |
| | $ | 6 |
|
Net interest settlements (2) | | (76 | ) | | (76 | ) | | — |
| | 15 |
| | — |
| | (137 | ) |
Total net interest income | | (76 | ) | | (69 | ) | | (1 | ) | | 15 |
| | — |
| | (131 | ) |
Net gains (losses) on derivatives and hedging activities: | | | | | | | | | | | | |
Gains (losses) on fair-value hedges | | — |
| | (13 | ) | | — |
| | 5 |
| | — |
| | (8 | ) |
Gains (losses) on derivatives not qualifying for hedge accounting (3) | | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | (2 | ) |
Net gains (losses) on derivatives and hedging activities | | (1 | ) | | (13 | ) | | (1 | ) | | 5 |
| | — |
| | (10 | ) |
Total net effect of derivatives and hedging activities | | $ | (77 | ) | | $ | (82 | ) | | $ | (2 | ) | | $ | 20 |
| | $ | — |
| | $ | (141 | ) |
| |
(1)
| Represents the amortization/accretion of fair value hedge accounting adjustments for both current and terminated hedge positions. |
| |
(2)
| Represents interest income/expense on derivatives in qualifying hedge relationships. Excludes the interest income/expense of the respective hedged items, which fully offset the interest income/expense of the derivatives, except to the extent of any hedge ineffectiveness. |
| |
(3)
| Includes net interest settlements on derivatives not qualifying for hedge accounting. See Notes to Financial Statements - Note 9 - Derivatives and Hedging Activities for additional information.
|
| |
(4)
| Consists of price alignment amounts on derivatives for which variation margin payments are characterized as daily settled contracts. |
Other Expenses.Expenses. The following table presents a comparison of the components of other expenses ($ amounts in millions).
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
Components | | 2017 | | 2016 | | 2017 | | 2016 | Components | | 2022 | | 2021 | | 2022 | | 2021 |
Compensation and benefits | | $ | 12 |
| | $ | 11 |
| | $ | 35 |
| | $ | 33 |
| Compensation and benefits | | $ | 15 | | | $ | 14 | | | $ | 41 | | | $ | 44 | |
Other operating expenses | | 7 |
| | 7 |
| | 19 |
| | 18 |
| Other operating expenses | | 7 | | | 7 | | | 22 | | | 22 | |
Finance Agency and Office of Finance expenses | | 1 |
| | 1 |
| | 5 |
| | 4 |
| |
Other | | — |
| | — |
| | — |
| | 1 |
| |
Finance Agency and Office of Finance | | Finance Agency and Office of Finance | | 3 | | | 4 | | | 10 | | | 9 | |
Voluntary AHP contributions | | Voluntary AHP contributions | | 1 | | | — | | | 3 | | | — | |
Other, net | | Other, net | | 2 | | | 2 | | | 4 | | | 8 | |
| Total other expenses | | $ | 20 |
| | $ | 19 |
| | $ | 59 |
| | $ | 56 |
| Total other expenses | | $ | 28 | | | $ | 27 | | | $ | 80 | | | $ | 83 | |
The net increase in compensation and benefitstotal other expenses for the ninethree months ended September 30, 20172022 compared to the samecorresponding period in 20162021 was primarily due to an increasenot significant.
The net decrease in personnel. The increase intotal other operating expenses for the nine months ended September 30, 20172022 compared to the samecorresponding period in 20162021 was primarily due to higher contractual servicesa decrease in compensation and professional fees asbenefits due to a resultdecrease in post-retirement benefits resulting from changes in market conditions, the impact of strategicwhich was fully offset by a corresponding change in fair value recorded in other income, and operational initiatives.excise tax refunds received.
Total Other Comprehensive Income (Loss). TotalBeginning in 2022, other comprehensive incomeexpenses include an additional 2.5% of net earnings accrued for voluntary contributions to our AHP in 2023. The voluntary AHP contributions further demonstrate the Bank's commitment to promoting affordable, sustainable and equitable housing in Indiana and Michigan.
AHP Assessments. For the three and nine months ended September 30, 2017 consisted substantially of unrealized gains on non-OTTI AFS securities. 2022, our required AHP expense was $5 million and $12 million, respectively. Our AHP expense fluctuates in accordance with our net earnings.
Total other comprehensive lossOther Comprehensive Income (Loss). Total OCI for the three and nine months ended September 30, 2016 also 2022, and for the three months ended September 30, 2021, consisted substantiallyprimarily of net unrealized losses on AFS securities, compared to net unrealized gains on non-OTTI AFS securities, with a partial offset of unrealized losses on OTTI AFS securities for the nine month period.corresponding nine-month period in 2021. These amounts were primarily impacted by changes in interest rates, credit spreads and volatility.
Operating Segments
Our products and services are grouped within two operating segments:traditional and mortgage loans.
Traditional. The Traditional segment consists of (i) credit products (including advances, letters of credit, and lines of credit), (ii) investments (including federal funds sold, securities purchased under agreements to resell, AFS securities and HTM securities), and (iii) correspondent services and deposits. The following table presents the financial performance of our Traditionaltraditional segment ($ amounts in millions).
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
Traditional | | 2017 | | 2016 | | 2017 | | 2016 | Traditional | | 2022 | | 2021 | | 2022 | | 2021 |
Net interest income | | $ | 52 |
| | $ | 38 |
| | $ | 140 |
| | $ | 104 |
| Net interest income | | $ | 60 | | | $ | 50 | | | $ | 163 | | | $ | 178 | |
Provision for (reversal of) credit losses | | — |
| | — |
| | — |
| | — |
| Provision for (reversal of) credit losses | | — | | | — | | | — | | | — | |
Other income (loss) | | (2 | ) | | (4 | ) | | (9 | ) | | (6 | ) | Other income (loss) | | 7 | | | (9) | | | (2) | | | (31) | |
Other expenses | | 17 |
| | 16 |
| | 50 |
| | 48 |
| Other expenses | | 24 | | | 23 | | | 68 | | | 72 | |
Income before assessments | | 33 |
| | 18 |
| | 81 |
| | 50 |
| Income before assessments | | 43 | | | 18 | | | 93 | | | 75 | |
Total assessments | | 4 |
| | 2 |
| | 9 |
| | 6 |
| |
AHP assessments | | AHP assessments | | 4 | | | 2 | | | 9 | | | 8 | |
| Net income | | $ | 29 |
| | $ | 16 |
| | $ | 72 |
| | $ | 44 |
| Net income | | $ | 39 | | | $ | 16 | | | $ | 84 | | | $ | 67 | |
The increase in net income for the Traditionaltraditional segment for the three andmonths ended September 30, 2022 compared to the corresponding period in 2021 was primarily due to higher earnings on the portion of the Bank's assets funded by its capital.
The increase in net income for the traditional segment for the nine months ended September 30, 20172022 compared to the respective periodscorresponding period in 20162021 was primarily due to higher earnings on the portion of the Bank's assets funded by its capital and higher interest spreads on advances and investments, partially offset by declines in the fair values of investments indirectly funding the liabilities under certain employee benefit plans and net hedging losses on qualifying fair-value hedging relationships.
Interest income on trading securities is recorded in net interest income, primarily as a resultwhile the impact of a higher average balance of, and higher spreadspurchase discount (premium) is recorded in other income through mark-to-market gains (losses) on both advances and investmenttrading securities. The increase for the nine month period was partially offset by higher expenses and net lossesNet interest settlements on derivatives and hedging activities.trading securities are also recorded in other income.
Mortgage Loans. The Mortgage Loans segment includes (i) mortgage loans purchased from our members through our MPP and (ii) participating interests purchased in 2012 - 2014 from the FHLBank of Topeka in mortgage loans originated by certain of its PFIs under the MPF Program. The following table presents the financial performance of our Mortgage Loansmortgage loans segment ($ amounts in millions).
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
Mortgage Loans | | 2017 | | 2016 | | 2017 | | 2016 | Mortgage Loans | | 2022 | | 2021 | | 2022 | | 2021 |
Net interest income | | $ | 17 |
| | $ | 11 |
| | $ | 52 |
| | $ | 41 |
| Net interest income | | $ | 13 | | | $ | 8 | | | $ | 38 | | | $ | 12 | |
Provision for (reversal of) credit losses | | — |
| | — |
| | — |
| | — |
| Provision for (reversal of) credit losses | | — | | | — | | | — | | | — | |
Other income (loss) | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | Other income (loss) | | — | | | — | | | — | | | — | |
Other expenses | | 3 |
| | 3 |
| | 9 |
| | 8 |
| Other expenses | | 4 | | | 4 | | | 12 | | | 12 | |
Income before assessments | | 13 |
| | 8 |
| | 42 |
| | 32 |
| |
Total assessments | | 1 |
| | 1 |
| | 4 |
| | 3 |
| |
Net income | | $ | 12 |
| | $ | 7 |
| | $ | 38 |
| | $ | 29 |
| |
Income (loss) before assessments | | Income (loss) before assessments | | 9 | | | 4 | | | 26 | | | — | |
AHP assessments (credits) | | AHP assessments (credits) | | 1 | | | — | | | 3 | | | — | |
| Net income (loss) | | Net income (loss) | | $ | 8 | | | $ | 4 | | | $ | 23 | | | $ | — | |
The increase in net income for the Mortgage Loansmortgage loans segment for the three and nine months ended September 30, 20172022 compared to the respectivecorresponding periods in 20162021 was primarilysubstantially due to higher net interest income resulting from an increase in the average outstanding balancelower amortization of mortgage loans held for portfolio, a decrease in amortization of concession fees on called consolidated obligations, and a decrease in amortization of purchased premiumpurchase premiums resulting from lower principal prepayments.
Analysis of Financial Condition
Total Assets. The table below presents the comparative highlights of our major asset categories ($ amounts in millions).
| | | | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 |
Major Asset Categories | | Carrying Value | | % of Total | | Carrying Value | | % of Total | Major Asset Categories | | Carrying Value | | % of Total | | Carrying Value | | % of Total |
Advances | | $ | 32,953 |
| | 53 | % | | $ | 28,096 |
| | 52 | % | Advances | | $ | 31,196 | | | 48 | % | | $ | 27,498 | | | 46 | % |
Mortgage loans held for portfolio, net | | 10,196 |
| | 16 | % | | 9,501 |
| | 18 | % | Mortgage loans held for portfolio, net | | 7,649 | | | 12 | % | | 7,616 | | | 13 | % |
Cash and short-term investments | | 5,927 |
| | 10 | % | | 4,128 |
| | 8 | % | Cash and short-term investments | | 7,607 | | | 12 | % | | 7,048 | | | 12 | % |
Investment securities | | 12,791 |
| | 21 | % | | 11,880 |
| | 22 | % | |
Trading securities | | Trading securities | | 3,115 | | | 5 | % | | 3,947 | | | 7 | % |
Other investment securities | | Other investment securities | | 15,273 | | | 23 | % | | 13,474 | | | 22 | % |
Other assets (1) | | 311 |
| | — | % | | 302 |
| | — | % | Other assets (1) | | 555 | | | — | % | | 422 | | | — | % |
| Total assets | | $ | 62,178 |
| | 100 | % | | $ | 53,907 |
| | 100 | % | Total assets | | $ | 65,395 | | | 100 | % | | $ | 60,005 | | | 100 | % |
| |
(1)
| Includes accrued interest receivable, premises, software and equipment, derivative assets and other miscellaneous assets. |
(1) Includes accrued interest receivable, premises, software and equipment, derivative assets and other miscellaneous assets.
Total assets were $62.2 billion as of September 30, 2017,2022 were $65.4 billion, a net increase of $8.3$5.4 billion, or 15%9%, compared to December 31, 2016,2021, primarily driven primarily by ana net increase in advances outstanding. The mix of our assets at September 30, 2022 changed slightly compared to December 31, 2021 in that advances as a percent of total assets changed slightly,increased from 46% to 48%, reflecting primarily due to the growthincreased use of short-term advances by our members. In addition, a significant portion of our purchases of U.S. Treasury obligations in advances.2022 have been classified as AFS securities.
Advances. In general, advances fluctuate in accordance with our members' funding needs, primarily determined by their deposit levels, mortgage pipelines, loan growth, investment opportunities, available collateral, other balance sheet strategies, and the cost of alternative funding options.
Advances at September 30, 2022 at carrying value totaled $33.0$31.2 billion, at September 30, 2017, a net increase of $4.9$3.7 billion, or 17%13%, compared to December 31, 2016. 2021. This increase wasreflects higher demand by our members for advances primarily duein response to an increase their loan growth outpacing their deposit growth, rising market interest rates, including the adverse impact on their investment portfolios, and the availability of suitable products to assist our members in short-termmanaging their balance sheets in the current economic environment.
Our advances portfolio is well-diversified with advances to commercial banks and savings institutions, credit unions, and insurance companies. Advances to depository institution members.
Advances due in one year or less increased from 45%institutions, as a percent of the total advances outstanding at par at December 31, 2016 to 50% of the total outstanding, at par,value, were 59% at September 30, 2017, reflecting members' increased demand for short-term funding. See Notes2022, while advances to Financial Statements - Note 6 - Advances for more information.insurance companies were 41%.
In accordance with the Final Membership Rule, by February 19, 2017, the memberships of the eight captive insurers that were admitted as members on or after September 12, 2014 were terminated and all of their outstanding advances were fully repaid.
The table below presents advances outstanding by type of financial institution ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Borrower Type | | Par Value | | % of Total | | Par Value | | % of Total |
Depository institutions: | | | | | | | | |
Commercial banks and savings institutions | | $ | 14,496 | | | 46 | % | | $ | 12,199 | | | 45 | % |
Credit unions | | 4,060 | | | 13 | % | | 2,199 | | | 8 | % |
Former members - depositories | | 223 | | | — | % | | 225 | | | 1 | % |
Total depository institutions | | 18,779 | | | 59 | % | | 14,623 | | | 54 | % |
| | | | | | | | |
Insurance companies: | | | | | | | | |
Captive insurance company (1) | | 213 | | | 1 | % | | 263 | | | 1 | % |
Other insurance companies | | 12,846 | | | 40 | % | | 12,419 | | | 45 | % |
Former members - other insurance companies | | 5 | | | — | % | | 5 | | | — | % |
Total insurance companies | | 13,064 | | | 41 | % | | 12,687 | | | 46 | % |
| | | | | | | | |
CDFIs | | — | | | — | % | | — | | | — | % |
| | | | | | | | |
Total advances outstanding | | $ | 31,843 | | | 100 | % | | $ | 27,310 | | | 100 | % |
(1) Captive insurance companies that were admitted as FHLBank members prior to September 12, 2014, and did not meet the definition of "insurance company" or fall within another category of institution that is eligible for FHLBank membership under the Final Membership Rule, had their memberships terminated on February 19, 2021. The outstanding advances to one captive insurer are not required to be repaid prior to their various maturity dates through 2024.
|
| | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Borrower Type | | Par Value | | % of Total | | Par Value | | % of Total |
Depository institutions: | | | | | | | | |
Commercial banks and savings institutions | | $ | 15,180 |
| | 46 | % | | $ | 10,805 |
| | 39 | % |
Credit unions | | 2,944 |
| | 9 | % | | 2,385 |
| | 8 | % |
Total depository institutions | | 18,124 |
| | 55 | % | | 13,190 |
| | 47 | % |
Insurance companies: | | | | | | | | |
Captive insurance companies (1) | | — |
| | — | % | | 56 |
| | — | % |
Captive insurance companies (2) | | 3,114 |
| | 9 | % | | 3,310 |
| | 12 | % |
Other insurance companies | | 11,708 |
| | 36 | % | | 11,482 |
| | 41 | % |
Total insurance companies | | 14,822 |
| | 45 | % | | 14,848 |
| | 53 | % |
| | | | | | | | |
Total members | | 32,946 |
| | 100 | % | | 28,038 |
| | 100 | % |
| | | | | | | | |
Former members | | 59 |
| | — | % | | 94 |
| | — | % |
| | | | | | | | |
Total advances | | $ | 33,005 |
| | 100 | % | | $ | 28,132 |
| | 100 | % |
The following table presents the par value of advances outstanding by product type and redemption term, some of which contain call or put options ($ amounts in millions). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
Product Type and Redemption Term | | Par Value | | % of Total | | Par Value | | % of Total |
Fixed-rate: | | | | | | | | |
Without call or put options | | | | | | | | |
Due in 1 year or less | | $ | 12,476 | | | 40 | % | | $ | 7,670 | | | 29 | % |
Due after 1 through 5 years | | 5,838 | | | 18 | % | | 5,708 | | | 21 | % |
Due after 5 through 15 years | | 1,068 | | | 3 | % | | 752 | | | 3 | % |
Thereafter | | — | | | — | % | | 2 | | | — | % |
Total | | 19,382 | | | 61 | % | | 14,132 | | | 53 | % |
| | | | | | | | |
Callable or prepayable | | | | | | | | |
Due in 1 year or less | | 2 | | | — | % | | — | | | — | % |
Due after 1 through 5 years | | — | | | — | % | | 2 | | | — | % |
Due after 5 through 15 years | | 5 | | | — | % | | 5 | | | — | % |
Thereafter | | — | | | — | % | | — | | | — | % |
Total | | 7 | | | — | % | | 7 | | | — | % |
| | | | | | | | |
Putable | | | | | | | | |
Due in 1 year or less | | 5 | | | — | % | | — | | | — | % |
Due after 1 through 5 years | | 1,619 | | | 5 | % | | 2,289 | | | 8 | % |
Due after 5 through 15 years | | 4,796 | | | 15 | % | | 5,747 | | | 21 | % |
Thereafter | | — | | | — | % | | — | | | — | % |
Total | | 6,420 | | | 20 | % | | 8,036 | | | 29 | % |
| | | | | | | | |
Other (1) | | | | | | | | |
Due in 1 year or less | | 49 | | | — | % | | 50 | | | — | % |
Due after 1 through 5 years | | 55 | | | — | % | | 64 | | | — | % |
Due after 5 through 15 years | | 31 | | | — | % | | 24 | | | — | % |
Thereafter | | 15 | | | — | % | | 3 | | | — | % |
Total | | 150 | | | — | % | | 141 | | | — | % |
| | | | | | | | |
Total fixed-rate | | 25,959 | | | 81 | % | | 22,316 | | | 82 | % |
| | | | | | | | |
Variable-rate: | | | | | | | | |
Without call or put options | | | | | | | | |
Due in 1 year or less | | 622 | | | 2 | % | | 18 | | | — | % |
Due after 1 through 5 years | | 160 | | | 1 | % | | 167 | | | 1 | % |
Due after 5 through 15 years | | — | | | — | % | | — | | | — | % |
Thereafter | | — | | | — | % | | — | | | — | % |
Total | | 782 | | | 3 | % | | 185 | | | 1 | % |
| | | | | | | | |
Callable or prepayable | | | | | | | | |
Due in 1 year or less | | 288 | | | 1 | % | | 126 | | | — | % |
Due after 1 through 5 years | | 2,982 | | | 9 | % | | 2,831 | | | 10 | % |
Due after 5 through 15 years | | 1,477 | | | 5 | % | | 1,297 | | | 5 | % |
Thereafter | | 354 | | | 1 | % | | 555 | | | 2 | % |
Total | | 5,101 | | | 16 | % | | 4,809 | | | 17 | % |
| | | | | | | | |
Total variable-rate | | 5,883 | | | 19 | % | | 4,994 | | | 18 | % |
| | | | | | | | |
Overdrawn demand and overnight deposit accounts | | 1 | | | — | % | | — | | | — | % |
| | | | | | | | |
Total advances | | $ | 31,843 | | | 100 | % | | $ | 27,310 | | | 100 | % |
(1) Includes fixed-rate amortizing/mortgage matched advances. | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)
| Memberships terminated by February 19, 2017. |
| |
(2)
| Memberships must terminate no later than February 19, 2021. |
During the nine months ended September 30, 2022, the par value of advances due in one year or less increased by 71%, while advances due after one year decreased by 5%. As a borrower prepays an advance, the Bank's future income will be lower if the principal portionresult, advances due in one year or less, as a percentage of the prepaid advance is reinvested in lower-yielding assets that continue to be funded by higher-cost debt. At September 30, 2017, we had $8.9 billion, or 27%, of advancestotal outstanding at par, that may be prepaid without prepayment or termination fees. All other advances may only be prepaid if the borrower pays a fee that is sufficient to make us financially indifferent to the prepayment.
Mortgage Loans Held for Portfolio.In general, our volume of mortgage loan purchases is affected by several factors, including interest rates, competition, the general level of housing and refinancing activity in the United States, consumer product preferences and regulatory considerations.
To continue to meet the needs of our members and maintain an appropriate level of mortgage loans held for portfolio on our statement of condition, in December 2016, we agreed to sell a 90% participating interest in a $100 million MCC of certain newly acquired MPP loans to the FHLBank of Atlanta. Principal amounts settled in December 2016 totaled $72 million, and the remaining $18 million settled in January 2017.
A breakdown of mortgage loans held for portfolio by primary product type is presented below ($ amounts in millions).
|
| | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Product Type | | UPB | | % of Total | | UPB | | % of Total |
MPP: | | | | | | | | |
Conventional Original | | $ | 907 |
| | 9 | % | | $ | 1,096 |
| | 12 | % |
Conventional Advantage | | 8,363 |
| | 84 | % | | 7,412 |
| | 80 | % |
FHA | | 376 |
| | 4 | % | | 422 |
| | 4 | % |
Total MPP | | 9,646 |
| | 97 | % | | 8,930 |
| | 96 | % |
MPF Program: | | | | | | | | |
Conventional | | 256 |
| | 2 | % | | 288 |
| | 3 | % |
Government | | 64 |
| | 1 | % | | 75 |
| | 1 | % |
Total MPF Program | | 320 |
| | 3 | % | | 363 |
| | 4 | % |
| | | | | | | | |
Total mortgage loans held for portfolio | | $ | 9,966 |
| | 100 | % | | $ | 9,293 |
| | 100 | % |
The increase in the UPB of mortgage loans held for portfolio was due to purchases under MPP Advantage exceeding repayments of outstanding MPP and MPF Program loans. Over time, the outstanding balance of mortgage loans purchased under our original MPP and the MPF Program will continue to decrease.
We have established and maintain an allowance for loan losses based on our best estimate of probable losses over the loss emergence period. Our estimate of MPP losses remaining after borrower's equity, but before credit enhancements, was $7 million43% at September 30, 2017 and $9 million2022, an increase from 29% at December 31, 2016. After consideration2021. However, during the nine months ended September 30, 2022, in response to the Bank exercising its option on certain long-term putable advances, several members replaced that funding with short-term advances without put options. Based on the earlier of the portion recoverable underredemption date or the associated credit enhancements,next put date, advances due in one year or less increased by 25%, while advances due after one year increased by 8%. As a result, advances due in one year or less on that basis, as a percentage of the resulting allowance for MPP loan losses was less than $1 milliontotal outstanding at par, totaled 53% at September 30, 2017 and 2022, an increase from 49% at December 31, 2016. See 2021. For additional information, see Notes to Financial Statements - Note 84 - AllowanceAdvances.
Mortgage Loans Held for Credit Losses for more information.
During the third quarter of 2017, major hurricanes caused substantial damage to property in several states on the southeastern coasts of the United States. In response to those hurricanes, the Bank communicated to its mortgage loan servicers that special relief would be available for borrowers in Federal Emergency Management Agency ("FEMA") designated disaster areas. Under this relief, mortgage loan servicers are authorized to grant forbearance or temporarily suspend mortgage payments for up to 90 days for borrowers whose income is affected by the disaster or for borrowers whose property is located in a FEMA designated disaster area. Portfolio.Mortgage loan servicers were also directed to suspend collections and foreclosure proceedings in these areas for 90 days. Based on the circumstances of individual borrowers, additional forbearance time may be granted.
The Bank has sought to analyze the potential impact of the hurricanes on the Bank’s mortgage loans held for portfolio. Because allportfolio at September 30, 2022, at carrying value, totaled $7.6 billion, a net increase of $33 million, or a portion of any incurred losses would be covered by the credit enhancements in place and because there is no concentration of0.4%, from December 31, 2021, as the Bank's loans inpurchases exceeded principal repayments. For the affected states, we do not expect that any net losses resulting from the hurricanes will have a material effect on the Bank’s financial condition or results of operations. Based on the limited information currently available, we did not record any additional allowance for loan losses as ofnine months ended September 30, 2017. If additional information becomes available indicating that any losses are probable2022, purchases of mortgage loans under Advantage MPP totaled $927 million, while MPP and the amount of the loss can be reasonably estimated, we will record an appropriate addition to the allowance at that time.MPF program repayments totaled $825 million.
Cash and Investments.The following table presents a comparison of the components of our cash and investments at carrying value ($ amounts in millions). |
| | | | | | | | | | | | |
Components of Cash and Investments | | September 30, 2017 | | December 31, 2016 | | Change |
Cash and short-term investments: | | | | | | |
Cash and due from banks | | $ | 70 |
| | $ | 547 |
| | $ | (477 | ) |
Interest-bearing deposits | | 301 |
| | 150 |
| | 151 |
|
Securities purchased under agreements to resell | | 2,721 |
| | 1,781 |
| | 940 |
|
Federal funds sold | | 2,835 |
| | 1,650 |
| | 1,185 |
|
Total cash and short-term investments | | 5,927 |
| | 4,128 |
| | 1,799 |
|
| | | | | | |
Investment securities: | | | | | | |
AFS securities: | | | | | | |
GSE and TVA debentures | | 4,525 |
| | 4,715 |
| | (190 | ) |
GSE MBS | | 2,227 |
| | 1,076 |
| | 1,151 |
|
Private-label RMBS | | 232 |
| | 269 |
| | (37 | ) |
Total AFS securities | | 6,984 |
| | 6,060 |
| | 924 |
|
HTM securities: | | |
| | |
| | |
Other U.S. obligations - guaranteed MBS | | 3,171 |
| | 2,679 |
| | 492 |
|
GSE MBS | | 2,589 |
| | 3,082 |
| | (493 | ) |
Private-label RMBS and ABS | | 47 |
| | 59 |
| | (12 | ) |
Total HTM securities | | 5,807 |
| | 5,820 |
| | (13 | ) |
Total investment securities | | 12,791 |
| | 11,880 |
| | 911 |
|
| | | | | | |
Total cash and investments, carrying value | | $ | 18,718 |
| | $ | 16,008 |
| | $ | 2,710 |
|
| | | | | | | | | | | | | | | | | | | | |
Components | | September 30, 2022 | | December 31, 2021 | | Change |
Cash and short-term investments: | | | | | | |
Cash and due from banks | | $ | 22 | | | $ | 868 | | | $ | (846) | |
Interest-bearing deposits | | 478 | | | 100 | | | 378 | |
Securities purchased under agreements to resell | | 2,500 | | | 3,500 | | | (1,000) | |
Federal funds sold | | 4,607 | | | 2,580 | | | 2,027 | |
Total cash and short-term investments | | 7,607 | | | 7,048 | | | 559 | |
| | | | | | |
Trading securities: | | | | | | |
U.S. Treasury obligations | | 3,115 | | | 3,947 | | | (832) | |
Total trading securities | | 3,115 | | | 3,947 | | | (832) | |
| | | | | | |
Other investment securities: | | | | | | |
AFS securities: | | | | | | |
U.S. Treasury obligations | | 3,402 | | | — | | | 3,402 | |
GSE and TVA debentures | | 1,900 | | | 2,697 | | | (797) | |
GSE multifamily MBS | | 5,995 | | | 6,463 | | | (468) | |
Total AFS securities | | 11,297 | | | 9,160 | | | 2,137 | |
| | | | | | |
HTM securities: | | | | | | |
| | | | | | |
Other U.S. obligations single-family MBS | | 2,711 | | | 2,626 | | | 85 | |
GSE single-family MBS | | 635 | | | 816 | | | (181) | |
GSE multifamily MBS | | 630 | | | 872 | | | (242) | |
Total HTM securities | | 3,976 | | | 4,314 | | | (338) | |
| | | | | | |
Total investment securities | | 18,388 | | | 17,421 | | | 967 | |
| | | | | | |
Total cash and investments, carrying value | | $ | 25,995 | | | $ | 24,469 | | | $ | 1,526 | |
Cash and Short-Term Investments.Cash andshort-term investments totaled $5.9 billion at September 30, 2017,2022 totaled $7.6 billion, an increase of 44% compared to$559 million, or 8%, from December 31, 2016. 2021. Cash and short-term investments as a percent of total assets were 10% at September 30, 2017 compared to 8% at 2022 and December 31, 2016.
2021 totaled 12%. The total outstanding balance and composition of our short-term investment portfolio isinvestments are influenced by our liquidity needs, regulatory requirements, actual and anticipated member advance activity, market conditions and, the availability of short-term investments at attractive interest rates, relative to our cost of funds.
InvestmentTrading Securities.AFSWe purchase U.S. Treasury obligations as trading securities totaled $7.0 billionto enhance the Bank's liquidity. Such securities outstanding at September 30, 2017,2022 totaled $3.1 billion, a decrease of $832 million, or 21%, from December 31, 2021. A significant portion of our purchases of U.S. Treasury obligations in 2022 have been classified as AFS securities.
Liquidity Portfolio. As a result, the liquidity portfolio, consisting of cash and short-term investments as well as trading securities, at September 30, 2022 totaled $10.7 billion, a decrease of $273 million, or 2%, from December 31, 2021.
Other Investment Securities. AFS securities at September 30, 2022 totaled $11.3 billion, a net increase of 15% compared to $6.1$2.1 billion, ator 23%, from December 31, 2016.2021. The increase resulted substantially from purchases of GSEU.S. Treasury obligations and MBS, to maintain a ratio ofpartially offset by principal payments on MBS and ABS to total regulatory capitalmaturities of up to 300%. Agency debentures.
Net unrealized gains on AFS securities at September 30, 2017 were $1122022 totaled $16 million, an increasea net decrease of $46$136 million compared to December 31, 2016, primarily due to increased volume and changes in interest rates, credit spreads and volatility.
The percentage of non-MBS AFS securities due in one year or less decreased to 3% at September 30, 2017 from 21% at December 31, 2016, and the percentage due after one year through five years increased to 53% at September 30, 2017 from 39% at December 31, 2016. The changes were due primarily to reinvestments in longer-term securities during 2017. See Notes to Financial Statements - Note 3 - Available-for-Sale Securities for more information.
HTM securities totaled $5.8 billion at September 30, 2017, relatively unchanged from December 31, 2016. At September 30, 2017, the estimated fair value of our HTM securities totaled $5.8 billion, of which $2.3 billion was in an unrealized loss position, a decrease of 32% from $3.4 billion at December 31, 2016,2021, primarily due to changes in interest rates, credit spreads and volatility. The associated unrealized losses decreased from $23 million at December 31, 2016 to $12 million
HTM securities at September 30, 2017. See Notes to Financial Statements - Note 4 - Held-to-Maturity Securities for more information.2022 totaled $4.0 billion, a net decrease of $338 million, or 8%, from December 31, 2021. The net decrease resulted primarily from principal payments and maturities of these securities, partially offset by purchases of MBS.
See Risk Management - CreditRisk Management - Investments - Long-Term Investments herein for more information on our investment securities.
Interest RateInterest-Rate Payment Terms.Our AFS and HTMinvestment securities are presented below at amortized cost by interest-rate payment terms ($ amounts in millions). |
| | | | | | | | |
Interest Rate Payment Terms | | September 30, 2017 | | December 31, 2016 |
AFS Securities: | | | | |
Total non-MBS fixed-rate | | $ | 4,478 |
| | $ | 4,693 |
|
MBS: | | | | |
Fixed-rate | | 2,195 |
| | 1,061 |
|
Variable-rate | | 199 |
| | 239 |
|
Total MBS | | 2,394 |
| | 1,300 |
|
| | | | |
Total AFS securities, at amortized cost | | $ | 6,872 |
| | $ | 5,993 |
|
| | | | |
HTM Securities: | | | | |
MBS and ABS: | | | | |
Fixed-rate | | $ | 1,213 |
| | $ | 1,512 |
|
Variable-rate | | 4,594 |
| | 4,308 |
|
Total MBS and ABS | | 5,807 |
| | 5,820 |
|
| | | | |
Total HTM securities, at amortized cost | | $ | 5,807 |
| | $ | 5,820 |
|
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| | September 30, 2022 | | December 31, 2021 |
Interest-Rate Payment Terms | | Estimated Fair Value | | % of Total | | Estimated Fair Value | | % of Total |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total fixed-rate trading securities | | $ | 3,115 | | | 100 | % | | $ | 3,947 | | | 100 | % |
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| | Amortized Cost | | % of Total | | Amortized Cost | | % of Total |
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AFS (1) and HTM securities: | | | | | | | | |
Total fixed-rate | | $ | 11,486 | | | 75 | % | | $ | 9,226 | | | 69 | % |
Total variable-rate | | 3,770 | | | 25 | % | | 4,096 | | | 31 | % |
| | | | | | | | |
Total AFS and HTM securities | | $ | 15,256 | | | 100 | % | | $ | 13,322 | | | 100 | % |
Fixed-rate(1) Carrying value for AFS MBSis equal to estimated fair value.
The mix of fixed- vs. variable-rate AFS and HTM securities at September 30, 2017 increased significantly compared to2022 changed slightly from December 31, 2016, but substantially2021, primarily due to purchases of fixed-rate U.S. Treasury obligations. However, all of the fixed-rate AFSAFS securities are swapped to effectively create variable-rate securities,exposures, consistent with our balance sheet strategies to manage interest-rate risk.
Total Liabilities. Total liabilities were $59.3 billion at September 30, 2017,2022 were $61.8 billion, a net increase of 15% compared to $5.4 billion, or 10%, from December 31, 2016. This increase was2021, substantially due to a netan increase in consolidated obligations to fund our asset growth.obligations.
Deposits (Liabilities). Total deposits were $490 million at September 30, 2017, an2022 were $538 million, a net decrease of 7% compared to$828 million, or 61%, from December 31, 2016.2021. These deposits representprovide a relatively small portion of our funding. The balances of these accounts can fluctuate from period to period and vary dependingdepending upon such factors as the attractiveness of our deposit pricing relative to the rates available on alternative money market instruments, members' preferences with respect to the maturity of their investments, and members' liquidity.
Consolidated Obligations.The overall balance of our consolidated obligations fluctuates in relation to our total assets and the availability of alternative sources of funds. The carrying value of consolidated obligations outstanding at September 30, 2022 totaled $60.5 billion, a net increase of $6.1 billion, or 11%, from December 31, 2021, which reflected increased funding needs associated with the net increase in the Bank's total assets.
The composition of our consolidated obligations can fluctuate significantly based on comparative changes in their cost levels, supply and demand conditions, demand for advances, and our overall balance sheet management strategy. Discount notes are issued to provide short-term funds, while CO bonds are generally issued to provide a longer-term mix of funding.
The carrying value of consolidated obligations outstanding at September 30, 2017 totaled $58.3 billion, a net increase of $8.0 billion or 16% from December 31, 2016, primarily due to an increase in discount notes to fund short-term advances. Access to short-term debt markets has been reliable because institutional investors, driven by increased liquidity preferences and risk aversion, including the effects of money market fund reform, have sought the FHLBanks' short-term debt as an asset of choice, which has led to advantageous funding opportunities and utilization by the FHLBanks of debt maturing in one year or less.
The following table presents a breakdown by term of our consolidated obligations outstanding ($ amounts in millions).
| | | | September 30, 2017 | | December 31, 2016 | | September 30, 2022 | | December 31, 2021 |
By Term | | Par Value | | % of Total | | Par Value | | % of Total | By Term | | Par Value | | % of Total | | Par Value | | % of Total |
Consolidated obligations due in 1 year or less: | | | | | | | | | Consolidated obligations due in 1 year or less: | | | | | | | | |
Discount notes | | $ | 22,418 |
| | 38 | % | | $ | 16,820 |
| | 34 | % | Discount notes | | $ | 21,343 | | | 34 | % | | $ | 12,118 | | | 22 | % |
CO bonds | | 14,378 |
| | 25 | % | | 16,234 |
| | 32 | % | CO bonds | | 9,975 | | | 16 | % | | 14,357 | | | 26 | % |
Total due in 1 year or less | | 36,796 |
| | 63 | % | | 33,054 |
| | 66 | % | Total due in 1 year or less | | 31,318 | | | 50 | % | | 26,475 | | | 48 | % |
Long-term CO bonds | | 21,566 |
| | 37 | % | | 17,274 |
| | 34 | % | Long-term CO bonds | | 31,493 | | | 50 | % | | 28,193 | | | 52 | % |
| Total consolidated obligations | | $ | 58,362 |
| | 100 | % | | $ | 50,328 |
| | 100 | % | Total consolidated obligations | | $ | 62,811 | | | 100 | % | | $ | 54,668 | | | 100 | % |
The mix of our funding due in 1 year or less changed slightly from December 31, 2021 as discount notes outstanding increased and CO bonds outstanding decreased, primarily due to the increase in short-term advances. We continue to seek to maintain a sufficient liquidity and funding balance between our financial assets and financial liabilities. Additionally, the FHLBanks work collectively to manage FHLB System-wide liquidity and funding and jointly monitor System-wide refinancing risk. In managing and monitoring the amounts of assets that require refunding, the FHLBanks may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations). See Notes to Financial Statements - Note 3 - Available-for-Sale Securities, Note 4 - Held-to-Maturity Securities, Note 6 - Advances, and Note 10 - Consolidated Obligations for more detailed information regarding contractual maturities of certain of our financial assets and liabilities.
Derivatives.Asof September 30, 2017 and December 31, 2016, we had derivative assets, net of collateral held or posted, including accrued interest, with estimated fair values of $142 million and $135 million, respectively, and derivative liabilities, net of collateral held or posted, including accrued interest, with estimated fair values of $1 million and $25 million, respectively. Increases and decreases in the fair value of derivatives are primarily caused by changes in the derivatives' respective underlying interest-rate indices.
The volume of derivative hedges is often expressed in terms of notional amounts, which is the amount upon which interest payments are calculated. The following table presents the notional amounts by type of hedged item regardless of whether or not it is in a qualifying hedge relationship ($ amounts in millions).
| | | | | | | | | | | | | | |
Hedged Item | | September 30, 2022 | | December 31, 2021 |
Advances | | $ | 20,555 | | | $ | 21,084 | |
AFS securities | | 16,470 | | | 13,356 | |
Mortgage loans MDCs | | 88 | | | 194 | |
CO bonds | | 29,214 | | | 21,177 | |
| | | | |
| | | | |
Total notional outstanding | | $ | 66,327 | | | $ | 55,811 | |
The increase in the total notional amount outstanding during the nine months ended September 30, 2022 of $10.5 billion, or 19%, was substantially due to an increase in derivatives hedging CO bonds, driven primarily by an increase in long-term callable CO bonds, and an increase in fixed-rate AFS securities, driven primarily by the purchases of U.S. Treasury obligations.
The following table presents the cumulative impact of fair-value hedging basis adjustments on our statement of condition ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | Advances | | AFS Securities | | CO Bonds | | Total |
Cumulative fair-value hedging basis adjustments on hedged items | | $ | (654) | | | $ | (1,159) | | | $ | 2,243 | | | $ | 430 | |
Estimated fair value of associated derivatives, net | | 655 | | | 1,436 | | | (2,257) | | | (166) | |
| | | | | | | | |
Net cumulative fair-value hedging basis adjustments | | $ | 1 | | | $ | 277 | | | $ | (14) | | | $ | 264 | |
52
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Hedged Item | | September 30, 2017 | | December 31, 2016 |
Advances | | $ | 10,047 |
| | $ | 9,382 |
|
Investments | | 7,046 |
| | 6,244 |
|
Mortgage loans | | 518 |
| | 548 |
|
CO bonds | | 11,100 |
| | 8,865 |
|
Discount notes | | 298 |
| | 773 |
|
Total notional | | $ | 29,009 |
| | $ | 25,812 |
|
Total Capital. Total capital at September 30, 2017 was $2.82022 was $3.6 billion, a net increase of $395$8 million, or 16% compared to 0.2%, from December 31, 2016. This increase was due primarily to additional2021. The increases in capital stock issued to membersoutstanding and retained earnings were substantially offset by other comprehensive losses, which substantially resulted from unrealized losses on investments in connection withMBS, driven by the increase in advances. Other comprehensive income and the growth of retained earnings also contributed to the increase.market interest rates.
The following table presents a percentage breakdown of the components of GAAP capital.
| | Components | | September 30, 2017 | | December 31, 2016 | Components | | September 30, 2022 | | December 31, 2021 |
Capital stock | | 63 | % | | 61 | % | Capital stock | | 65 | % | | 63 | % |
Retained earnings | | 33 | % | | 37 | % | Retained earnings | | 35 | % | | 33 | % |
AOCI | | 4 | % | | 2 | % | AOCI | | — | % | | 4 | % |
Total GAAP capital | | 100 | % | | 100 | % | Total GAAP capital | | 100 | % | | 100 | % |
The changes in the components of GAAP capital at September 30, 2022 compared to December 31, 2021 were primarily due to a decrease in net unrealized gains on AFS securities.
The following table presents a reconciliation of GAAP capital to regulatory capital ($ amounts in millions).
| | | | | | | | | | | | | | |
Reconciliation | | September 30, 2022 | | December 31, 2021 |
| | | | |
Total GAAP capital | | $ | 3,564 | | | $ | 3,556 | |
Exclude: AOCI | | 2 | | | (133) | |
Add: MRCS | | 43 | | | 50 | |
Total regulatory capital | | $ | 3,609 | | | $ | 3,473 | |
|
| | | | | | | | |
Reconciliation | | September 30, 2017 | | December 31, 2016 |
Total GAAP capital | | $ | 2,831 |
| | $ | 2,436 |
|
Exclude: AOCI | | (103 | ) | | (56 | ) |
Add: MRCS | | 165 |
| | 170 |
|
Total regulatory capital | | $ | 2,893 |
| | $ | 2,550 |
|
Liquidity and Capital Resources
Liquidity.Our primary sources of liquidity are holdings of liquid assets, comprised of cash, and short-term investments, and trading securities, as well as the issuance of consolidated obligations.
Our cash and short-term investments portfolio totaled $5.9 billion at September 30, 2017. 2022 totaled $7.6 billion. Our short-term investments generally consist of high-quality financial instruments, many of which mature overnight. Our trading securities at September 30, 2022 totaled $3.1 billion and consisted solely of U.S. Treasury obligations. As a result, our liquidity portfolio at September 30, 2022 totaled $10.7 billion, or 17% of total assets. The level of our liquidity fluctuates and is influenced by regulatory requirements, actual and anticipated member advance activity and market conditions and opportunities.
During the first nine months of 2017,ended September 30, 2022, we maintained sufficient access to funding; our net proceeds from the issuance of consolidated obligations totaled $179.6$656.3 billion.
We have not identified any trends, demands, commitments, events or uncertainties thatChanges in Cash Flow.Net cash provided by operating activities for the nine months ended September 30, 2022 was $1.4 billion, compared to net cash provided by operating activities for the nine months ended September 30, 2021 of $281 million. The net change in cash provided by operating activities of $1.1 billion was substantially due to the fluctuation in variation margin payments on cleared derivatives. Such payments are likely to materially increase or decrease our liquidity.treated by the Clearinghouses as daily settled contracts.
Capital Resources.
Total Regulatory Capital. A The following table provides a breakdown of our outstanding capital stock categorized by type of member institution, and MRCS is provided in the following table ($ amounts in millions).
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| | September 30, 2022 | | December 31, 2021 |
By Type of Member Institution | | Amount | | % of Total | | Amount | | % of Total |
Capital Stock: | | | | | | | | |
Depository institutions: | | | | | | | | |
Commercial banks and savings institutions | | $ | 1,145 | | | 48 | % | | $ | 1,126 | | | 49 | % |
Credit unions | | 367 | | | 16 | % | | 309 | | | 13 | % |
Total depository institutions | | 1,512 | | | 64 | % | | 1,435 | | | 62 | % |
Insurance companies | | 814 | | | 34 | % | | 811 | | | 35 | % |
CDFIs | | — | | | — | % | | — | | | — | % |
Total capital stock, putable at par value | | 2,326 | | | 98 | % | | 2,246 | | | 97 | % |
| | | | | | | | |
MRCS: | | | | | | | | |
Captive insurance company (1) | | 10 | | | — | % | | 12 | | | 1 | % |
Other former members | | 33 | | | 2 | % | | 38 | | | 2 | % |
| | | | | | | | |
Total MRCS | | 43 | | | 2 | % | | 50 | | | 3 | % |
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Total regulatory capital stock | | $ | 2,369 | | | 100 | % | | $ | 2,296 | | | 100 | % |
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| | September 30, 2017 | | December 31, 2016 |
By Type of Member Institution | | Amount | | % of Total | | Amount | | % of Total |
Depository institutions: | | | | | | | | |
Commercial banks and savings institutions | | $ | 895 |
| | 46 | % | | $ | 691 |
| | 41 | % |
Credit unions | | 232 |
| | 12 | % | | 212 |
| | 14 | % |
Total depository institutions | | 1,127 |
| | 58 | % | | 903 |
| | 55 | % |
Insurance companies | | 652 |
| | 33 | % | | 590 |
| | 35 | % |
CDFIs | | — |
| | — | % | | — |
| | — | % |
Total capital stock, putable at par value | | 1,779 |
| | 91 | % | | 1,493 |
| | 90 | % |
| | | | | | | | |
MRCS: | | | | | | | | |
Captive insurance companies (1) | | — |
| | — | % | | 3 |
| | — | % |
Captive insurance companies (2) | | 152 |
| | 8 | % | | 152 |
| | 9 | % |
Former members (3) | | 13 |
| | 1 | % | | 15 |
| | 1 | % |
Total MRCS | | 165 |
| | 9 | % | | 170 |
| | 10 | % |
| | | | | | | | |
Total regulatory capital stock | | $ | 1,944 |
| | 100 | % | | $ | 1,663 |
| | 100 | % |
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(1)
| Memberships terminated by February 19, 2017. |
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(2)
| Memberships must terminate no later than February 19, 2021. |
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(3)
| Balances at September 30, 2017 and December 31, 2016 include $4 million and $6 million, respectively, of MRCS that had reached the end of the five-year redemption period but will not be redeemed or repurchased until the associated credit products and other obligations are no longer outstanding. |
Our remaining(1) Represents a captive insurance company members that do not meet the new definition of "insurance company" or fall within another category of institution that is eligible for FHLBankwhose membership shall have their membershipswas terminated no later thanon February 19, 2021. Upon termination, allOn that date, we repurchased its excess stock of their outstanding Class B capital stock shall$18 million. The remaining balance will not be repurchased, or redeemed after a five-year redemption period.until the associated credit products and other obligations are no longer outstanding.
Excess Capital Stock.The following table presents the composition of our excess capital stock ($ amounts in millions).
| | Components | | September 30, 2017 | | December 31, 2016 | Components | | September 30, 2022 | | December 31, 2021 |
Member capital stock not subject to outstanding redemption requests | | $ | 262 |
| | $ | 238 |
| Member capital stock not subject to outstanding redemption requests | | $ | 669 | | $ | 798 |
Member capital stock subject to outstanding redemption requests | | 4 |
| | 2 |
| Member capital stock subject to outstanding redemption requests | | — | | 14 |
MRCS | | 28 |
| | 25 |
| MRCS | | 23 | | 28 |
| Total excess capital stock | | $ | 294 |
| | $ | 265 |
| Total excess capital stock | | $ | 692 | | $ | 840 |
| | | | | | | | |
Excess stock as a percentage of regulatory capital stock | | 15 | % | | 16 | % | Excess stock as a percentage of regulatory capital stock | | 29 | % | | 37 | % |
Finance Agency rules limit the ability of an FHLBank to issueThe decrease in excess stock under certain circumstances, including when its total excess stock exceeds 1% of total assets or ifduring the issuance of excess stock would cause total excess stock to exceed 1% of total assets. Our total excess stock atnine months ended September 30, 2017 was 0.5%2022 resulted from repurchases totaling $167 million to comply with our capital plan as a result of our total assets. Therefore, we are currently permitted to issue new excessregulatory capital ratio exceeding 6.0% at January 31, 2022.
Capital Distributions.The following table summarizes our weighted-average dividend rate and dividend payout ratio.
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Weighted-average dividend rate (1) | | 3.42 | % | | 2.35 | % | | 2.73 | % | | 2.48 | % |
Dividend payout ratio (2) | | 39.76 | % | | 65.59 | % | | 41.68 | % | | 61.26 | % |
(1) Dividends paid in cash during the period (annualized) divided by the average amount of Class B stock to members and distribute stockeligible for dividends should we choose to do so, subject to these regulatory limitations.under our capital plan, excluding MRCS.
(2) Dividends paid in cash during the period divided by net income for the period.
Capital Distributions.
On October 26, 2017,27, 2022, our board of directors declared a cash dividend on Class B-2 activity-based stock at an annualized rate of 4.25% (annualized)4.75% and on our Class B-1 capitalnon-activity-based stock and 3.40% (annualized)at an annualized rate of 1.25%, resulting in a spread between the rates of 3.50 percentage points. The overall weighted-average annualized rate paid was 3.56%. The dividends were paid in cash on our Class B-2 capital stock.
October 28, 2022.
Adequacy of Capital.We must maintain sufficient permanent capital to meet the combined credit risk, market risk and operations risk components of the Finance Agency's risk-based capital requirement. As presented in theThe following table we werepresents our risk-based capital requirement in compliance with the requirementrelation to our permanent capital at September 30, 20172022 and December 31, 20162021 ($ amounts in millions)millions).
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Risk-Based Capital Components | | September 30, 2017 | | December 31, 2016 | Risk-Based Capital Components | | September 30, 2022 | | December 31, 2021 |
Credit risk | | $ | 369 |
| | $ | 346 |
| Credit risk | | $ | 176 | | | $ | 155 | |
Market risk | | 266 |
| | 239 |
| Market risk | | 777 | | | 684 | |
Operations risk | | 191 |
| | 176 |
| |
Operational risk | | Operational risk | | 286 | | | 252 | |
| Total risk-based capital requirement | | $ | 826 |
| | $ | 761 |
| Total risk-based capital requirement | | $ | 1,239 | | | $ | 1,091 | |
| | | | | | | | |
Permanent capital | | $ | 2,893 |
| | $ | 2,550 |
| Permanent capital | | $ | 3,609 | | | $ | 3,473 | |
The increase in theour total risk-based capital requirement was primarily caused by an increase in both the credit risk and market risk components. The increase in credit risk was mainly the result of longer maturities of our GSE debentures while the increase in market risk wascomponent due to changes in portfolio composition andthe market environment, including changes in interest rates, CO bond-swap basis, volatility, option-adjusted spreads and volatility. balance sheet composition. The operationsoperational risk capital component is calculated as 30% of the credit and market risk components. Our permanent capital components. For information concerning the Finance Agency's proposed rule on FHLBank capital requirements, see Recent Accounting and Regulatory Developments - Legislative and Regulatory Developments in this Item 2.
Off-Balance Sheet Arrangements
At at September 30, 2017, principal previously paid2022 remained well in full byexcess of our MPP servicers totaling $2 million remains subject to potential claims by those servicers for any losses resulting from past or future liquidations of the underlying properties. An estimate of the losses is included in the MPP allowance for loan losses. See Notes to Financial Statements - Note 8 - Allowance for Credit Losses for more information.total risk-based capital requirement.
See Notes to Financial Statements - Note 16 - Commitments and Contingencies for information on additional commitments and contingencies.
Critical Accounting Policies and Estimates
We determined that four of our accounting policies are critical because they require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions. These accounting policies relate to:
Derivatives and hedging activities (see Notes to Financial Statements - Note 9 - Derivatives and Hedging Activities for more detail);
Fair value estimates (see Notes to Financial Statements - Note 15 - Estimated Fair Values for more detail);
Provision for credit losses (see Notes to Financial Statements - Note 8 - Allowance for Credit Losses for more detail); and
OTTI (see Notes to Financial Statements - Note 5 - Other-Than-Temporary Impairment for more detail).
A full discussion of our critical accounting policies and estimates is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates in our 20162021 Form 10-K. See below for additional information regarding certain of these policies.
Provision for Credit Losses.
Mortgage Loans Acquired under the MPP. Our allowance for loan losses incorporates our analysis of delinquent conventional MPP loans, using the estimated fair value of the underlying collateral, further reduced by estimated liquidation costs.
We also performed our loan loss analysis at December 31, 2016 considering an adverse scenario whereby we used a haircut on our underlying collateral values of 20% for delinquent conventional loans, including individually evaluated loans. We consider such a haircut to represent the most distressed scenario that is reasonably possible to occur over the loss emergence period of 24 months. In this distressed scenario, while holding all other assumptions constant, our estimated incurred losses remaining after borrowers' equity, but before credit enhancements, would increase by only $4.7 million. Additionally, such increase would be substantially offset by credit enhancements. Therefore, the allowance for loan losses continues to be based upon our best estimate of the probable losses over the loss emergence period that would not be recovered from the credit enhancements.
Other-Than-Temporary Impairment. The following table presents the significant modeling assumptions used to determine whether a security was OTTI during the three months ended September 30, 2017, as well as the related current credit enhancement as of September 30, 2017 ($ amounts in millions).
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| | | | Significant Modeling Assumptions for all private-label RMBS and ABS (2) | | Current Credit Enhancement (2) |
Classification | | UPB (1) | | Prepayment Rates | | Default Rates | | Loss Severities | |
Private-label RMBS: | | | | | | | | | | |
Total Prime | | $ | 278 |
| | 13 | % | | 7 | % | | 23 | % | | 4 | % |
Total Alt-A | | — |
| | 10 | % | | 5 | % | | 11 | % | | 11 | % |
Total private-label RMBS | | $ | 278 |
| | 13 | % | | 7 | % | | 23 | % | | 4 | % |
| | | | | | | | | | |
Home equity loan ABS: | | | | | | | | | | |
Total subprime - home equity loans (3) | | $ | 1 |
| | 7 | % | | 30 | % | | 41 | % | | — | % |
| |
(1)
| Excludes one manufactured housing loan ABS, with a UPB of $7 million, for which underlying collateral data is not readily available and alternative procedures are used to evaluate for OTTI. |
| |
(2)
| Weighted average based on UPB. |
| |
(3)
| Modeling assumptions assume no payout from monoline bond insurers. |
In addition to evaluating our private-label RMBS under a best estimate scenario, we perform a cash flow analysis for each of these securities under a more stressful housing price scenario. This more stressful scenario is primarily based on a short-term housing price forecast that is 5% lower than the best estimate scenario, followed by a recovery path with annual rates of housing price growth that are 33% lower than the best estimate.
The actual OTTI-related credit losses recognized in earnings for the three months ended September 30, 2017 totaled $14 thousand. Under the more stressful scenario, the estimated OTTI-related credit losses for the same period were virtually unchanged. The adverse scenario and associated results do not represent our current expectations and, therefore, should not be construed as a prediction of our future results, market conditions or the performance of these securities.
Additional information regarding OTTI of our private-label RMBS and ABS is provided in Notes to Financial Statements - Note 5 - Other-Than-Temporary Impairment.
Recent Accounting and Regulatory Developments
Accounting Developments. See Notes to Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance forFor a description of how recent accounting developments may impact our financial condition, results of operations or cash flows.flows, see Notes to Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance.
Legislative and Regulatory Developments.There were no material legislative or regulatory developments during the period covered by this report.
Information Security Management Advisory Bulletin. On September 28, 2017, the Finance Agency issued Advisory Bulletin 2017-02, which supersedes previous guidance on an FHLBank’s information security program. The advisory bulletin describes three main components of an information security program and reflects the expectation that each FHLBank will use a risk-based approach to implement its information security program. The advisory bulletin contains expectations related to (i) governance, including guidance related to roles and responsibilities, risk assessments, industry standards, and cyber-insurance; (ii) engineering and architecture, including guidance on network security, software security, and security of endpoints; and (iii) operations, including guidance on continuous monitoring, vulnerability management, baseline configuration, asset life cycle, awareness and training, incident response and recovery, user access management, data classification and protection, oversight of third parties, and threat intelligence sharing.
We do not expect this advisory bulletin to materially affect our financial condition or results of operations, but we anticipate that it may result in increased costs relating to enhancements to our information security program.
Finance Agency Final Rule on Minority and Women Inclusion.On July 13, 2017, the Finance Agency issued a final rule, effective August 24, 2017, amending its Minority and Women Inclusion regulations to clarify the scope of the FHLBanks' obligation to promote diversity and ensure inclusion. The final rule updates the existing Finance Agency regulations aimed at promoting diversity and the inclusion and participation of minorities, women, and individuals with disabilities, and the businesses they own ("MWDOB") in all FHLBank business and activities, including management, employment, customer outreach and access, MWDOB participation in financial transactions with the FHLBank, and contracting. The final rule encourages the FHLBanks to expand contracting opportunities for minorities, women, and individuals with disabilities through subcontracting arrangements and to track the cumulative spend associated with such diverse subcontracting arrangements. In addition, the final rule requires each FHLBank to:
develop stand-alone, board-approved diversity and inclusion strategic plans or incorporate diversity and inclusion principles into its existing strategic planning processes and adopt strategies for promoting diversity and ensuring inclusion;
amend its policies on equal opportunity in employment by adding sexual orientation, gender identity, and status as a parent to the list of protected classifications;
establish a process to grant or deny requests for accommodations to employees and job applicants based on their religious beliefs or practices;
provide information in its annual reports to the Finance Agency about its efforts to advance diversity and inclusion through identifying and selecting MWDOB firms for participation in financial transactions with the FHLBank, identifying ways in which it may give consideration to MWDOB business with the FHLBank when reviewing and evaluating vendor contract proposals, and enhancing customer access by MWDOB businesses (including through the FHLBank's affordable housing and community investment programs;
report data regarding the number of diverse individuals currently in supervisory or managerial positions and its strategies for promoting the diversity of supervisors and managers;
classify and provide additional data in its annual reports about the number of, and amounts paid under, its MWDOB contracts, as well as demographic data regarding the categories of MWDOB entities to which it awards vendor contracts; and
provide data to the Finance Agency regarding the type of contracts it considers exempt from these diversity and inclusion requirements, as well as the criteria and rationale for establishing such exemptions and an analysis of any potential negative or adverse impact such exemptions might have on contracting opportunities for MWDOB businesses or diverse individuals.
We do not expect this final rule to materially affect our financial condition or results of operations, but we anticipate that it may result in increased costs and substantially increase the amount of tracking, monitoring, and reporting that will be required of each FHLBank.
Finance Agency Final Rule on Membership for Non-Federally-Insured Credit Unions. On June 5, 2017, the Finance Agency issued a final rule on FHLBank membership, implementing 2015 statutory amendments to the Bank Act that authorizes FHLBanks to accept applications for membership from state-chartered credit unions without federal share insurance, provided certain prerequisites are met. The final rule generally treats these credit unions the same as other depository institutions with regard to membership criteria, with an additional requirement that each credit union obtain: (1) an affirmative statement from its state regulator that it meets the requirements for federal insurance as of the date of its application for FHLBank membership; (2) a written statement from the state regulator that it cannot or will not make any determination regarding the credit union’s eligibility for federal insurance; or (3) if the state regulator fails or refuses to respond to the credit union’s request within six months, confirmation of the failure to receive a response.
The final rule became effective July 5, 2017. We do not expect this rule to materially affect our financial condition or results of operations.
Finance Agency Proposed Rule on Capital Requirements. On July 3, 2017, the Finance Agency published a proposed rule to adopt, with amendments, the Finance Board regulations pertaining to the capital requirements for the FHLBanks. The proposed rule would carry over most of the existing regulations without material change, but would substantively revise the credit risk component of the risk-based capital requirement, as well as the limitations on extensions of unsecured credit and derivative exposure. The main revisions would remove requirements that the FHLBanks calculate credit risk capital charges and unsecured credit limits based on ratings issued by an NRSRO, and instead require that the FHLBanks establish and use their own internal rating methodology. With respect to derivatives, the proposed rule would impose a new capital charge for cleared derivatives, which under the existing rule do not carry a capital charge, and would change the way that the capital charge and risk limits were calculated for uncleared derivatives, in both cases to align with the Dodd-Frank Act’s clearing mandate and derivatives reforms. The proposed rule also would revise the percentages used in the regulation’s tables to calculate credit risk capital charges for advances and for non-mortgage assets. The Finance Agency proposes to retain for now the percentages used in the tables to calculate capital charges for mortgage-related assets, and to address at a later date the methodology for residential mortgage assets. While a March 2009 regulatory directive pertaining to certain liquidity matters would remain in place, the Finance Agency also proposes to rescind certain minimum regulatory liquidity requirements and address these liquidity requirements in a separate rulemaking.
We submitted a joint comment letter with the other FHLBanks on August 31, 2017. We continue to evaluate the proposed rule but do not expect this rule, if adopted as proposed, to materially affect our financial condition or results of operations.
FRB and FDIC Final Rules on Mandatory Contractual Stay Requirements for Qualified Financial Contracts ("QFCs").On September 12, 2017, the FRB published a final rule, effective November 13, 2017, requiring certain global systemically important banking institutions ("GSIB") regulated by the FRB to amend their covered QFCs to limit a counterparty’s immediate termination or exercise of default rights under the QFCs in the event of bankruptcy or receivership of the GSIB or an affiliate of the GSIB. Covered QFCs include derivatives, repurchase agreements (known as “repos”) and reverse repos, and securities lending and borrowing agreements. On September 27, 2017, the FDIC adopted a substantively identical final rule, effective January 1, 2018, with respect to QFCs entered into with certain FDIC-supervised institutions.
Although we are not a covered entity under these rules, as a counterparty to covered entities under QFCs, we may be required to amend QFCs entered into with FRB-regulated GSIBs or applicable FDIC-supervised institutions. These rules may impact our ability to terminate business relationships with covered entities and could adversely impact the amount we recover in the event of the bankruptcy or receivership of a covered entity. We do not expect these final rules to materially affect our financial condition or results of operations.
LIBOR Transition. In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced the FCA’s intention to cease sustaining LIBOR after 2021. The Federal Reserve Board had previously convened the Alternative Reference Rates Committee (“ARRC”) to identify a set of alternative reference interest rates for possible use as market benchmarks. The ARRC proposed an alternative rate in June 2017, and in August 2017, the Federal Reserve Board requested public comment on a proposal to begin publishing that and two other alternative rates beginning in 2018. We are not able to predict whether LIBOR will cease to be available after 2021, or whether the alternative rates the Federal Reserve Board proposes to publish will become market benchmarks in place of LIBOR. Because we routinely engage in transactions involving financial instruments that reference LIBOR, these developments could have a material impact on us.
Risk Management
We have exposure to a number of risks in pursuing our business objectives. These risks may be broadly classified as market, credit, liquidity, operational, and business. Market risk is discussed in Item 3. Quantitative and Qualitative Disclosures about Market Risk. SeeFor more information, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management in our 20162021 Form 10-K for more information.10-K.
Credit Risk Management. We face credit risk on advances and other credit products, investments, mortgage loans, derivative financial instruments, and AHP grants.
Advances and Other Credit Products.As of September 30, 2017 and December 31, 2016, advances to our insurance company members represented 45% and 53%, respectively, of our total advances, at par. In 2016, our board of directors modified the initial borrowing limit for our insurance company members (excluding captive insurance companies) to 25% of their total general account assets less money borrowed. As of September 30, 2017, no insurance company member (excluding captive insurers) had total credit products outstanding in excess of this threshold.
The Final Membership Rule did not require us to terminate any credit extensions to captive insurance companies that were outstanding on the effective date. However, new or renewed credit extensions to captive insurance companies that became members prior to September 12, 2014 are subject to certain restrictions relating to maturity dates and cannot exceed 40% of the member's total assets. As of September 30, 2017, we had advances outstanding, at par, of $1.7 billion to one captive insurance company member whose total credit products exceeded the percentage limit. We may impose additional restrictions on extensions of credit to our members, including captive insurance companies, at our discretion.
Concentration.Our credit risk is magnified due to the concentration of advances in a few borrowers. As of September 30, 2017,2022, our top borrower held 16%14% of total advances outstanding, at par, and our top five borrowers held 44%45% of total advances outstanding, at par. As a result of this concentration, we perform frequent credit and collateral reviews on our largest borrowers. In addition, we analyze the implications to our financial management and profitability if we were to lose the business
Investments. We are also exposed to credit risk through our investment portfolios.portfolio. Our policies restrict the acquisition of investments to high-quality, short-term money market instruments and high-quality long-term securities.
Short-Term Investments. The following table presents the unsecured investment credit exposuresexposure to private counterparties, categorized by the domicile of the counterparty's ultimate parent, based on the lowest of the counterparty's NRSRO long-term credit ratings, stated in terms of the S&P equivalent. The table does not reflect the foreign sovereign government's credit rating ($ amounts in millions).
| | September 30, 2017 | | AA | | A | | Total | |
September 30, 2022 | | September 30, 2022 | | AA | | A | | Total |
Domestic | | $ | — |
| | $ | 971 |
| | $ | 971 |
| Domestic | | $ | — | | | $ | 1,698 | | | $ | 1,698 | |
Australia | | Australia | | 1,550 | | | — | | | 1,550 | |
Canada | | — |
| | 400 |
| | 400 |
| Canada | | — | | | 1,710 | | | 1,710 | |
Sweden | | 750 |
| | 265 |
| | 1,015 |
| |
Australia | | 750 |
| | — |
| | 750 |
| |
| Netherlands | | Netherlands | | — | | | 127 | | | 127 | |
| Total unsecured credit exposure | | $ | 1,500 |
| | $ | 1,636 |
| | $ | 3,136 |
| Total unsecured credit exposure | | $ | 1,550 | | | $ | 3,535 | | | $ | 5,085 | |
Long-Term Investments. A Finance Agency regulation provides that the total valueamount of our investments in MBS, and ABS, calculated using amortized historical cost excluding the impact of certain derivatives adjustments, must not exceed 300% of our total regulatory capital, as of the day we purchase the securities, based on the capital amount most recently reported to the Finance Agency. Total regulatory capital consistsIf our outstanding investments in MBS exceed the limitation at any time, but were in compliance at the time we purchased the investments, we would not be considered out of retained earnings, Class B capital stock and MRCS. Thesecompliance with the regulation, but we would not be permitted to purchase additional investments totaled 286% of total regulatory capital at September 30, 2017.in MBS until these outstanding investments were within the limitation. Generally, our goal is to maintain these investments near the 300% limit in order to enhance earnings and capital for our members and diversify our revenue stream.At September 30, 2022, these investments totaled 297% of total regulatory capital.
The following table presents the carrying values of our investments, excluding accrued interest, grouped by credit rating and investment category. Applicable rating levels are determined using the lowest relevant long-term rating from S&P Moody's and Fitch,Moody's, each stated in terms of the S&P equivalent. Rating modifiers are ignored when determining the applicable rating level for a given counterparty or investment. Amounts reported do not reflect any subsequent changes in ratings, outlook, or watch status ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | | | AA | | A | | | | | | Total |
Short-term investments: | | | | | | | | | | | | |
Interest-bearing deposits | | | | $ | — | | $ | 478 | | | | | | $ | 478 |
Securities purchased under agreements to resell | | | | 2,500 | | — | | | | | | 2,500 |
Federal funds sold | | | | 1,550 | | 3,057 | | | | | | 4,607 |
Total short-term investments | | | | 4,050 | | 3,535 | | | | | | 7,585 |
| | | | | | | | | | | | |
Trading securities: | | | | | | | | | | | | |
U.S. Treasury obligations | | | | 3,115 | | — | | | | | | 3,115 |
Total trading securities | | | | 3,115 | | — | | | | | | 3,115 |
| | | | | | | | | | | | |
Other investment securities: | | | | | | | | | | | | |
U.S. Treasury obligations | | | | 3,402 | | — | | | | | | 3,402 |
GSE and TVA debentures | | | | 1,900 | | — | | | | | | 1,900 |
GSE MBS | | | | 7,260 | | — | | | | | | 7,260 |
Other U.S. obligations - guaranteed RMBS | | | | 2,711 | | — | | | | | | 2,711 |
Total other investment securities | | | | 15,273 | | — | | | | | | 15,273 |
| | | | | | | | | | | | |
Total investments, carrying value | | | | $ | 22,438 | | $ | 3,535 | | | | | | $ | 25,973 |
| | | | | | | | | | | | |
Percentage of total | | | | 86 | % | | 14 | % | | | | | | 100 | % |
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| Below |
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| Investment |
|
|
September 30, 2017 |
| AAA |
| AA |
| A |
| BBB |
| Grade |
| Total |
Short-term investments: |
|
|
|
|
| |
|
|
|
|
|
|
|
|
Interest-bearing deposits |
| $ | — |
|
| $ | — |
|
| $ | 301 |
|
| $ | — |
|
| $ | — |
|
| $ | 301 |
|
Securities purchased under agreements to resell |
| — |
|
| 2,721 |
|
| — |
|
| — |
|
| — |
|
| 2,721 |
|
Federal funds sold |
| — |
|
| 1,500 |
|
| 1,335 |
|
| — |
|
| — |
|
| 2,835 |
|
Total short-term investments |
| — |
|
| 4,221 |
|
| 1,636 |
|
| — |
|
| — |
|
| 5,857 |
|
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE and TVA debentures |
| — |
|
| 4,525 |
|
| — |
|
| — |
|
| — |
|
| 4,525 |
|
GSE MBS |
| — |
|
| 4,816 |
|
| — |
|
| — |
|
| — |
|
| 4,816 |
|
Other U.S. obligations - guaranteed RMBS |
| — |
|
| 3,171 |
|
| — |
|
| — |
|
| — |
|
| 3,171 |
|
Private-label RMBS and ABS | | — |
| | 4 |
| | 17 |
| | 2 |
| | 255 |
| | 278 |
|
Total long-term investments |
| — |
|
| 12,516 |
|
| 17 |
|
| 2 |
|
| 255 |
|
| 12,790 |
|
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|
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|
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|
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|
|
|
|
Total investments, carrying value |
| $ | — |
|
| $ | 16,737 |
|
| $ | 1,653 |
|
| $ | 2 |
|
| $ | 255 |
|
| $ | 18,647 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total |
| — | % |
| 90 | % |
| 9 | % |
| — | % |
| 1 | % |
| 100 | % |
Mortgage Loans Held for Portfolio. See Risk Management - Mortgage Loans Held for Portfolio of our 2016 Form 10-K for information on loss allocation structures, mortgage insurance, and state concentrations for mortgage loans.
LRA. The following table presents the changes in the LRA for original MPP and Advantage MPP Advantage ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
LRA Activity | | Original | | Advantage | | Total | | Original | | Advantage | | Total |
Liability, beginning of period | | $ | 2 | | | $ | 233 | | | $ | 235 | | | $ | 4 | | | $ | 227 | | | $ | 231 | |
Additions | | — | | | 2 | | | 2 | | | — | | | 11 | | | 11 | |
Claims paid | | — | | | — | | | — | | | — | | | — | | | — | |
Distributions to PFIs | | (1) | | | (3) | | | (4) | | | (3) | | | (6) | | | (9) | |
Liability, end of period | | $ | 1 | | | $ | 232 | | | $ | 233 | | | $ | 1 | | | $ | 232 | | | $ | 233 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 |
LRA Activity | | Original | | Advantage | | Total | | Original | | Advantage | | Total |
Liability, beginning of period | | $ | 8 |
| | $ | 129 |
| | $ | 137 |
| | $ | 9 |
| | $ | 97 |
| | $ | 106 |
|
Additions | | — |
| | 7 |
| | 7 |
| | — |
| | 12 |
| | 12 |
|
Claims paid | | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Distributions to PFIs | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Liability, end of period | | $ | 8 |
| | $ | 136 |
| | $ | 144 |
| | $ | 8 |
| | $ | 109 |
| | $ | 117 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 |
LRA Activity | | Original | | Advantage | | Total | | Original | | Advantage | | Total |
Liability, beginning of period | | $ | 8 |
| | $ | 118 |
| | $ | 126 |
| | $ | 9 |
| | $ | 83 |
| | $ | 92 |
|
Additions | | — |
| | 18 |
| | 18 |
| | 1 |
| | 26 |
| | 27 |
|
Claims paid | | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Distributions to PFIs | | — |
| | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Liability, end of period | | $ | 8 |
| | $ | 136 |
| | $ | 144 |
| | $ | 8 |
| | $ | 109 |
| | $ | 117 |
|
Derivatives.The following table presents key information on derivative positions with counterparties on a settlement date basis using the lowestlower credit ratingsrating from S&P orand Moody's, stated in terms of the S&P equivalent ($ amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | Notional Amount | | Net Estimated Fair Value Before Collateral | | Cash Collateral Pledged To (From) Counterparties | | Net Credit Exposure |
Non-member counterparties: | | | | | | | | |
Asset positions with credit exposure | | | | | | | | |
| | | | | | | | |
Uncleared derivatives - A | | $ | 3,231 | | | $ | 196 | | | $ | (191) | | | $ | 5 | |
| | | | | | | | |
Cleared derivatives (1) | | 25,146 | | | 25 | | | 309 | | | 334 | |
Liability positions with credit exposure | | | | | | | | |
| | | | | | | | |
Uncleared derivatives - A | | 6,337 | | | (74) | | | 76 | | | 2 | |
| | | | | | | | |
| | | | | | | | |
Total derivative positions with credit exposure to non-member counterparties | | 34,714 | | | 147 | | | 194 | | | 341 | |
Total derivative positions with credit exposure to member institutions (2) | | 8 | | | — | | | — | | | — | |
Subtotal - derivative positions with credit exposure | | 34,722 | | | $ | 147 | | | $ | 194 | | | $ | 341 | |
Derivative positions without credit exposure | | 31,605 | | | | | | | |
| | | | | | | | |
Total derivative positions | | $ | 66,327 | | | | | | | |
(1) Represents derivative transactions cleared by two Clearinghouses, each rated AA-.
(2)Includes MDCs from member institutions under our MPP.
57
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| | | | | | | | | | | | | | | | |
September 30, 2017 | | Notional Amount | | Net Estimated Fair Value Before Collateral and Variation Margin for Daily Settled Contracts | | Cash Collateral Pledged To (From) Counterparties and Variation Margin for Daily Settled Contracts (1) | | Net Credit Exposure |
Non-member counterparties: | | | | | | | | |
Asset positions with credit exposure | | | | | | | | |
Uncleared derivatives - AA | | $ | 2,303 |
| | $ | 11 |
| | $ | (8 | ) | | $ | 3 |
|
Uncleared derivatives - A | | 6,689 |
| | 45 |
| | (41 | ) | | 4 |
|
Uncleared derivatives - BBB | | — |
| | — |
| | — |
| | — |
|
Cleared derivatives (2) | | 16,965 |
| | 85 |
| | 49 |
| | 134 |
|
Liability positions with credit exposure | | | | | | | | |
Uncleared derivatives - A | | 2,684 |
| | (5 | ) | | 6 |
| | 1 |
|
Cleared derivatives (2) | | — |
| | — |
| | — |
| | — |
|
Total derivative positions with credit exposure to non-member counterparties | | 28,641 |
| | 136 |
| | 6 |
| | 142 |
|
Total derivative positions with credit exposure to member institutions (3) | | 20 |
| | — |
| | — |
| | — |
|
Subtotal - derivative positions with credit exposure | | 28,661 |
| | $ | 136 |
| | $ | 6 |
| | $ | 142 |
|
Derivative positions without credit exposure | | 348 |
| |
| |
| |
|
|
Total derivative positions | | $ | 29,009 |
| |
|
| |
|
| |
|
|
| |
(1)
| Includes variation margin for daily settled contracts of $23 million at September 30, 2017. |
| |
(2)
| Represents derivative transactions cleared with a clearinghouse, which is not rated. |
| |
(3)
| Includes MDCs from member institutions (MPP). |
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As used in this Item, unless the context otherwise requires, the terms "Bank," "we," "us," and "our" refer to the Federal Home Loan Bank of Indianapolis or its management. We use certain acronyms and terms throughout this Item which are defined in the Glossary of Terms.
Measuring Market Risks
To evaluate market risk, we utilize multiple risk measurements, including VaR, duration of equity, convexity, changes in MVE, duration gap, convexity, VaR,and earnings at risk, and changes in MVE.risk. Periodically, we conduct stress tests to measure and analyze the effects that extreme movements in the level of interest rates and the shape of the yield curve would have on our risk position.
Market Risk-Based Capital Requirement. When calculating the risk-based capital requirement, the VaR comprising the first factor of the market risk component is defined as the potential dollar loss from adverse market movements, for a holding period of 120 business days, with a 99% confidence interval, based on those historical prices and market rates. The table below presents the VaR ($ amounts in millions).
|
| | | | |
Date | | VaR |
September 30, 2017 | | $ | 266 |
|
December 31, 2016 | | 239 |
|
Certain Market and Interest-Rate Risk Metrics under Potential Interest-Rate Scenarios. We also monitor the sensitivities of MVE and duration of equity to potential interest-rate scenarios. We measure potential changes in the market value to book value of equity based on the current month-end level of rates versus large parallel rate shifts. Key Metrics. The following table presents certain market and interest-rate metrics under different interest-rate scenarios ($ amounts in millions).
|
| | | | | | | | | | | | | | | | | | | | |
September 30, 2017 | | Down 200 (1) | | Down 100 (1) | | Base | | Up 100 | | Up 200 |
MVE | | $ | 3,234 |
| | $ | 3,096 |
| | $ | 2,976 |
| | $ | 2,869 |
| | $ | 2,758 |
|
Percent change in MVE from base | | 8.7 | % | | 4.0 | % | | 0 | % | | (3.6 | )% | | (7.3 | )% |
MVE/Book value of equity (2) | | 107.9 | % | | 103.3 | % | | 99.3 | % | | 95.8 | % | | 92.1 | % |
Duration of equity (3) | | 3.4 | | 4.4 | | 3.7 | | 3.8 | | 4.0 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | Down 200 | | Down 100 | | Base | | Up 100 | | Up 200 |
MVE | | $ | 3,352 | | $ | 3,320 | | $ | 3,288 | | $ | 3,264 | | $ | 3,248 |
Percent change in MVE from base | | 2.0 | % | | 1.0 | % | | — | % | | (0.7) | % | | (1.2) | % |
MVE/book value of equity | | 92.9 | % | | 92.0 | % | | 91.2 | % | | 90.5 | % | | 90.1 | % |
Duration of equity | | 1.0 | | | 1.0 | | | 0.9 | | | 0.6 | | | 0.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2021 | | | | | | | | | | |
MVE | | $ | 3,599 | | $ | 3,485 | | $ | 3,530 | | $ | 3,556 | | $ | 3,543 |
Percent change in MVE from base | | 2.0 | % | | (1.3) | % | | — | % | | 0.7 | % | | 0.4 | % |
MVE/book value of equity | | 99.8 | % | | 96.6 | % | | 97.9 | % | | 98.6 | % | | 98.2 | % |
Duration of equity | | 0.9 | | 1.7 | | (1.3) | | (0.1) | | 0.6 |
|
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December 31, 2016 | | | | | | | | | | |
MVE | | $ | 2,545 |
| | $ | 2,634 |
| | $ | 2,604 |
| | $ | 2,546 |
| | $ | 2,467 |
|
Percent change in MVE from base | | (2.3 | )% | | 1.1 | % | | 0 | % | | (2.2 | )% | | (5.3 | )% |
MVE/Book value of equity (2) | | 97.7 | % | | 101.1 | % | | 99.9 | % | | 97.7 | % | | 94.7 | % |
Duration of equity (3) | | (5.3) | | (0.1) | | 1.7 | | 2.8 | | 3.4 |
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(1)��
| Given the current low interest rate environment, we adjusted the downward rate shocks to prevent the assumed interest rate from becoming negative. |
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(2)
| The change in the base MVE/book value of equity from December 31, 2016 resulted primarily from the change in market value of the assets and liabilities in response to changes in the market environment and changes in portfolio composition. The changes in the MVE sensitivity from December 31, 2016 was primarily due to an update of the vendor prepayment model used in market risk modeling. |
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(3)
| We use interest rate shocks in 50 bp increments to determine duration of equity. |
The changes in those key metrics from December 31, 2021 resulted primarily from the changes in market values of the Bank's assets and liabilities in response to changes in the market environment, changes in portfolio composition and our hedging strategies.
Duration Gap. The base case duration gap was 0.13% at September 30, 2017 compared to 0.03% at2022 and December 31, 2016.2021 was 0.15% and (0.11)% , respectively.
See For information about our use of derivative hedges, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Use of Derivative Hedges in our 20162021 Form 10-K for10-K.
Replacement of the LIBOR Benchmark Interest Rate
We continue to implement our transition plan that has reduced our exposure to the risks arising from the cessation of the publication of LIBOR and has the flexibility to evolve with market developments and standards, member needs, and guidance provided by the issuers of Agency securities. As a result, we do not expect the replacement of LIBOR by June 30, 2023 to have a material adverse impact on the Bank's business, results of operations or financial condition.
For more information, aboutsee Item 1A. Risk Factors - Changes in Response to the Replacement of the LIBOR Benchmark Interest Rate Could Adversely Affect Our Business, Financial Condition and Results of Operations. and Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our use of derivative hedges.2021 Form 10-K.
The following table presents our LIBOR-rate indexed financial instruments outstanding at September 30, 2022 and December 31, 2021 by year of maturity ($ amounts in millions).
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LIBOR-Indexed Financial Instruments | | Year of Maturity | | | | |
September 30, 2022 | | 2022 | | Through June 30, 2023 | | Thereafter | | Total | | % of Total Outstanding |
Assets: | | | | | | | | | | |
Advances, par value (1) | | $ | 9 | | | $ | 48 | | | $ | 1,305 | | | $ | 1,362 | | | 4 | % |
MBS, par value (2) | | — | | | — | | | 2,116 | | | 2,116 | | | 20 | % |
Total | | $ | 9 | | | $ | 48 | | | $ | 3,421 | | | $ | 3,478 | | | |
| | | | | | | | | | |
Interest-rate swaps - receive leg, notional (2): | | | | | | | | | | |
Cleared | | $ | 190 | | | $ | 760 | | | $ | 2,190 | | | $ | 3,140 | | | 12 | % |
Uncleared | | — | | | 63 | | | 2,760 | | | 2,823 | | | 7 | % |
Total | | $ | 190 | | | $ | 823 | | | $ | 4,950 | | | $ | 5,963 | | | |
| | | | | | | | | | |
Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest-rate swaps - pay leg, notional (2): | | | | | | | | | | |
Cleared | | $ | 1,180 | | | $ | 2,200 | | | $ | 300 | | | $ | 3,680 | | | 15 | % |
| | | | | | | | | | |
Total | | $ | 1,180 | | | $ | 2,200 | | | $ | 300 | | | $ | 3,680 | | | |
| | | | | | | | | | |
Other derivatives, notional: | | | | | | | | | | |
Interest-rate caps held (2) | | $ | — | | | $ | — | | | $ | 611 | | | $ | 611 | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2021 | | | | | | | | | | |
Assets: | | | | | | | | | | |
Advances, par value (1) | | $ | 134 | | | $ | 48 | | | $ | 2,259 | | | $ | 2,441 | | | 9 | % |
MBS, par value (2) | | — | | | — | | | 2,669 | | | 2,669 | | | 25 | % |
Total | | $ | 134 | | | $ | 48 | | | $ | 4,928 | | | $ | 5,110 | | | |
| | | | | | | | | | |
Interest-rate swaps - receive leg, notional (2): | | | | | | | | | | |
Cleared | | $ | 1,366 | | | $ | 767 | | | $ | 2,336 | | | $ | 4,469 | | | 20 | % |
Uncleared | | 320 | | | 314 | | | 6,176 | | | 6,810 | | | 21 | % |
Total | | $ | 1,686 | | | $ | 1,081 | | | $ | 8,512 | | | $ | 11,279 | | | |
| | | | | | | | | | |
Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Interest-rate swaps - pay leg, notional (2): | | | | | | | | | | |
Cleared | | $ | 3,134 | | | $ | 1,150 | | | $ | — | | | $ | 4,284 | | | 19 | % |
| | | | | | | | | | |
Total | | $ | 3,134 | | | $ | 1,150 | | | $ | — | | | $ | 4,284 | | | |
| | | | | | | | | | |
Other derivatives, notional: | | | | | | | | | | |
Interest-rate caps held (2) | | $ | 15 | | | $ | — | | | $ | 611 | | | $ | 626 | | | 100 | % |
(1) Year of maturity on our advances is based on redemption term.
(2) Year of maturity on our MBS, interest-rate swaps and interest-rate caps is based on contractual maturity. The actual maturities on MBS will likely differ from contractual maturities as borrowers have the right to prepay their obligations with or without prepayment fees.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We are responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our reports filed under the Securities Exchange Act of 1934, as amended ("Exchange Act") is: (a) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission'sSEC's rules and forms; and (b) accumulated and communicated to our management, including our principal executive officer, principal financial officer, and principal accounting officer, to allow timely decisions regarding required disclosures.
As of September 30, 2017,2022, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (the principal executive officer), Chief Financial Officer (the principal financial officer), and Chief Accounting Officer (the principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. In making this evaluation, our management used the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017.2022.
Internal Control Over Financial Reporting
Changes in Internal Control Over Financial Reporting.There were no changes in our internal control over financial reporting, as defined in rules 13a-15(f) and 15(d)-15(f) of the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls.We do not expect that our disclosure controls and procedures and other internal controls will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also is based in part upon certain assumptions about the likelihood of future events, and there can only be reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions. Additionally, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In the ordinary course of business, we may from time to time become a party to lawsuits involving various business matters. We are unaware of any potential claims against us thatlawsuits presently pending which, individually or in the aggregate, could be material.have a material effect on our financial condition or results of operations.
Item 1A. RISK FACTORS
ThereThere have been no material changes in the risk factors described in Item 1A. Risk Factors of our 20162021 Form 10-K.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS
EXHIBIT INDEX
Exhibit Index | | | | | | | | |
Exhibit Number | | Description |
| | |
3.1* | | | | Description3.1 of our Current Report on Form 8-K (Commission File No. 000-51404) filed on July 28, 2022 |
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31.1 | | |
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31.2 | | |
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31.3 | | |
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32 | | |
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101.INS | | XBRL Instance Document |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| | |
104 | | Cover Page Interactive Data File (formatted as inline XBRL) |
* These documents are incorporated by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| FEDERAL HOME LOAN BANK OF INDIANAPOLIS |
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November 9, 201710, 2022 | By: | /s/ CINDY L. KONICH |
| Name: | Cindy L. Konich |
| Title: | President - Chief Executive Officer |
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November 9, 2017 | By: | /s/ GREGORY L. TEARE |
| Name: | Gregory L. Teare |
| Title: | Executive Vice President - Chief Financial Officer |
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November 9, 2017 | By: | /s/ K. LOWELL SHORT, JR. |
| Name: | K. Lowell Short, Jr. |
| Title: | Senior Vice President - Chief Accounting Officer |