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EX-32 - EXHIBIT 32 - Federal Home Loan Bank of Indianapolisex32section1350certificati.htm
EX-31.3 - EXHIBIT 31.3 - Federal Home Loan Bank of Indianapolisex313september302016.htm
EX-31.2 - EXHIBIT 31.2 - Federal Home Loan Bank of Indianapolisex312september302016.htm
EX-31.1 - EXHIBIT 31.1 - Federal Home Loan Bank of Indianapolisex311september302016.htm


 
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, 2016

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 corporation
(State or other jurisdiction of incorporation or organization)
 
35-6001443
(I.R.S. employer identification number)
8250 Woodfield Crossing Boulevard
Indianapolis, IN
(Address of principal executive offices)
 
46240
(Zip code)
(317) 465-0200
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing 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. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
o  Large accelerated filer
o  Accelerated filer
x Non-accelerated filer (Do not check if a smaller reporting company)
o  Smaller reporting company

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, 2016

Class B Stock, par value $100
16,198,619




Table of Contents
Page
 
 
Number
 
Special Note Regarding Forward-Looking Statements
PART I.
FINANCIAL INFORMATION
 
Item 1.
FINANCIAL STATEMENTS (unaudited)
 
 
 
 
 
Statements of Condition as of September 30, 2016 and December 31, 2015
 
 
 
 
Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
 
 
 
Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
 
 
 
Statements of Capital for the Nine Months Ended September 30, 2015 and 2016
 
 
 
 
Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015
 
 
 
 
Notes to Financial Statements:
 
 
Note 1 - Summary of Significant Accounting Policies and Change in Accounting Principle
 
Note 2 - Recently Adopted and Issued Accounting Guidance
 
Note 3 - Available-for-Sale Securities
 
Note 4 - Held-to-Maturity Securities
 
Note 5 - Other-Than-Temporary Impairment
 
Note 6 - Advances
 
Note 7 - Mortgage Loans Held for Portfolio
 
Note 8 - Allowance for Credit Losses
 
Note 9 - Derivatives and Hedging Activities
 
Note 10 - Consolidated Obligations
 
Note 11 - Affordable Housing Program
 
Note 12 - Capital
 
Note 13 - Accumulated Other Comprehensive Income
 
Note 14 - Segment Information
 
Note 15 - Estimated Fair Values
 
Note 16 - Commitments and Contingencies
 
Note 17 - Transactions with Related Parties and Other Entities
 
 
 
 
GLOSSARY OF 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 Arrangements
 
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 6.
EXHIBITS




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 other factors, resulting from the effects of, and changes in, various monetary or fiscal policies and regulations, including those determined by the FRB 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;
demand for our advances and purchases of mortgage loans resulting from:
changes in our members' deposit flows and credit demands;
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 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 legislative, regulatory, or other developments, and judicial rulings that affect us, our status as a secured creditor, our members (or certain classes of members or their affiliates), prospective members, counterparties, one or more of the FHLBanks and/or investors in the consolidated obligations of the FHLBanks;
ability to access the capital markets and raise capital market funding at 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 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 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,
2016
 
December 31,
2015
Assets:
 
 
 
Cash and due from banks
$
658,314

 
$
4,931,602

Interest-bearing deposits
155,359

 
161

Securities purchased under agreements to resell
2,250,000

 

Federal funds sold
1,450,000

 

Available-for-sale securities (Notes 3 and 5)
6,349,317

 
4,069,149

Held-to-maturity securities (estimated fair values of $6,072,716 and $6,405,865, respectively) (Notes 4 and 5)
6,000,371

 
6,345,337

Advances (Note 6)
26,473,137

 
26,908,908

Mortgage loans held for portfolio, net of allowance for loan losses of $(850) and $(1,125), respectively (Notes 7 and 8)
9,269,930

 
8,145,790

Accrued interest receivable
94,380

 
88,377

Premises, software, and equipment, net
36,995

 
38,501

Derivative assets, net (Note 9)
140,239

 
49,867

Other assets
31,227

 
30,412

 
 
 
 
Total assets
$
52,909,269

 
$
50,608,104

 
 
 
 
Liabilities:
 

 
 
Deposits
$
578,232

 
$
556,764

Consolidated obligations (Note 10):
 

 
 
Discount notes
16,392,571

 
19,251,376

Bonds
32,740,146

 
27,861,617

Total consolidated obligations, net
49,132,717

 
47,112,993

Accrued interest payable
90,595

 
81,836

Affordable Housing Program payable (Note 11)
23,669

 
31,103

Derivative liabilities, net (Note 9)
94,250

 
80,614

Mandatorily redeemable capital stock (Note 12)
179,219

 
14,063

Other liabilities
470,722

 
344,934

Total liabilities
50,569,404

 
48,222,307

 
 
 
 
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: 14,354,794 and 15,277,692, respectively
1,435,480

 
1,527,769

Class B-2 issued and outstanding shares: 22,843 and 371, respectively
2,284

 
37

     Total capital stock
1,437,764

 
1,527,806

Retained earnings:
 
 
 
Unrestricted
717,694

 
705,449

Restricted
144,199

 
129,664

Total retained earnings
861,893

 
835,113

Total accumulated other comprehensive income (Note 13)
40,208

 
22,878

Total capital
2,339,865

 
2,385,797

 
 
 
 
Total liabilities and capital
$
52,909,269

 
$
50,608,104


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

2



Federal Home Loan Bank of Indianapolis
Statements of Income
(Unaudited, $ amounts in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Interest Income:
 
 
 
 
 
 
 
Advances
$
55,487

 
$
32,584

 
$
155,243

 
$
90,263

Prepayment fees on advances, net
6

 
7

 
205

 
299

Interest-bearing deposits
252

 
51

 
650

 
158

Securities purchased under agreements to resell
2,769

 
468

 
4,992

 
935

Federal funds sold
1,655

 
718

 
7,165

 
1,882

Available-for-sale securities
18,218

 
8,556

 
47,997

 
23,382

Held-to-maturity securities
30,638

 
28,353

 
84,427

 
87,100

Mortgage loans held for portfolio
67,994

 
68,676

 
205,165

 
195,076

Other interest income, net
434

 
(784
)
 
1,171

 
(739
)
Total interest income
177,453


138,629

 
507,015


398,356

 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
Consolidated obligation discount notes
16,485

 
4,834

 
47,588

 
11,307

Consolidated obligation bonds
109,368

 
85,536

 
309,767

 
242,455

Deposits
190

 
20

 
412

 
62

Mandatorily redeemable capital stock
1,880

 
135

 
4,748

 
391

Total interest expense
127,923

 
90,525

 
362,515

 
254,215

 
 
 
 
 
 
 
 
Net interest income
49,530

 
48,104

 
144,500

 
144,141

Provision for (reversal of) credit losses
85

 
(180
)
 
(132
)
 
(568
)
 
 
 
 
 
 
 
 
Net interest income after provision for credit losses
49,445

 
48,284

 
144,632

 
144,709

 
 
 
 
 
 
 
 
Other Income (Loss):
 
 
 
 
 
 
 
Total other-than-temporary impairment losses

 

 

 

Non-credit portion reclassified to (from) other comprehensive
income, net
(75
)
 
(29
)
 
(168
)
 
(61
)
Net other-than-temporary impairment losses, credit portion
(75
)
 
(29
)
 
(168
)
 
(61
)
Net gains (losses) on derivatives and hedging activities
(4,826
)
 
(659
)
 
(9,716
)
 
4,724

Service fees
227

 
256

 
970

 
644

Standby letters of credit fees
165

 
162

 
570

 
501

Other, net (Note 16)
339

 
308

 
1,089

 
5,747

Total other income (loss)
(4,170
)
 
38

 
(7,255
)
 
11,555

 
 
 
 
 
 
 
 
Other Expenses:
 
 
 
 
 
 
 
Compensation and benefits
11,274

 
10,181

 
33,195

 
31,879

Other operating expenses
6,307

 
5,493

 
17,643

 
16,126

Federal Housing Finance Agency
661

 
595

 
2,110

 
1,905

Office of Finance
785

 
621

 
2,373

 
2,271

Other
272

 
350

 
778

 
1,090

Total other expenses
19,299

 
17,240

 
56,099

 
53,271

 
 
 
 
 
 
 
 
Income before assessments
25,976

 
31,082

 
81,278

 
102,993

 
 
 
 
 
 
 
 
Affordable Housing Program assessments
2,786

 
3,121

 
8,603

 
10,338

 
 
 
 
 
 
 
 
Net income
$
23,190

 
$
27,961

 
$
72,675

 
$
92,655


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

3



Federal Home Loan Bank of Indianapolis
Statements of Comprehensive Income
(Unaudited, $ amounts in thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income
$
23,190

 
$
27,961

 
$
72,675

 
$
92,655

 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Net change in unrealized gains (losses) on available-for-sale securities
24,784

 
(13,280
)
 
23,878

 
(14,684
)
 
 
 
 
 
 
 
 
Non-credit portion of other-than-temporary impairment losses on available-for-sale securities:
 
 
 
 
 
 
 
Reclassification of non-credit portion to other income (loss)
75

 
29

 
168

 
61

Net change in fair value not in excess of cumulative non-credit losses
(131
)
 
(86
)
 
(79
)
 
(192
)
Unrealized gains (losses)
564

 
(2,615
)
 
(5,733
)
 
(4,146
)
Net non-credit portion of other-than-temporary impairment losses on available-for-sale securities
508

 
(2,672
)
 
(5,644
)
 
(4,277
)
 
 
 
 
 
 
 
 
Non-credit portion of other-than-temporary impairment losses on held-to-maturity securities:
 
 
 
 
 
 
 
Accretion of non-credit portion
6

 
9

 
22

 
33

Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities
6

 
9

 
22

 
33

 
 
 
 
 
 
 
 
Pension benefits, net
(310
)
 
(413
)
 
(926
)
 
(1,240
)
 
 
 
 
 
 
 
 
Total other comprehensive income (loss)
24,988


(16,356
)

17,330

 
(20,168
)
 
 
 
 
 
 
 
 
Total comprehensive income
$
48,178

 
$
11,605

 
$
90,005

 
$
72,487



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

4



Federal Home Loan Bank of Indianapolis
Statements of Capital
Nine Months Ended September 30, 2015 and 2016
(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, 2014
 
15,510

 
$
1,550,981

 
$
672,159

 
$
105,470

 
$
777,629

 
$
46,660

 
$
2,375,270

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total comprehensive income
 
 
 
 
 
74,124

 
18,531

 
92,655

 
(20,168
)
 
72,487

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of capital stock
 
1,423

 
142,347

 
 
 
 
 
 
 
 
 
142,347

Repurchase/redemption of capital stock
 
(2,403
)
 
(240,335
)
 
 
 
 
 
 
 
 
 
(240,335
)
Cash dividends on capital stock
(4.08% annualized)
 
 
 
 
 
(48,307
)
 

 
(48,307
)
 
 
 
(48,307
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2015
 
14,530

 
$
1,452,993

 
$
697,976

 
$
124,001

 
$
821,977

 
$
26,492

 
$
2,301,462

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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




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

5



Federal Home Loan Bank of Indianapolis
Statements of Cash Flows
(Unaudited, $ amounts in thousands)
 
Nine Months Ended September 30,
 
2016
 
2015
Operating Activities:
 
 
 
Net income
$
72,675

 
$
92,655

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization and depreciation
42,947

 
41,702

Prepayment fees on advances, net of related swap termination fees
(526
)
 
(1,862
)
Changes in net derivative and hedging activities
30,601

 
35,970

Net other-than-temporary impairment losses, credit portion
168

 
61

Provision for (reversal of) credit losses
(132
)
 
(568
)
Changes in:
 
 
 
Accrued interest receivable
(6,133
)
 
(3,197
)
Other assets
652

 
(3,331
)
Accrued interest payable
8,759

 
6,645

Other liabilities
23,258

 
24,809

Total adjustments, net
99,594

 
100,229

 
 
 
 
Net cash provided by operating activities
172,269

 
192,884

 
 
 
 
Investing Activities:
 
 


Net changes in:
 
 
 
Interest-bearing deposits
(335,205
)
 
(21,831
)
Securities purchased under agreements to resell
(2,250,000
)
 
(750,000
)
Federal funds sold
(1,450,000
)
 
(270,000
)
Available-for-sale securities:
 
 
 
Proceeds from maturities
641,054

 
60,350

Purchases
(2,643,720
)
 
(79,866
)
Held-to-maturity securities:
 
 
 
Proceeds from maturities
1,035,530

 
1,144,000

Purchases
(845,844
)
 
(316,868
)
Advances:
 
 
 
Principal repayments
106,942,904

 
65,787,838

Disbursements to members
(106,464,271
)
 
(69,257,792
)
Mortgage loans held for portfolio:
 
 
 
Principal collections
1,202,287

 
1,027,539

Purchases from members
(2,307,678
)
 
(2,306,586
)
Purchases of premises, software, and equipment
(2,830
)
 
(3,248
)
 
 
 
 
Net cash used in investing activities
(6,477,773
)
 
(4,986,464
)
 


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

6



Federal Home Loan Bank of Indianapolis
Statements of Cash Flows, continued
(Unaudited, $ amounts in thousands)
 
Nine Months Ended September 30,
 
2016
 
2015
Financing Activities:
 
 
 
Changes in deposits
20,808

 
(336,453
)
Net payments on derivative contracts with financing elements
(28,417
)
 
(45,278
)
Net proceeds from issuance of consolidated obligations:
 
 
 
Discount notes
273,582,542

 
58,752,115

Bonds
26,104,166

 
17,396,692

Payments for matured and retired consolidated obligations:
 
 
 
Discount notes
(276,449,167
)
 
(56,898,077
)
Bonds
(21,226,935
)
 
(14,047,300
)
Proceeds from issuance of capital stock
93,014

 
142,347

Payments for redemption/repurchase of mandatorily redeemable capital stock
(18,972
)
 
(1,489
)
Payments for redemption/repurchase of capital stock

 
(240,335
)
Dividend payments on capital stock
(44,823
)
 
(48,307
)
 
 
 
 
Net cash provided by financing activities
2,032,216

 
4,673,915

 
 
 
 
Net increase (decrease) in cash and due from banks
(4,273,288
)
 
(119,665
)
 
 
 
 
Cash and due from banks at beginning of period
4,931,602

 
3,550,939

 
 
 
 
Cash and due from banks at end of period
$
658,314

 
$
3,431,274

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest payments
$
302,462

 
$
234,740

Purchases of securities, traded but not yet settled
230,700

 

Affordable Housing Program payments
16,037

 
14,254

Capitalized interest on certain held-to-maturity securities
875

 
1,245

Par value of shares reclassified to mandatorily redeemable capital stock, net
183,056

 

 

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

7



Federal Home Loan Bank of Indianapolis
Notes to Financial Statements
(Unaudited, $ amounts in thousands unless otherwise indicated)


Note 1 - Summary of Significant Accounting Policies and Change in Accounting Principle

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 "we," "us," and "our" refer to the Federal Home Loan Bank of Indianapolis or its management.

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. These interim financial statements should be read in conjunction with our audited financial statements and notes thereto, which are included in our 2015 Form 10-K.

The financial statements contain all adjustments that are, in the opinion of management, necessary for a fair statement of our 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 forth in Note 1 - Summary of Significant Accounting Policies in our 2015 Form 10-K. There have been no significant changes to these policies through September 30, 2016, with the exception of the change in accounting principle.

Change in Accounting Principle. On April 7, 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance requires a reclassification on the statement of condition of unamortized debt issuance costs related to a recognized debt liability from assets to a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

The guidance became effective for the interim and annual periods beginning on January 1, 2016 and was adopted retrospectively. As a result, unamortized concessions on consolidated obligations that were included in other assets at December 31, 2015 were reclassified as a reduction to the corresponding consolidated obligations. The reclassification resulted in a reduction in consolidated obligation discount notes of $920 and consolidated obligation bonds of $11,113 at December 31, 2015. Accordingly, total assets and total liabilities were each reduced at December 31, 2015 by $12,033. The adoption of this guidance did not have any effect on our results of operations or cash flows.
 
 
 
 
 
 
 
Use of 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.

Reclassifications. We have reclassified certain amounts from the prior period to conform to the current period presentation. These reclassifications had no effect on net income, total comprehensive income, total capital, or net cash flows.





Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


Note 2 - Recently Adopted and Issued Accounting Guidance

Recently Adopted Accounting Guidance.

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. On March 10, 2016, the FASB issued amendments to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under GAAP does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met.

This guidance becomes effective for the interim and annual periods beginning on January 1, 2017, and early adoption is permitted. The amendments provide entities with the option to apply the guidance using either a prospective approach or a modified retrospective approach to all derivative instruments that meet the specific conditions. We elected to early adopt the guidance prospectively on January 1, 2016. The adoption of this guidance had no effect on our financial condition, results of operations, or cash flows.

Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. On April 15, 2015, the FASB issued amendments to clarify a customer's accounting for fees paid in a cloud computing arrangement. The amendments provide guidance to customers on determining whether a cloud computing arrangement includes a software license. If the arrangement contains a software license, the license element of the arrangement should be accounted for as internal-use software; otherwise, the arrangement should be accounted for as a service contract.

The guidance became effective for the interim and annual periods beginning on January 1, 2016 and was adopted prospectively. The adoption of this guidance had no effect on our financial condition, results of operations, or cash flows.

Amendments to the Consolidation Analysis. On February 18, 2015, the FASB issued amended guidance to enhance the consolidation analysis for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and MBS transactions). The new guidance primarily emphasizes: (i) risk of loss when determining a controlling financial interest, such that a reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement when certain criteria are met; (ii) reducing the frequency of the application of related-party guidance when determining a controlling interest in a VIE; and (iii) potentially changing consolidation exclusions for entities in several industries that typically make use of limited partnerships or VIEs.

The guidance became effective for the interim and annual periods beginning on January 1, 2016 and was adopted prospectively. The adoption of this guidance had no effect on our financial condition, results of operations, or cash flows.

Recently Issued Accounting Guidance.

Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued amendments to clarify 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.
This guidance is effective for interim and annual periods beginning on January 1, 2018, and early adoption is permitted. This guidance should be applied using a retrospective transition method to each period presented. We are in the process of evaluating this guidance. Although the adoption of this guidance will have no effect on our financial condition or results of operations, its effect on the statement of cash flows has not yet been determined.
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. The amendments require entities to measure expected losses instead of incurred losses. Such measurement must be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.





Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


The new guidance requires a financial asset, or a group of financial assets, measured at amortized cost basis to be presented at the net amount expected to be collected over the contractual term of the financial asset. The guidance also requires, among other provisions, the following:

The statement of income must reflect the measurement of credit losses for newly recognized financial assets, as well as the increases or decreases in expected credit losses that have taken place during the period;    
Entities must determine the allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination in a manner similar to other financial assets measured at amortized cost. The initial allowance for credit losses is required to be added to the purchase price;
Entities must record credit losses relating to AFS debt securities through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost; and
Public entities must further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).

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. This guidance should be applied using a modified-retrospective approach whereby a cumulative-effect adjustment is recorded to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In addition, the guidance requires the use of a prospective transition approach for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and for debt securities for which OTTI had been recognized before the effective date. 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.

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 guidance requires 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.

This guidance becomes effective for the interim and annual periods beginning on January 1, 2017, and early adoption is permitted. The guidance should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the period for which the amendments are adopted. 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.

Revenue from Contracts with Customers. On May 28, 2014, the FASB issued new guidance on revenue from contracts with customers. This guidance outlines a comprehensive model for recognizing revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer. This guidance applies to all contracts with customers except those that are within the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, or lease contracts. The guidance provides entities with the option of using either of the following two methods upon adoption: (i) a full retrospective method, applied to each prior reporting period presented; or (ii) a modified retrospective method, with the cumulative effect of initially applying this guidance recognized at the date of initial adoption.

On August 12, 2015, the FASB issued an amendment to defer the effective date of the guidance by one year. In 2016, the FASB has issued additional amendments to clarify certain aspects of the guidance; however, the amendments do not change the core principle in the guidance.

The guidance is effective for interim and annual periods beginning on January 1, 2018. Early adoption is permitted only as of the interim and annual reporting periods beginning after January 1, 2017. We are in the process of evaluating this guidance, but its effect on our financial condition, results of operations, and cash flows is not expected to be material.




Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


Note 3 - Available-for-Sale Securities

Major Security Types. The following table presents our AFS securities by type of security.
 
 
 
 
 
 
Gross
 
Gross
 
 
 
 
Amortized
 
Non-Credit
 
Unrealized
 
Unrealized
 
Estimated
September 30, 2016
 
Cost (1)
 
OTTI
 
Gains
 
Losses
 
Fair Value
GSE and TVA debentures
 
$
5,065,910

 
$

 
$
17,906

 
$
(6,042
)
 
$
5,077,774

GSE MBS
 
979,749

 

 
12,603

 
(492
)
 
991,860

Private-label RMBS
 
255,098

 
(215
)
 
24,800

 

 
279,683

Total AFS securities
 
$
6,300,757

 
$
(215
)
 
$
55,309

 
$
(6,534
)
 
$
6,349,317

 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
GSE and TVA debentures
 
$
3,478,617

 
$

 
$
5,467

 
$
(3,542
)
 
$
3,480,542

GSE MBS
 
271,249

 

 
477

 
(2,305
)
 
269,421

Private-label RMBS
 
288,957

 
(304
)
 
30,533

 

 
319,186

Total AFS securities
 
$
4,038,823

 
$
(304
)
 
$
36,477

 
$
(5,847
)
 
$
4,069,149


(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.

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, 2016
 
Fair Value
 
Losses
 
Fair Value
 
Losses
 
Fair Value
 
Losses
GSE and TVA debentures
 
$
1,005,402

 
$
(5,018
)
 
$
180,075

 
$
(1,024
)
 
$
1,185,477

 
$
(6,042
)
GSE MBS
 

 

 
83,648

 
(492
)
 
83,648

 
(492
)
Private-label RMBS
 

 

 
3,353

 
(215
)
 
3,353

 
(215
)
Total impaired AFS securities
 
$
1,005,402

 
$
(5,018
)
 
$
267,076

 
$
(1,731
)
 
$
1,272,478

 
$
(6,749
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
GSE and TVA debentures
 
$
578,809

 
$
(2,774
)
 
$
107,349

 
$
(768
)
 
$
686,158

 
$
(3,542
)
GSE MBS
 
183,508

 
(2,305
)
 

 

 
183,508

 
(2,305
)
Private-label RMBS
 

 

 
4,179

 
(304
)
 
4,179

 
(304
)
Total impaired AFS securities
 
$
762,317


$
(5,079
)

$
111,528


$
(1,072
)

$
873,845


$
(6,151
)

Contractual Maturity. The amortized cost and estimated fair value of non-MBS AFS securities by contractual maturity are presented below. MBS are not presented by contractual maturity because their actual maturities will likely differ from contractual maturities as borrowers have the right to prepay their obligations with or without prepayment fees.
 
 
September 30, 2016
 
December 31, 2015
 
 
Amortized
 
Estimated
 
Amortized
 
Estimated
Year of Contractual Maturity
 
Cost
 
Fair Value
 
Cost
 
Fair Value
Due in 1 year or less
 
$
1,095,395

 
$
1,097,760

 
$
820,210

 
$
821,413

Due after 1 year through 5 years
 
1,973,214

 
1,982,605

 
1,921,544

 
1,924,567

Due after 5 years through 10 years
 
1,755,805

 
1,758,956

 
637,007

 
635,356

Due after 10 years
 
241,496

 
238,453

 
99,856

 
99,206

Total non-MBS
 
5,065,910

 
5,077,774

 
3,478,617

 
3,480,542

Total MBS
 
1,234,847

 
1,271,543

 
560,206

 
588,607

Total AFS securities
 
$
6,300,757

 
$
6,349,317

 
$
4,038,823

 
$
4,069,149






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, 2016 or 2015. As of September 30, 2016, 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.

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, 2016
 
Cost (1)
 
OTTI
 
Value
 
Gains
 
Losses
 
 Fair Value
MBS and ABS:
 
 
 
 
 
 
 
 
 
 
 
 
Other U.S. obligations -guaranteed MBS
 
$
2,765,248

 
$

 
$
2,765,248

 
$
8,589

 
$
(10,573
)
 
$
2,763,264

GSE MBS
 
3,171,926

 

 
3,171,926

 
77,872

 
(2,210
)
 
3,247,588

Private-label RMBS
 
53,831

 

 
53,831

 
33

 
(441
)
 
53,423

Private-label ABS
 
9,476

 
(110
)
 
9,366

 
34

 
(959
)
 
8,441

Total MBS and ABS
 
6,000,481

 
(110
)
 
6,000,371

 
86,528

 
(14,183
)
 
6,072,716

 
 
 
 
 
 
 
 
 
 
 
 
 
Total HTM securities
 
$
6,000,481

 
$
(110
)
 
$
6,000,371

 
$
86,528

 
$
(14,183
)
 
$
6,072,716

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
GSE debentures
 
$
100,000

 
$

 
$
100,000

 
$
2

 
$

 
$
100,002

MBS and ABS:
 
 
 
 
 
 
 
 
 
 
 
 
Other U.S. obligations -guaranteed MBS
 
2,894,867

 

 
2,894,867

 
13,113

 
(12,148
)
 
2,895,832

GSE MBS
 
3,267,647

 

 
3,267,647

 
63,687

 
(2,333
)
 
3,329,001

Private-label RMBS
 
72,107

 

 
72,107

 
116

 
(939
)
 
71,284

Private-label ABS
 
10,848

 
(132
)
 
10,716

 
61

 
(1,031
)
 
9,746

Total MBS and ABS
 
6,245,469

 
(132
)
 
6,245,337

 
76,977

 
(16,451
)
 
6,305,863

 
 
 
 
 
 
 
 
 
 
 
 
 
Total HTM securities
 
$
6,345,469

 
$
(132
)
 
$
6,345,337

 
$
76,979

 
$
(16,451
)
 
$
6,405,865


(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).





Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


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.
 
 
Less than 12 months
 
12 months or more
 
Total
 
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
 
Estimated
 
Unrealized
September 30, 2016
 
Fair Value
 
Losses
 
Fair Value
 
Losses
 
Fair Value
 
Losses (1)
MBS and ABS:
 
 
 
 
 
 
 
 
 
 
 
 
Other U.S. obligations - guaranteed MBS
 
$
254,215

 
$
(667
)
 
$
1,477,024

 
$
(9,906
)
 
$
1,731,239

 
$
(10,573
)
GSE MBS
 
896,530

 
(1,431
)
 
218,277

 
(779
)
 
1,114,807

 
(2,210
)
Private-label RMBS
 
20,106

 
(37
)
 
17,480

 
(404
)
 
37,586

 
(441
)
Private-label ABS
 

 

 
8,440

 
(1,035
)
 
8,440

 
(1,035
)
Total MBS and ABS
 
1,170,851

 
(2,135
)
 
1,721,221

 
(12,124
)
 
2,892,072

 
(14,259
)
Total impaired HTM securities
 
$
1,170,851

 
$
(2,135
)
 
$
1,721,221

 
$
(12,124
)
 
$
2,892,072

 
$
(14,259
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
MBS and ABS:
 
 
 
 
 
 
 
 
 
 
 
 
Other U.S. obligations - guaranteed MBS
 
$
1,271,907

 
$
(6,147
)
 
$
603,045

 
$
(6,001
)
 
$
1,874,952

 
$
(12,148
)
GSE MBS
 
566,277

 
(1,744
)
 
224,436

 
(589
)
 
790,713

 
(2,333
)
Private-label RMBS
 
16,206

 
(102
)
 
24,958

 
(837
)
 
41,164

 
(939
)
Private-label ABS
 

 

 
9,746

 
(1,102
)
 
9,746

 
(1,102
)
Total MBS and ABS
 
1,854,390

 
(7,993
)
 
862,185

 
(8,529
)
 
2,716,575

 
(16,522
)
Total impaired HTM securities
 
$
1,854,390

 
$
(7,993
)
 
$
862,185

 
$
(8,529
)
 
$
2,716,575

 
$
(16,522
)

(1) 
For private-label ABS, total unrealized losses do not agree to total gross unrecognized holding losses at September 30, 2016 and December 31, 2015 of $959 and $1,031, respectively. Total unrealized losses include non-credit-related OTTI losses recorded in AOCI of $110 and $132, respectively, and gross unrecognized holding gains on previously OTTI securities of $34 and $61, respectively.

Contractual Maturity. The only non-MBS HTM security held at December 31, 2015 matured in 2016. MBS and ABS are not presented by contractual maturity because their actual maturities will likely differ from contractual maturities as certain borrowers have the right to prepay their obligations with or without prepayment fees.
 
 
 
 
 
 
 
 
 
 
 
 
 
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. 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. If either of these conditions is met, we recognize an OTTI loss in earnings equal to the entire difference between the security's amortized cost and its estimated fair value at the statement of condition date. For those impaired securities that meet neither of these conditions, we perform a cash flow analysis to determine whether we expect to recover the entire amortized cost of the security as described in Note 1 - Summary of Significant Accounting Policies and Note 6 - Other-Than-Temporary Impairment in our 2015 Form 10-K.

OTTI - Significant Inputs. The FHLBanks' OTTI Governance Committee developed a short-term housing price forecast with projected changes ranging from a decrease of 1% to an increase of 10% over a twelve-month period. For the vast majority of housing markets, the changes range from an increase of 3% 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.





Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


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, 2016 on the one security for which an OTTI was determined to have occurred, as well as the related current credit enhancement. Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before we will experience a loss on the security. A credit enhancement percentage of zero reflects a security that has no remaining credit support and is likely to have experienced an actual principal loss. The classification (prime, Alt-A or subprime) is based on the model used to project the cash flows for the security, which may not be the same as the classification by the rating agency at the time of origination.
 
 
Significant Modeling Assumptions
for OTTI private-label RMBS
for the three months ended September 30, 2016
 
Year of Securitization
 
Prepayment Rates
 
Default Rates
 
Loss Severities
 
Current Credit
 Enhancement
Prime - 2006
 
11
%
 
15
%
 
35
%
 
0
%

Results of OTTI Evaluation Process. As a result of our analysis, on one security initially impaired prior to January 1, 2015, OTTI credit losses of $75 and $168 were recognized for the three and nine months ended September 30, 2016, respectively, and OTTI credit losses of $29 and $61 were recognized for the three and nine months ended September 30, 2015, 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.
 
 
 
 
 
 
 
 
 
OTTI 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, 2016 are considered temporary.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 6 - Advances

We had advances outstanding, as presented below by year of contractual maturity, with current interest rates ranging from 0.28% to 7.53%.
 
 
September 30, 2016
 
December 31, 2015
Year of Contractual Maturity
 
Amount
 
WAIR %
 
Amount
 
WAIR %
Overdrawn demand and overnight deposit accounts
 
$

 

 
$
89

 
2.58

Due in 1 year or less
 
10,710,689

 
0.76

 
11,969,004

 
0.63

Due after 1 year through 2 years
 
2,986,418

 
1.79

 
2,678,669

 
1.50

Due after 2 years through 3 years
 
1,885,480

 
1.95

 
2,511,090

 
1.83

Due after 3 years through 4 years
 
2,776,421

 
1.58

 
1,705,052

 
2.44

Due after 4 years through 5 years
 
1,892,448

 
1.48

 
2,638,688

 
1.22

Thereafter
 
6,077,380

 
1.12

 
5,304,876

 
1.30

Total advances, par value
 
26,328,836

 
1.19

 
26,807,468

 
1.13

Fair-value hedging adjustments
 
120,049

 
 

 
69,829

 
 

Unamortized swap termination fees associated with modified advances, net of deferred prepayment fees
 
24,252

 
 

 
31,611

 
 

Total advances
 
$
26,473,137

 
 

 
$
26,908,908

 
 






Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


The following table presents advances by the earlier of the year of contractual maturity 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
 
 
September 30,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
Overdrawn demand and overnight deposit accounts
 
$

 
$
89

 
$

 
$
89

Due in 1 year or less
 
17,027,539

 
17,669,284

 
10,889,189

 
12,224,004

Due after 1 year through 2 years
 
2,686,418

 
2,540,919

 
2,981,418

 
2,601,169

Due after 2 years through 3 years
 
1,825,980

 
2,309,925

 
1,880,480

 
2,491,090

Due after 3 years through 4 years
 
1,802,421

 
1,635,052

 
2,776,421

 
1,700,052

Due after 4 years through 5 years
 
1,220,948

 
1,553,688

 
2,181,448

 
2,635,688

Thereafter
 
1,765,530

 
1,098,511

 
5,619,880

 
5,155,376

Total advances, par value
 
$
26,328,836

 
$
26,807,468

 
$
26,328,836

 
$
26,807,468


Under the Final Membership Rule, captive insurance companies that were admitted as FHLBank members on or after 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 membership terminated by February 19, 2017. Upon termination, all of their outstanding advances shall be repaid. As a result, all of their outstanding advances as of September 30, 2016 totaling $328,500 are due in one year or less.

Credit Risk Exposure and Security Terms. At September 30, 2016 and December 31, 2015, we had a total of $14.7 billion and $14.8 billion, respectively, of advances outstanding, at par, to single borrowers with balances that were greater than or equal to $1.0 billion. These advances, representing 56% and 55%, respectively, of total advances at par outstanding on those dates, were made to eight borrowers. At September 30, 2016 and December 31, 2015, we held sufficient collateral to secure the advances to these borrowers.

See Note 8 - Allowance for Credit Losses for information related to credit risk on advances and allowance methodology for credit losses.





Notes to Financial Statements, continued
(Unaudited, $ amounts in thousands unless otherwise indicated)


Note 7 - Mortgage Loans Held for Portfolio

The following tables present information on mortgage loans held for portfolio by term and by type.
Term
 
September 30, 2016
 
December 31, 2015
Fixed-rate long-term mortgages
 
$
7,887,336

 
$
6,811,266

Fixed-rate medium-term (1) mortgages
 
1,169,663

 
1,170,789

Total mortgage loans held for portfolio, UPB
 
9,056,999

 
7,982,055

Unamortized premiums
 
207,333

 
162,875

Unamortized discounts
 
(1,566
)
 
(1,832
)
Fair-value hedging adjustments
 
8,014

 
3,817

Allowance for loan losses
 
(850
)
 
(1,125
)
Total mortgage loans held for portfolio, net
 
$
9,269,930

 
$
8,145,790


(1) 
Defined as a term of 15 years or less at origination.
 
 
 
 
 
 
 
Type
 
September 30, 2016
 
December 31, 2015
Conventional
 
$
8,532,055

 
$
7,371,032

Government -guaranteed or -insured
 
524,944

 
611,023

Total mortgage loans held for portfolio, UPB
 
$
9,056,999

 
$
7,982,055

Product
 
September 30, 2016
 
December 31, 2015
MPP
 
$
8,673,185

 
$
7,543,183

MPF
 
383,814

 
438,872

Total mortgage loans held for portfolio, UPB
 
$
9,056,999

 
$
7,982,055