Fair Values | FAIR VALUES The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of March 31, 2017 and December 31, 2016 . Subjectivity of Estimates: Estimates of the fair value of advances with options, mortgage instruments, derivatives with embedded options and consolidated obligation bonds with options are highly subjective and require judgments regarding significant matters such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions could have a material effect on the fair value estimates. Fair Value Hierarchy: The FHLBank records trading securities, available-for-sale securities, derivative assets and derivative liabilities at fair value on a recurring basis and on occasion, certain private-label MBS, impaired mortgage loans held for portfolio and non-financial assets on a non-recurring basis. The fair value hierarchy requires the FHLBank to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of the market observability of the fair value measurement for the asset or liability. The FHLBank must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels: • Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the FHLBank can access on the measurement date. • Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 Inputs – Unobservable inputs for the asset or liability. The FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no reclassifications of assets or liabilities recorded at fair value on a recurring basis during the three months ended March 31, 2017 and 2016 . The carrying value and fair value of the FHLBank’s financial assets and liabilities as of March 31, 2017 and December 31, 2016 are summarized in Tables 13.1 and 13.2 (in thousands). These values do not represent an estimate of the overall market value of the FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities. Table 13.1 03/31/2017 Carrying Value Total Fair Value Level 1 Level 2 Level 3 Netting Adjustment and Cash Collateral 1 Assets: Cash and due from banks $ 108,492 $ 108,492 $ 108,492 $ — $ — $ — Interest-bearing deposits 401,161 401,161 — 401,161 — — Securities purchased under agreements to resell 2,500,000 2,500,000 — 2,500,000 — — Federal funds sold 2,705,000 2,705,000 — 2,705,000 — — Trading securities 2,702,316 2,702,316 — 2,702,316 — — Available-for-sale securities 1,124,924 1,124,924 — 1,124,924 — — Held-to-maturity securities 4,852,742 4,844,888 — 4,655,391 189,497 — Advances 25,822,945 25,866,229 — 25,866,229 — — Mortgage loans held for portfolio, net of allowance 6,700,948 6,815,907 — 6,814,144 1,763 — Accrued interest receivable 72,569 72,569 — 72,569 — — Derivative assets 51,998 51,998 — 80,659 — (28,661 ) Liabilities: Deposits 579,805 579,805 — 579,805 — — Consolidated obligation discount notes 22,505,730 22,504,048 — 22,504,048 — — Consolidated obligation bonds 21,670,348 21,547,096 — 21,547,096 — — Mandatorily redeemable capital stock 2,264 2,264 2,264 — — — Accrued interest payable 60,887 60,887 — 60,887 — — Derivative liabilities 2,665 2,665 — 80,990 — (78,325 ) Other Asset (Liability): Standby letters of credit (1,061 ) (1,061 ) — (1,061 ) — — Standby bond purchase agreements (32 ) 5,037 — 5,037 — — Advance commitments — (5,690 ) — (5,690 ) — — 1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also derivative cash collateral, related accrued interest held or placed with the same clearing agent or derivative counterparty, and variation margin for daily settled contracts . Variation margin for daily settled contracts of $(10,292,000) is included with derivative assets. Table 13.2 12/31/2016 Carrying Value Total Fair Value Level 1 Level 2 Level 3 Netting Adjustment and Cash Collateral 1 Assets: Cash and due from banks $ 207,254 $ 207,254 $ 207,254 $ — $ — $ — Interest-bearing deposits 387,920 387,920 — 387,920 — — Securities purchased under agreements to resell 2,400,000 2,400,000 — 2,400,000 — — Federal funds sold 2,725,000 2,725,000 — 2,725,000 — — Trading securities 2,502,788 2,502,788 — 2,502,788 — — Available-for-sale securities 1,091,721 1,091,721 — 1,091,721 — — Held-to-maturity securities 4,502,224 4,487,252 — 4,276,650 210,602 — Advances 23,985,835 24,016,686 — 24,016,686 — — Mortgage loans held for portfolio, net of allowance 6,640,725 6,754,046 — 6,752,849 1,197 — Overnight loans to other FHLBanks 600,000 600,000 — 600,000 — — Accrued interest receivable 68,400 68,400 — 68,400 — — Derivative assets 60,900 60,900 — 76,405 — (15,505 ) Liabilities: Deposits 598,931 598,931 — 598,931 — — Consolidated obligation discount notes 21,775,341 21,774,950 — 21,774,950 — — Consolidated obligation bonds 20,722,335 20,568,653 — 20,568,653 — — Mandatorily redeemable capital stock 2,670 2,670 2,670 — — — Accrued interest payable 49,808 49,808 — 49,808 — — Derivative liabilities 7,171 7,171 — 106,667 — (99,496 ) Other Asset (Liability): Standby letters of credit (1,151 ) (1,151 ) — (1,151 ) — — Standby bond purchase agreements 6 6,016 — 6,016 — — Advance commitments — (6,241 ) — (6,241 ) — — 1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty. Fair Value Measurements: Tables 13.3 and 13.4 present, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended March 31, 2017 and December 31, 2016 (in thousands). The FHLBank measures certain held-to-maturity securities at fair value on a nonrecurring basis due to the recognition of a credit loss. For held-to-maturity securities that had credit impairment recorded during a period for which no total impairment was recorded (the full amount of additional credit impairment was a reclassification from non-credit impairment previously recorded in AOCI), these securities were recorded at their carrying values and not fair value. The FHLBank measures certain impaired mortgage loans held for portfolio at fair value on a nonrecurring basis when, upon individual evaluation for impairment, the estimated fair value less costs to sell is lower than the recorded investment. REO is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount. Table 13.3 03/31/2017 Total Level 1 Level 2 Level 3 Netting Adjustment and Cash Collateral 1 Recurring fair value measurements - Assets: Trading securities: Certificates of deposit $ 200,006 $ — $ 200,006 $ — $ — GSE obligations 2 $ 1,564,310 $ — $ 1,564,310 $ — $ — U.S. obligation MBS 3 665 — 665 — — GSE MBS 4 937,335 — 937,335 — — Total trading securities 2,702,316 — 2,702,316 — — Available-for-sale securities: GSE MBS 5 1,124,924 — 1,124,924 — — Total available-for-sale securities 1,124,924 — 1,124,924 — — Derivative assets: Interest-rate related 51,631 — 80,292 — (28,661 ) Mortgage delivery commitments 367 — 367 — — Total derivative assets 51,998 — 80,659 — (28,661 ) TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS $ 3,879,238 $ — $ 3,907,899 $ — $ (28,661 ) Recurring fair value measurements - Liabilities: Derivative liabilities: Interest-rate related $ 2,603 $ — $ 80,928 $ — $ (78,325 ) Mortgage delivery commitments 62 — 62 — — Total derivative liabilities 2,665 — 80,990 — (78,325 ) TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES $ 2,665 $ — $ 80,990 $ — $ (78,325 ) Nonrecurring fair value measurements - Assets 6 : Held-to-maturity securities: Private-label residential MBS $ 631 $ — $ — $ 631 $ — Impaired mortgage loans 1,769 — — 1,769 — Real estate owned 471 — — 471 — TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS $ 2,871 $ — $ — $ 2,871 $ — 1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also derivative cash collateral, related accrued interest held or placed with the same clearing agent or derivative counterparty, and variation margin for daily settled contracts . 2 Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit and Farmer Mac. GSE securities are not guaranteed by the U.S. government. 3 Represents single-family MBS issued by Ginnie Mae, which are guaranteed by the U.S. government. 4 Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac. 5 Represents multi-family MBS issued by Fannie Mae. 6 Includes assets adjusted to fair value during the three months ended March 31, 2017 and still outstanding as of March 31, 2017 . Table 13.4 12/31/2016 Total Level 1 Level 2 Level 3 Netting Adjustment and Cash Collateral 1 Recurring fair value measurements - Assets: Trading securities: GSE obligations 2 $ 1,563,351 $ — $ 1,563,351 $ — $ — U.S. obligation MBS 3 690 — 690 — — GSE MBS 4 938,747 — 938,747 — — Total trading securities 2,502,788 — 2,502,788 — — Available-for-sale securities: GSE MBS 5 1,091,721 — 1,091,721 — — Total available-for-sale securities 1,091,721 — 1,091,721 — — Derivative assets: Interest-rate related 60,686 — 76,191 — (15,505 ) Mortgage delivery commitments 214 — 214 — — Total derivative assets 60,900 — 76,405 — (15,505 ) TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS $ 3,655,409 $ — $ 3,670,914 $ — $ (15,505 ) Recurring fair value measurements - Liabilities: Derivative liabilities: Interest-rate related $ 6,799 $ — $ 106,295 $ — $ (99,496 ) Mortgage delivery commitments 372 — 372 — — Total derivative liabilities 7,171 — 106,667 — (99,496 ) TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES $ 7,171 $ — $ 106,667 $ — $ (99,496 ) Nonrecurring fair value measurements - Assets 6 : Held-to-maturity securities: Private-label residential MBS $ 4,781 $ — $ — $ 4,781 $ — Impaired mortgage loans 1,205 $ 1,205 Real estate owned 1,086 — — 1,086 — TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS $ 7,072 $ — $ — $ 7,072 $ — 1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty. 2 Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac and Farm Credit. GSE securities are not guaranteed by the U.S. government. 3 Represents single-family MBS issued by Ginnie Mae, which are guaranteed by the U.S. government. 4 Represents single-family and multi-family MBS issued by Fannie Mae and Freddie Mac. 5 Represents multi-family MBS issued by Fannie Mae. 6 Includes assets adjusted to fair value during the year ended December 31, 2016 and still outstanding as of December 31, 2016 . |