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EX-32.1 - CERTIFICATION OF CEO AND CFO - Federal Home Loan Bank of Dallasfhlbdallas-93017xex_321.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - Federal Home Loan Bank of Dallasfhlbdallas-93017xex_312.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - Federal Home Loan Bank of Dallasfhlbdallas-93017xex_311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-51405
FEDERAL HOME LOAN BANK OF DALLAS
(Exact name of registrant as specified in its charter)
Federally chartered corporation
(State or other jurisdiction of incorporation
or organization)
 
71-6013989
(I.R.S. Employer
Identification Number)
 
 
 
8500 Freeport Parkway South, Suite 600
Irving, TX
(Address of principal executive offices)
 
75063-2547
(Zip code)
(214) 441-8500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant [1] has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and [2] has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (17 C.F.R. §232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated
filer o
 
Accelerated
filer o
 
Non-accelerated
filer þ
 
Smaller reporting
company o
 
Emerging growth
company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
At October 31, 2017, the registrant had outstanding 22,130,009 shares of its Class B Capital Stock, $100 par value per share.
 



FEDERAL HOME LOAN BANK OF DALLAS
TABLE OF CONTENTS

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




PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CONDITION
(Unaudited; in thousands, except share data)
 
September 30,
2017
 
December 31,
2016
ASSETS
 

 
 

Cash and due from banks
$
147,528

 
$
27,696

Interest-bearing deposits
327

 
255

Securities purchased under agreements to resell (Note 10)
2,300,000

 
3,100,000

Federal funds sold
9,830,000

 
6,242,000

Trading securities (Note 3)
114,547

 
111,638

Available-for-sale securities (Notes 4, 10 and 15) ($565,892 and $613,351 pledged at September 30, 2017 and December 31, 2016, respectively, which could be rehypothecated)
14,978,247

 
13,175,933

Held-to-maturity securities (a) (Note 5)
2,032,355

 
2,499,595

Advances (Notes 6 and 7)
36,287,884

 
32,506,175

Mortgage loans held for portfolio, net of allowance for credit losses of $141 at both
September 30, 2017 and December 31, 2016, respectively (Note 7)
576,806

 
123,961

Loan to other FHLBank (Note 17)

 
290,000

Accrued interest receivable
112,555

 
87,977

Premises and equipment, net
17,353

 
17,972

Derivative assets (Notes 10 and 11)
43,043

 
15,637

Other assets
9,238

 
13,238

TOTAL ASSETS
$
66,449,883

 
$
58,212,077

 
 
 
 
LIABILITIES AND CAPITAL
 
 
 
Deposits
 
 
 
Interest-bearing
$
996,127

 
$
1,040,139

Non-interest bearing
19

 
19

Total deposits
996,146

 
1,040,158

Consolidated obligations (Note 8)
 
 
 
Discount notes
31,438,766

 
26,941,782

Bonds
30,060,229

 
26,997,487

Total consolidated obligations
61,498,995

 
53,939,269

 
 
 
 
Loan from other FHLBank (Note 17)
250,000

 

Mandatorily redeemable capital stock
7,032

 
3,417

Accrued interest payable
67,680

 
43,274

Affordable Housing Program (Note 9)
29,556

 
22,871

Derivative liabilities (Notes 10 and 11)
14,337

 
14,343

Other liabilities (Note 4)
297,552

 
331,403

Total liabilities
63,161,298

 
55,394,735

 
 
 
 
Commitments and contingencies (Notes 7 and 15)


 


 
 
 
 
CAPITAL (Note 12)
 
 
 
Capital stock
 
 
 
Capital stock — Class B-1 putable ($100 par value) issued and outstanding shares: 8,062,143 and 6,904,110 shares at September 30, 2017 and December 31, 2016, respectively
806,214

 
690,411

Capital stock — Class B-2 putable ($100 par value) issued and outstanding shares: 14,006,005 and 12,397,371 shares at September 30, 2017 and December 31, 2016, respectively
1,400,601

 
1,239,737

Total Class B Capital Stock
2,206,815

 
1,930,148

Retained earnings
 
 
 
Unrestricted
818,251

 
745,104

Restricted
102,663

 
78,880

Total retained earnings
920,914

 
823,984

Accumulated other comprehensive income (Note 18)
160,856

 
63,210

Total capital
3,288,585

 
2,817,342

TOTAL LIABILITIES AND CAPITAL
$
66,449,883

 
$
58,212,077

_____________________________
(a) 
Fair values: $2,057,431 and $2,514,512 at September 30, 2017 and December 31, 2016, respectively.
The accompanying notes are an integral part of these financial statements.

1


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

 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
INTEREST INCOME
 
 
 
 
 
 
 
 
Advances
 
$
123,268

 
$
56,830

 
$
294,405

 
$
152,180

Prepayment fees on advances, net
 
366

 
2,160

 
1,310

 
3,502

Interest-bearing deposits
 
697

 
1,012

 
1,635

 
2,531

Securities purchased under agreements to resell
 
1,963

 
2,593

 
3,685

 
4,758

Federal funds sold
 
25,748

 
5,535

 
56,073

 
14,737

Trading securities
 
581

 
579

 
1,729

 
2,336

Available-for-sale securities
 
64,171

 
36,347

 
169,756

 
92,170

Held-to-maturity securities
 
9,557

 
7,393

 
27,220

 
22,721

Mortgage loans held for portfolio
 
4,502

 
813

 
8,462

 
2,377

Total interest income
 
230,853

 
113,262

 
564,275

 
297,312

INTEREST EXPENSE
 
 
 
 
 
 
 
 
Consolidated obligations
 
 
 
 
 
 
 
 
Bonds
 
88,201

 
36,086

 
226,548

 
96,681

Discount notes
 
77,612

 
31,916

 
153,947

 
80,752

Deposits
 
2,463

 
586

 
6,838

 
1,641

Mandatorily redeemable capital stock
 
40

 
6

 
91

 
23

Other borrowings
 
45

 

 
99

 

Total interest expense
 
168,361

 
68,594

 
387,523

 
179,097

NET INTEREST INCOME
 
62,492

 
44,668

 
176,752

 
118,215

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

 

 

 
(310
)
Net non-credit impairment losses on held-to-maturity securities recognized in other comprehensive income
 

 
(8
)
 

 
290

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

 
(8
)
 

 
(20
)
 
 
 
 
 
 
 
 
 
Net gains (losses) on trading securities
 
296

 
(797
)
 
2,344

 
9,133

Net gains (losses) on derivatives and hedging activities
 
345

 
197

 
5,974

 
(20,563
)
Realized gains on sales of held-to-maturity securities
 
2,093

 
65

 
3,983

 
794

Realized gains on sales of available-for-sale securities
 

 
889

 
1,837

 
5,104

Letter of credit fees
 
2,061

 
1,430

 
5,454

 
4,275

Other, net
 
668

 
629

 
2,318

 
1,979

Total other income
 
5,463

 
2,405

 
21,910

 
702

OTHER EXPENSE
 
 
 
 
 
 
 
 
Compensation and benefits
 
12,551

 
14,468

 
38,722

 
38,069

Other operating expenses
 
6,640

 
6,788

 
18,352

 
17,970

Finance Agency
 
834

 
630

 
2,554

 
2,004

Office of Finance
 
1,088

 
842

 
2,693

 
2,322

Discretionary grants and donations
 
2,065

 
592

 
3,277

 
1,541

Derivative clearing fees
 
313

 
280

 
927

 
786

Total other expense
 
23,491

 
23,600

 
66,525

 
62,692

INCOME BEFORE ASSESSMENTS
 
44,464

 
23,473

 
132,137

 
56,225

Affordable Housing Program assessment
 
4,451

 
2,348

 
13,223

 
5,625

NET INCOME
 
$
40,013

 
$
21,125

 
$
118,914

 
$
50,600

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

2


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

 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
NET INCOME
 
$
40,013

 
$
21,125

 
$
118,914

 
$
50,600

OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
Net unrealized gains on available-for-sale securities, net of unrealized gains and losses relating to hedged interest rate risk included in net income
 
27,278

 
97,845

 
101,518

 
92,381

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

 
(889
)
 
(1,837
)
 
(5,104
)
Unrealized gains (losses) on cash flow hedges
 
(917
)
 
2,147

 
(6,668
)
 
(12,980
)
Reclassification adjustment for losses on cash flow hedges included in net income
 
491

 
990

 
1,927

 
2,570

Non-credit portion of other-than-temporary impairment losses on held-to-maturity securities
 

 

 

 
(302
)
Reclassification adjustment for non-credit portion of other-than-temporary impairment losses recognized as credit losses in net income
 

 
8

 

 
12

Accretion of non-credit portion of other-than-temporary impairment losses to the carrying value of held-to-maturity securities
 
822

 
1,076

 
2,752

 
3,505

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

 
5

 
15

 
15

Amortization of net actuarial gain included in net periodic benefit cost
 
(9
)
 
(25
)
 
(61
)
 
(74
)
Total other comprehensive income
 
27,670

 
101,157

 
97,646

 
80,023

TOTAL COMPREHENSIVE INCOME
 
$
67,683

 
$
122,282

 
$
216,560

 
$
130,623


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

3




FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(Unaudited, in thousands)

 
Capital Stock
Class B-1 - Putable
(Membership/Excess)
 
Capital Stock
Class B-2 - Putable
(Activity)
 
 
 
 
 
 
 
Accumulated
 Other
Comprehensive
 Income (Loss)
 
 
 
 
 
Retained Earnings
 
 
Total
 Capital
 
Shares
 
Par Value
 
Shares
 
Par Value
 
Unrestricted
 
Restricted
 
Total
 
 
BALANCE, JANUARY 1, 2017
6,904

 
$
690,411

 
12,397

 
$
1,239,737

 
$
745,104

 
$
78,880

 
$
823,984

 
$
63,210

 
$
2,817,342

Net transfers of shares between Class B-1 and Class B-2 Stock
8,252

 
825,222

 
(8,252
)
 
(825,222
)
 

 

 

 

 

Proceeds from sale of capital stock
72

 
7,225

 
9,984

 
998,353

 

 

 

 

 
1,005,578

Repurchase/redemption of capital stock
(7,303
)
 
(730,329
)
 

 

 

 

 

 

 
(730,329
)
Shares reclassified to mandatorily redeemable capital stock
(79
)
 
(7,963
)
 
(123
)
 
(12,267
)
 

 

 

 

 
(20,230
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 

 
95,131

 
23,783

 
118,914

 

 
118,914

Other comprehensive income

 

 

 

 

 

 

 
97,646

 
97,646

Dividends on capital stock (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 

 

 
(198
)
 

 
(198
)
 

 
(198
)
Mandatorily redeemable capital stock

 

 

 

 
(138
)
 

 
(138
)
 

 
(138
)
Stock
216

 
21,648

 

 

 
(21,648
)
 

 
(21,648
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, SEPTEMBER 30, 2017
8,062

 
$
806,214

 
14,006

 
$
1,400,601

 
$
818,251

 
$
102,663

 
$
920,914

 
$
160,856

 
$
3,288,585

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, JANUARY 1, 2016
6,325

 
$
632,454

 
9,077

 
$
907,678

 
$
699,213

 
$
62,990

 
$
762,203

 
$
(103,023
)
 
$
2,199,312

Net transfers of shares between Class B-1 and Class B-2 Stock
5,734

 
573,408

 
(5,734
)
 
(573,408
)
 

 

 

 

 

Proceeds from sale of capital stock
48

 
4,761

 
8,718

 
871,790

 

 

 

 

 
876,551

Repurchase/redemption of capital stock
(5,486
)
 
(548,550
)
 

 

 

 

 

 

 
(548,550
)
Shares reclassified to mandatorily redeemable capital stock
(1
)
 
(68
)
 

 

 

 

 

 

 
(68
)
Comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Net income

 

 

 

 
40,480

 
10,120

 
50,600

 

 
50,600

Other comprehensive income

 

 

 

 

 

 

 
80,023

 
80,023

Dividends on capital stock (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash

 

 

 

 
(198
)
 

 
(198
)
 

 
(198
)
Mandatorily redeemable capital stock

 

 

 

 
(5
)
 

 
(5
)
 

 
(5
)
Stock
120

 
11,977

 

 

 
(11,977
)
 

 
(11,977
)
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
BALANCE, SEPTEMBER 30, 2016
6,740

 
$
673,982

 
12,061

 
$
1,206,060

 
$
727,513

 
$
73,110

 
$
800,623

 
$
(23,000
)
 
$
2,657,665


(a) Dividends were paid at annualized rates of 0.599 percent and 1.599 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the first quarter of 2017, at 0.83 percent and 1.83 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the second quarter of 2017 and at 1.06 percent and 2.06 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the third quarter of 2017.

(b) Dividends were paid at annualized rates of 0.375 percent and 1.251 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the first quarter of 2016, at 0.431 percent and 1.431 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the second quarter of 2016 and at 0.444 percent and 1.444 percent on Class B-1 Stock and Class B-2 Stock, respectively, in the third quarter of 2016.

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

4


FEDERAL HOME LOAN BANK OF DALLAS
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
For the Nine Months Ended
 
September 30,
 
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net income
$
118,914

 
$
50,600

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
 
 
 
Net premiums and discounts on advances, consolidated obligations, investments and mortgage loans
69,451

 
64,114

Concessions on consolidated obligations
3,233

 
3,633

Premises, equipment and computer software costs
2,770

 
2,944

Non-cash interest on mandatorily redeemable capital stock
61

 
22

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

 
20

Gains on sales of held-to-maturity securities
(3,983
)
 
(794
)
Gains on sales of available-for-sale securities
(1,837
)
 
(5,104
)
Net increase in trading securities
(2,751
)
 
(9,599
)
Loss due to changes in net fair value adjustment on derivative and hedging activities
32,759

 
59,297

Increase in accrued interest receivable
(24,600
)
 
(22,178
)
Decrease (increase) in other assets
4,486

 
(28
)
Increase (decrease) in Affordable Housing Program (AHP) liability
6,685

 
(487
)
Increase (decrease) in accrued interest payable
24,402

 
(2,166
)
Increase in other liabilities
2,246

 
3,486

Total adjustments
112,922

 
93,160

Net cash provided by operating activities
231,836

 
143,760

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Net decrease (increase) in interest-bearing deposits, including swap collateral pledged
80,051

 
(482,108
)
Net decrease (increase) in securities purchased under agreements to resell
800,000

 
(2,250,000
)
Net increase in federal funds sold
(3,588,000
)
 
(4,632,000
)
Decrease in loan to other FHLBank
290,000

 

Decrease in trading securities held for investment

 
102,215

Purchases of available-for-sale securities
(2,380,099
)
 
(5,807,501
)
Proceeds from maturities of available-for-sale securities
412,625

 
37,186

Proceeds from sales of available-for-sale securities
250,262

 
2,655,395

Proceeds from sales of held-to-maturity securities
162,789

 
129,857

Proceeds from maturities of held-to-maturity securities
438,128

 
434,292

Purchases of held-to-maturity securities
(125,000
)
 

Principal collected on advances
408,582,680

 
441,973,938

Advances made
(412,379,559
)
 
(449,027,085
)
Principal collected on mortgage loans held for portfolio
17,268

 
10,643

Purchases of mortgage loans held for portfolio
(468,033
)
 
(25,570
)
Purchases of premises, equipment and computer software
(2,695
)
 
(2,850
)
Net cash used in investing activities
(7,909,583
)
 
(16,883,588
)
 
 
 
 

5


 
For the Nine Months Ended
 
September 30,
 
2017
 
2016
FINANCING ACTIVITIES
 
 
 
Net increase (decrease) in deposits, including swap collateral held
(138,458
)
 
75,481

Net payments on derivative contracts with financing elements
(65,707
)
 
(48,590
)
Increase in loan from other FHLBank
250,000

 

Net proceeds from issuance of consolidated obligations
 

 
 
Discount notes
267,181,998

 
276,563,409

Bonds
16,764,354

 
19,079,312

Debt issuance costs
(3,854
)
 
(3,686
)
Payments for maturing and retiring consolidated obligations
 
 
 
Discount notes
(262,710,106
)
 
(266,023,001
)
Bonds
(13,738,885
)
 
(13,993,680
)
Proceeds from issuance of capital stock
1,005,578

 
876,551

Payments for redemption of mandatorily redeemable capital stock
(16,814
)
 
(6,683
)
Payments for repurchase/redemption of capital stock
(730,329
)
 
(548,550
)
Cash dividends paid
(198
)
 
(198
)
Net cash provided by financing activities
7,797,579

 
15,970,365

 
 
 
 
Net increase (decrease) in cash and cash equivalents
119,832

 
(769,463
)
Cash and cash equivalents at beginning of the period
27,696

 
837,202

Cash and cash equivalents at end of the period
$
147,528

 
$
67,739

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest paid
$
341,792

 
$
160,096

AHP payments, net
$
6,538

 
$
6,112

Stock dividends issued
$
21,648

 
$
11,977

Dividends paid through issuance of mandatorily redeemable capital stock
$
138

 
$
5

Variation margin recharacterized as settlement payments on derivative contracts (Note 10)
$
72,053

 
$

Net capital stock reclassified to mandatorily redeemable capital stock
$
20,230

 
$
68


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

6


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

Note 1—Basis of Presentation
The accompanying interim financial statements of the Federal Home Loan Bank of Dallas (the “Bank”) are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions provided by Article 10, Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. The financial statements contain all adjustments that are, in the opinion of management, necessary for a fair statement of the Bank’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments were of a normal recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.
The Bank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2016. The interim financial statements presented herein should be read in conjunction with the Bank’s audited financial statements and notes thereto, which are included in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 24, 2017 (the “2016 10-K”). The notes to the interim financial statements update and/or highlight significant changes to the notes included in the 2016 10-K.
The Bank is one of 11 district Federal Home Loan Banks, each individually a “FHLBank” and collectively the “FHLBanks,” and, together with the Office of Finance, a joint office of the FHLBanks, the “FHLBank System.” The Office of Finance manages the sale and servicing of the FHLBanks’ consolidated obligations. The Federal Housing Finance Agency (“Finance Agency”), an independent agency in the executive branch of the U.S. government, supervises and regulates the housing government-sponsored enterprises ("GSEs"), including the FHLBanks and the Office of Finance.
     Use of Estimates and Assumptions. The preparation of financial statements in conformity with U.S. GAAP requires management to make assumptions and estimates. These assumptions and estimates may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Significant estimates include the valuations of the Bank’s investment securities, as well as its derivative instruments and any associated hedged items. Actual results could differ from these estimates.

Note 2—Recently Issued Accounting Guidance
Contingent Put and Call Options in Debt Instruments. On March 14, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-06, "Contingent Put and Call Options in Debt Instruments" ("ASU 2016-06"), which clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The guidance requires entities to apply only the four-step decision sequence when assessing whether the economic characteristics and risks of call or put options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call or put option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call or put option is related to interest rates or credit risks. For public business entities, the guidance in ASU 2016-06 is effective for fiscal years beginning after December 15, 2016 (January 1, 2017 for the Bank), and interim periods within those fiscal years. Early adoption is permitted. The guidance is to be applied on a modified retrospective basis to existing debt instruments as of the beginning of the period for which the amendments are effective. The Bank adopted this guidance effective January 1, 2017. The adoption of ASU 2016-06 has not had any impact on the Bank's results of operations or financial condition.
Premium Amortization on Purchased Callable Debt Securities. On March 30, 2017, the FASB issued ASU 2017-08, "Premium Amortization on Purchased Callable Debt Securities" ("ASU 2017-08"), which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. For public business entities, the guidance in ASU 2017-08 is effective for fiscal years beginning after December 15, 2018 (January 1, 2019 for the Bank), and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts ASU 2017-08 in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The guidance is to be applied using a modified retrospective transition approach, with the cumulative-effect adjustment recognized in retained earnings as of the beginning of the period of adoption. The adoption of ASU 2017-08 is not expected to have a material impact on the Bank's results of operations or financial condition.
Derivatives and Hedging. On August 28, 2017, the FASB issued ASU 2017-12, "Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"), which is intended 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,

7


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 other comprehensive income. In addition, the guidance includes certain targeted improvements to the assessment of hedge effectiveness and permits, among other things, the following:
For fair value hedges, 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.
Partial-term fair value hedges of interest-rate risk, in which it can be assumed that the hedged item has a term that reflects only the designated cash flows being hedged.
For prepayable financial instruments, consideration only of how changes in the benchmark interest rate affect a decision to settle a debt instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest rate risk.
For a cash flow hedge of interest-rate risk of a variable-rate financial instrument, designation of the variability in cash flows attributable to the contractually specified interest rate as the hedged risk.
For a closed portfolio of prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, designation of an amount that is not expected to be affected by prepayments, defaults and other events affecting the timing and amount of cash flows as a hedged item.

For public business entities, the guidance in ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 (January 1, 2019 for the Bank), and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts ASU 2017-12 in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The guidance is to be applied to hedging relationships existing at the date of adoption using a modified retrospective transition approach as of the beginning of the year of adoption. For cash flow hedges existing on the date of adoption, the cumulative-effect adjustment is recognized in accumulated other comprehensive income with a corresponding adjustment to retained earnings. The amended presentation and disclosure guidance is required only prospectively. The Bank has not yet determined the effect that the adoption of ASU 2017-12 will have on its results of operations or financial condition.
Note 3—Trading Securities
Trading securities as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
September 30, 2017
 
December 31, 2016
U.S. Treasury Note
$
102,986

 
$
101,495

Other
11,561

 
10,143

Total
$
114,547

 
$
111,638

Other trading securities consist solely of mutual fund investments associated with the Bank's non-qualified deferred compensation plans.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
Note 4—Available-for-Sale Securities
 Major Security Types. Available-for-sale securities as of September 30, 2017 were as follows (in thousands):
 
Amortized
Cost
 
Gross
 Unrealized
 Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
476,655

 
$
8,399

 
$

 
$
485,054

GSE obligations
6,544,363

 
84,444

 
37

 
6,628,770

Other
182,608

 
1,275

 

 
183,883

 
7,203,626

 
94,118

 
37

 
7,297,707

GSE commercial mortgage-backed securities
7,616,353

 
71,528

 
7,341

 
7,680,540

Total
$
14,819,979

 
$
165,646

 
$
7,378

 
$
14,978,247

Included in the table above are GSE commercial mortgage-backed securities ("MBS") that were purchased but which had not yet settled as of September 30, 2017. The aggregate amount due of $261,453,000 is included in other liabilities on the statement of condition at that date.

8


Available-for-sale securities as of December 31, 2016 were as follows (in thousands):
 
Amortized
Cost
 
Gross
 Unrealized
 Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
489,573

 
$
6,325

 
$

 
$
495,898

GSE obligations
6,475,140

 
52,746

 
2,361

 
6,525,525

Other
318,223

 
1,770

 

 
319,993

 
7,282,936

 
60,841

 
2,361

 
7,341,416

GSE commercial MBS
5,834,410

 
32,861

 
32,754

 
5,834,517

Total
$
13,117,346

 
$
93,702

 
$
35,115

 
$
13,175,933

Included in the table above are GSE debentures and GSE commercial MBS that were purchased but which had not yet settled as of December 31, 2016. The aggregate amounts due of $15,000,000 and $282,595,000, respectively, are included in other liabilities on the statement of condition at that date.
Other debentures are comprised of securities issued by the Private Export Funding Corporation ("PEFCO"). These debentures are fully secured by U.S. government-guaranteed obligations and the payment of interest on the debentures is guaranteed by an agency of the U.S. government. The amortized cost of the Bank's available-for-sale securities includes hedging adjustments.
The following table summarizes (in thousands, except number of positions) the available-for-sale securities with unrealized losses as of September 30, 2017. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number
 of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number
 of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number
 of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
GSE debentures
3

 
$
61,779

 
$
37

 

 
$

 
$

 
3

 
$
61,779

 
$
37

GSE commercial MBS
24

 
619,365

 
1,703

 
36

 
1,305,580

 
5,638

 
60

 
1,924,945

 
7,341

Total
27

 
$
681,144

 
$
1,740

 
36

 
$
1,305,580

 
$
5,638

 
63

 
$
1,986,724

 
$
7,378


The following table summarizes (in thousands, except number of positions) the available-for-sale securities with unrealized losses as of December 31, 2016. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
GSE debentures
8

 
$
839,683

 
$
2,293

 
1

 
$
50,476

 
$
68

 
9

 
$
890,159

 
$
2,361

GSE commercial MBS
49

 
1,388,917

 
15,595

 
46

 
1,531,930

 
17,159

 
95

 
2,920,847

 
32,754

Total
57

 
$
2,228,600

 
$
17,888

 
47

 
$
1,582,406

 
$
17,227

 
104

 
$
3,811,006

 
$
35,115


At September 30, 2017, the gross unrealized losses on the Bank’s available-for-sale securities were $7,378,000. All of the Bank's available-for-sale securities are either guaranteed by the U.S. government, issued by GSEs, or fully secured by collateral that is guaranteed by the U.S government. As of September 30, 2017, the U.S. government and the issuers of the Bank’s holdings of GSE debentures and GSE MBS were rated triple-A by Moody’s Investors Service (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”) and AA+ by S&P Global Ratings (“S&P”). The Bank's holdings of PEFCO debentures are rated triple-A by Moody's and Fitch, and are not rated by S&P. Based upon the Bank's assessment of the creditworthiness of the issuers of the GSE debentures and the credit ratings assigned by each of the nationally recognized statistical rating organizations (“NRSROs”), the Bank expects that its holdings of GSE debentures that were in an unrealized loss position at September 30, 2017 would not be settled at an amount less than the Bank's amortized cost bases in these investments. In addition, based upon the Bank's assessment of the strength of the GSEs' guarantees of the Bank's holdings of GSE commercial MBS and the credit ratings assigned by each of the NRSROs, the Bank expects that its holdings of GSE commercial MBS that were in an unrealized loss position at September 30, 2017 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Because the current market value deficits associated with the Bank's available-for-sale securities are not attributable to credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of

9


their amortized cost bases, the Bank does not consider any of these investments to be other-than-temporarily impaired at September 30, 2017.
Redemption Terms. The amortized cost and estimated fair value of available-for-sale securities by contractual maturity at September 30, 2017 and December 31, 2016 are presented below (in thousands).
 
 
 
September 30, 2017
 
December 31, 2016
 
Maturity
 
Amortized Cost
 
Estimated
Fair Value
 
Amortized Cost
 
Estimated
Fair Value
 
 
Debentures
 
 
 
 
 
 
 
 
 
Due in one year or less
 
$
757,337

 
$
757,739

 
$
1,001,054

 
$
1,003,309

 
Due after one year through five years
 
2,827,166

 
2,858,239

 
2,079,374

 
2,100,171

 
Due after five years through ten years
 
3,382,191

 
3,441,560

 
3,989,554

 
4,022,456

 
Due after ten years
 
236,932

 
240,169

 
212,954

 
215,480

 
 
 
7,203,626

 
7,297,707

 
7,282,936

 
7,341,416

 
GSE commercial MBS
 
7,616,353

 
7,680,540

 
5,834,410

 
5,834,517

 
Total
 
$
14,819,979

 
$
14,978,247

 
$
13,117,346

 
$
13,175,933

Interest Rate Payment Terms. At September 30, 2017 and December 31, 2016, all of the Bank's available-for-sale securities were fixed rate securities which were swapped to a variable rate.
Sales of Securities. There were no sales of available-for-sale securities during the three months ended September 30, 2017. During the nine months ended September 30, 2017, the Bank sold available-for-sale securities with an amortized cost (determined by the specific identification method) of $248,425,000. Proceeds from the sales totaled $250,262,000, resulting in realized gains of$1,837,000. During the three and nine months ended September 30, 2016, the Bank sold available-for-sale securities with an amortized cost (determined by the specific identification method) of $200,214,000 and $2,650,291,000, respectively. Proceeds from the sales totaled $201,103,000 and $2,655,395,000, respectively, resulting in realized gains of $889,000 and $5,104,000, respectively.

Note 5—Held-to-Maturity Securities
     Major Security Types. Held-to-maturity securities as of September 30, 2017 were as follows (in thousands):
 
Amortized
Cost
 
OTTI Recorded in
Accumulated Other
Comprehensive
Income
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
11,460

 
$

 
$
11,460

 
$
22

 
$
1

 
$
11,481

State housing agency obligations
160,000

 

 
160,000

 
288

 
182

 
160,106

 
171,460

 

 
171,460

 
310

 
183

 
171,587

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed residential MBS
2,060

 

 
2,060

 
5

 

 
2,065

GSE residential MBS
1,739,123

 

 
1,739,123

 
12,049

 
1,816

 
1,749,356

Non-agency residential MBS
98,852

 
14,405

 
84,447

 
15,731

 
906

 
99,272

GSE commercial MBS
35,265

 

 
35,265

 

 
114

 
35,151

 
1,875,300

 
14,405

 
1,860,895

 
27,785

 
2,836

 
1,885,844

Total
$
2,046,760

 
$
14,405

 
$
2,032,355

 
$
28,095

 
$
3,019

 
$
2,057,431



10


Held-to-maturity securities as of December 31, 2016 were as follows (in thousands):
 
Amortized
Cost
 
OTTI Recorded in
 Accumulated Other
Comprehensive
Income
 
Carrying
Value
 
Gross
Unrecognized
Holding
Gains
 
Gross
Unrecognized
Holding
Losses
 
Estimated
Fair
Value
Debentures
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
$
15,973

 
$

 
$
15,973

 
$
8

 
$
94

 
$
15,887

State housing agency obligations
110,000

 

 
110,000

 
15

 
1,410

 
108,605

 
125,973

 

 
125,973

 
23

 
1,504

 
124,492

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed residential MBS
2,578

 

 
2,578

 
2

 
3

 
2,577

GSE residential MBS
2,211,159

 

 
2,211,159

 
12,086

 
7,914

 
2,215,331

Non-agency residential MBS
115,230

 
17,157

 
98,073

 
14,508

 
2,032

 
110,549

GSE commercial MBS
61,812

 

 
61,812

 

 
249

 
61,563

 
2,390,779

 
17,157

 
2,373,622

 
26,596

 
10,198

 
2,390,020

Total
$
2,516,752

 
$
17,157

 
$
2,499,595

 
$
26,619

 
$
11,702

 
$
2,514,512


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of September 30, 2017. The unrealized losses include other-than-temporary impairments recorded in accumulated other comprehensive income ("AOCI") and gross unrecognized holding losses (or, in the case of the Bank's holdings of non-agency residential MBS, gross unrecognized holding gains) and are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
1

 
$
499

 
$
1

 

 
$

 
$

 
1

 
$
499

 
$
1

State housing agency obligations
1

 
34,818

 
182

 

 

 

 
1

 
34,818

 
182

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential MBS
7

 
10,004

 
27

 
26

 
593,726

 
1,789

 
33

 
603,730

 
1,816

Non-agency residential MBS

 

 

 
17

 
60,931

 
2,925

 
17

 
60,931

 
2,925

GSE commercial MBS

 

 

 
1

 
35,151

 
114

 
1

 
35,151

 
114

Total
9

 
$
45,321

 
$
210

 
44

 
$
689,808

 
$
4,828

 
53

 
$
735,129

 
$
5,038



11


The following table summarizes (in thousands, except number of positions) the held-to-maturity securities with unrealized losses as of December 31, 2016. The unrealized losses include other-than-temporary impairments recorded in AOCI and gross unrecognized holding losses (or, in the case of the Bank's holdings of non-agency residential MBS, gross unrecognized holding gains) and are aggregated by major security type and length of time that individual securities have been in a continuous loss position.
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Debentures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed obligations
2

 
$
10,998

 
$
94

 

 
$

 
$

 
2

 
$
10,998

 
$
94

State housing agency obligations
1

 
33,590

 
1,410

 

 

 

 
1

 
33,590

 
1,410

Mortgage-backed securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government-guaranteed residential MBS
2

 
832

 
3

 

 

 

 
2

 
832

 
3

GSE residential MBS
24

 
513,602

 
1,291

 
33

 
790,653

 
6,623

 
57

 
1,304,255

 
7,914

Non-agency residential MBS
1

 
267

 
2

 
18

 
75,897

 
5,913

 
19

 
76,164

 
5,915

  GSE commercial MBS

 

 

 
3

 
61,563

 
249

 
3

 
61,563

 
249

Total
30

 
$
559,289

 
$
2,800

 
54

 
$
928,113

 
$
12,785

 
84

 
$
1,487,402

 
$
15,585


At September 30, 2017, the gross unrealized losses on the Bank’s held-to-maturity securities were $5,038,000, of which $2,925,000 were attributable to its holdings of non-agency (i.e., private-label) residential MBS, $1,931,000 were attributable to securities that are either guaranteed by the U.S. government or issued and guaranteed by GSEs and $182,000 were attributable to a security issued by a state housing agency.
As of September 30, 2017, the U.S. government and the issuers of the Bank’s holdings of GSE MBS were rated triple-A by Moody’s and Fitch and AA+ by S&P. Based upon the Bank's assessment of the strength of the government guaranty, the Bank expects that the U.S. government-guaranteed obligation that was in an unrealized loss position at September 30, 2017 would not be settled at an amount less than the Bank's amortized cost basis in this investment. In addition, based upon the credit ratings assigned by the NRSROs and the Bank's assessment of the strength of the GSEs’ guarantees of the Bank’s holdings of GSE MBS, the Bank expects that its holdings of GSE MBS that were in an unrealized loss position at September 30, 2017 would not be settled at an amount less than the Bank’s amortized cost bases in these investments. Finally, based upon the Bank's assessment of the creditworthiness of the state housing agency and the triple-A credit ratings assigned by the NRSROs, the Bank expects that the state housing agency debenture that was in an unrealized loss position at September 30, 2017 would not be settled at an amount less than the Bank’s amortized cost basis in this investment. Because the current market value deficits associated with these securities are not attributable to credit quality, and because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost bases, the Bank does not consider any of these investments to be other-than-temporarily impaired at September 30, 2017.
The deterioration in the U.S. housing markets that occurred primarily during the period from 2007 through 2011, as reflected during that period by declines in the values of residential real estate and higher levels of delinquencies, defaults and losses on residential mortgages, including the mortgages underlying the Bank’s non-agency residential MBS (“RMBS”), generally increased the risk that the Bank may not ultimately recover the entire cost bases of some of its non-agency RMBS. However, based upon its analysis of the securities in this portfolio, the Bank believes that the unrealized losses as of September 30, 2017 were principally the result of liquidity risk related discounts in the non-agency RMBS market and do not accurately reflect the currently likely future credit performance of the securities.
Because the ultimate receipt of contractual payments on the Bank’s non-agency RMBS will depend upon the credit and prepayment performance of the underlying loans and the credit enhancements for the senior securities owned by the Bank, the Bank closely monitors these investments in an effort to determine whether the credit enhancement associated with each security is sufficient to protect against potential losses of principal and interest on the underlying mortgage loans. The credit enhancement for each of the Bank’s non-agency RMBS is provided by a senior/subordinate structure, and none of the securities owned by the Bank are insured by third-party bond insurers. More specifically, each of the Bank’s non-agency RMBS represents a single security class within a securitization that has multiple classes of securities. Each security class has a distinct claim on the cash flows from the underlying mortgage loans, with the subordinate securities having a junior claim relative to the more senior securities. The Bank’s non-agency RMBS have a senior claim on the cash flows from the underlying mortgage loans.

12


To assess whether the entire amortized cost bases of its 23 non-agency RMBS holdings are likely to be recovered, the Bank performed a cash flow analysis for each security as of September 30, 2017 using two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank’s securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core based statistical areas (“CBSAs”), which are based upon an assessment of the individual housing markets. (The term “CBSA” refers collectively to metropolitan and micropolitan statistical areas as defined by the U.S. Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area of 10,000 or more people.) The Bank’s housing price forecast as of September 30, 2017 assumed changes in home prices ranging from declines of 6 percent to increases of 13 percent over the 12-month period beginning July 1, 2017. For the vast majority of markets, the changes were projected to range from increases of 1 percent to 6 percent. Thereafter, home price changes for each market were projected to return (at varying rates and over varying transition periods based on historical housing price patterns) to their long-term historical equilibrium levels. Following these transition periods, the constant long-term annual rates of appreciation for the vast majority of markets were projected to range between 2 percent and 5 percent.
The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancement for the senior securities is derived from the presence of subordinate securities, losses are generally allocated first to the subordinate securities until their principal balance is reduced to zero.
Based on the results of its cash flow analyses, the Bank determined it is likely that it will fully recover the remaining amortized cost bases of all of its non-agency RMBS. Because the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their remaining amortized cost bases, none of the Bank's non-agency RMBS were deemed to be other-than-temporarily impaired at September 30, 2017.
During the year ended December 31, 2016, one of the Bank's non-agency RMBS was determined to be other-than-temporarily impaired. In addition, 14 of the Bank's holdings of non-agency RMBS were determined to be other-than-temporarily impaired in periods prior to 2013.
The following table presents a rollforward for the three and nine months ended September 30, 2017 and 2016 of the amount related to credit losses on the Bank’s non-agency RMBS holdings for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (in thousands).
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Balance of credit losses, beginning of period
$
9,961

 
$
11,120

 
$
10,515

 
$
11,696

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

 
8

 

 
20

Increases in cash flows expected to be collected (accreted as interest income over the remaining lives of the applicable securities)
(263
)
 
(313
)
 
(817
)
 
(901
)
Balance of credit losses, end of period
9,698

 
10,815