Federal Home Loan Bank of Atlanta - FORM 10-Q

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EX-32.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq32014ex321.htm
EX-31.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq32014ex311.htm
EX-31.2 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq32014ex312.htm
EXCEL - IDEA: XBRL DOCUMENT - Federal Home Loan Bank of Atlanta	Financial_Report.xls

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 10-Q

_____________________________________



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-51845

_____________________________________

FEDERAL HOME LOAN BANK OF ATLANTA

(Exact name of registrant as specified in its charter)

_____________________________________



Federally chartered corporation		56-6000442
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1475 Peachtree Street, NE, Atlanta, Ga.		30309
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (404) 888-8000

_____________________________________

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. ý Yes ¨ No

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x (Do not check if a smaller reporting company)	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 ý No

The number of shares outstanding of the registrant’s Class B Stock, par value $100, as of October 31, 2014 was 46,847,312.

Table of Contents



PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	STATEMENTS OF CONDITION	3
	STATEMENTS OF INCOME	4
	STATEMENTS OF COMPREHENSIVE INCOME	5
	STATEMENTS OF CAPITAL	6
	STATEMENTS OF CASH FLOWS	7
	NOTES TO FINANCIAL STATEMENTS	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	67
PART II. OTHER INFORMATION		69
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosure	69
Item 5.	Other Information	69
Item 6.	Exhibits	69
SIGNATURES		70

Table of Contents

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CONDITION

(Unaudited)

(In millions, except par value)



	As of September 30, 2014			As of December 31, 2013
Assets
Cash and due from banks	$	4,386		$	4,374
Interest-bearing deposits (including deposits with another FHLBank of $2 and $1 as of September 30, 2014 and December 31, 2013, respectively)	1,010			1,007
Securities purchased under agreements to resell	455			—
Federal funds sold	4,095			1,795
Investment securities:
Trading securities (includes another FHLBank’s bond of $61 and $65 as of September 30, 2014 and December 31, 2013, respectively)	1,428			1,667
Available-for-sale securities	2,073			2,299
Held-to-maturity securities (fair value of $21,141 and $20,146 as of September 30, 2014 and December 31, 2013, respectively)	21,082			20,176
Total investment securities	24,583			24,142
Advances	88,627			89,588
Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio	792			929
Allowance for credit losses on mortgage loans	(4		)	(11		)
Total mortgage loans held for portfolio, net	788			918
Accrued interest receivable	184			199
Derivative assets	118			53
Premises and equipment, net	26			29
Other assets	165			211
Total assets	$	124,437		$	122,316
Liabilities
Interest-bearing deposits	$	1,271		$	1,752
Consolidated obligations, net:
Discount notes	26,055			32,202
Bonds	89,670			80,728
Total consolidated obligations, net	115,725			112,930
Mandatorily redeemable capital stock	19			24
Accrued interest payable	202			183
Affordable Housing Program payable	69			74
Derivative liabilities	180			187
Other liabilities	451			514
Total liabilities	117,917			115,664
Commitments and contingencies (Note 15)
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 7 and 10 as of September 30, 2014 and December 31, 2013, respectively	727			946
Subclass B2 issued and outstanding shares: 39 as of September 30, 2014 and December 31, 2013	3,927			3,937
Total capital stock Class B putable	4,654			4,883
Retained earnings:
Restricted	184			141
Unrestricted	1,555			1,516
Total retained earnings	1,739			1,657
Accumulated other comprehensive income	127			112
Total capital	6,520			6,652
Total liabilities and capital	$	124,437		$	122,316

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(Unaudited)

(In millions)



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
Interest income
Advances	$	11		$	54		$	119		$	178
Prepayment fees on advances, net	—			1			1			2
Interest-bearing deposits	1			1			3			4
Securities purchased under agreements to resell	1			1			1			1
Federal funds sold	2			1			6			7
Trading securities	19			26			57			79
Available-for-sale securities	30			33			93			98
Held-to-maturity securities	58			65			180			188
Mortgage loans	12			14			38			47
Total interest income	134			196			498			604
Interest expense
Consolidated obligations:
Discount notes	8			5			22			19
Bonds	80			104			247			325
Mandatorily redeemable capital stock	—			1			1			1
Total interest expense	88			110			270			345
Net interest income	46			86			228			259
(Reversal) provision for credit losses	(2		)	1			(4		)	4
Net interest income after (reversal) provision for credit losses	48			85			232			255
Noninterest income (loss)
Total other-than-temporary impairment losses	—			—			—			(1		)
Net amount of impairment losses (reclassified from) recorded in accumulated other comprehensive income	(2		)	—			(3		)	1
Net impairment losses recognized in earnings	(2		)	—			(3		)	—
Net losses on trading securities	(19		)	(15		)	(46		)	(79		)
Net gains on derivatives and hedging activities	77			34			108			151
Gain on early extinguishment of debt	—			2			15			2
Letters of credit fees	7			4			20			14
Gain on litigation settlements, net	4			—			4			—
Other	—			—			2			2
Total noninterest income	67			25			100			90
Noninterest expense
Compensation and benefits	19			16			53			49
Other operating expenses	10			11			29			32
Finance Agency	2			2			7			6
Office of Finance	1			2			4			5
Other	—			—			2			—
Total noninterest expense	32			31			95			92
Income before assessments	83			79			237			253
Affordable Housing Program assessments	9			8			24			25
Net income	$	74		$	71		$	213		$	228

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2014			2013		2014		2013
Net income	$	74		$	71	$	213	$	228
Other comprehensive income:
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
Noncredit losses transferred from held-to-maturity securities	—			—		—		(1		)
Net change in fair value on other-than-temporarily impaired available-for-sale securities	(5		)	16		11		141
Reclassification of noncredit portion of impairment losses included in net income	2			—		3		—
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities	(3		)	16		14		140
Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities:
Noncredit losses on held-to-maturity securities	—			—		—		(1		)
Reclassification of noncredit portion from held-to-maturity securities to available-for-sale securities	—			—		—		1
Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities	—			—		—		—
Other comprehensive income related to pension and postretirement benefit plans	—			—		1		1
Total other comprehensive (loss) income	(3		)	16		15		141
Total comprehensive income	$	71		$	87	$	228	$	369

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CAPITAL

(Unaudited)

(In millions)



	Capital Stock Class B Putable					Retained Earnings								Accumulated Other Comprehensive Income (Loss)			Total Capital
	Shares		Par Value			Restricted		Unrestricted			Total			Accumulated Other Comprehensive Income (Loss)			Total Capital
Balance, December 31, 2012	49		$	4,898		$	73	$	1,362		$	1,435		$	(58	)	$	6,275
Issuance of capital stock	34		3,427			—		—			—			—			3,427
Repurchase/redemption of capital stock	(40	)	(3,966		)	—		—			—			—			(3,966		)
Net shares reclassified to mandatorily redeemable capital stock	—		(8		)	—		—			—			—			(8		)
Comprehensive income	—		—			46		182			228			141			369
Cash dividends on capital stock	—		—			—		(84		)	(84		)	—			(84		)
Balance, September 30, 2013	43		$	4,351		$	119	$	1,460		$	1,579		$	83		$	6,013

Balance, December 31, 2013	49		$	4,883		$	141	$	1,516		$	1,657		$	112		$	6,652
Issuance of capital stock	34		3,415			—		—			—			—			3,415
Repurchase/redemption of capital stock	(37	)	(3,640		)	—		—			—			—			(3,640		)
Net shares reclassified to mandatorily redeemable capital stock	—		(4		)	—		—			—			—			(4		)
Comprehensive income	—		—			43		170			213			15			228
Cash dividends on capital stock	—		—			—		(131		)	(131		)	—			(131		)
Balance, September 30, 2014	46		$	4,654		$	184	$	1,555		$	1,739		$	127		$	6,520

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)



	For the Nine Months Ended September 30,
	2014			2013
Operating activities
Net income	$	213		$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	(87		)	(64		)
(Reversal) provision for credit losses	(4		)	4
Loss due to change in net fair value adjustment on derivative and hedging activities	60			7
Net change in fair value adjustment on trading securities	46			79
Net impairment losses recognized in earnings	3			—
Gain on early extinguishment of debt	(15		)	(2		)
Net change in:
Accrued interest receivable	15			26
Other assets	41			(14		)
Affordable Housing Program payable	(7		)	(13		)
Accrued interest payable	19			38
Other liabilities	(37		)	1
Total adjustments	34			62
Net cash provided by operating activities	247			290
Investing activities
Net change in:
Interest-bearing deposits	224			968
Securities purchased under agreements to resell	(455		)	(750		)
Federal funds sold	(2,300		)	4,240
Trading securities:
Proceeds from maturities	200			251
Available-for-sale securities:
Proceeds from maturities	261			435
Held-to-maturity securities:
Net change in short-term	—			550
Proceeds from maturities of long-term	2,091			2,897
Purchases of long-term	(3,022		)	(6,042		)
Advances:
Proceeds from principal collected	131,994			127,399
Made	(131,197		)	(119,605		)
Mortgage loans:
Proceeds from principal collected	119			228
Proceeds from sale of held for sale	—			18
Proceeds from sale of foreclosed assets	19			19
Purchase of premise, equipment, and software	(3		)	(2		)
Net cash (used in) provided by investing activities	(2,069		)	10,606

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FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Nine Months Ended September 30,
	2014			2013
Financing activities
Net change in deposits	(491		)	(199		)
Net payments on derivatives containing a financing element	(72		)	(121		)
Proceeds from issuance of consolidated obligations:
Discount notes	353,473			197,307
Bonds	64,255			62,917
Payments for debt issuance costs	(7		)	(6		)
Payments for maturing and retiring consolidated obligations:
Discount notes	(359,620		)	(212,758		)
Bonds	(55,339		)	(57,996		)
Proceeds from issuance of capital stock	3,415			3,427
Payments for repurchase/redemption of capital stock	(3,640		)	(3,966		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(9		)	(24		)
Cash dividends paid	(131		)	(84		)
Net cash provided by (used in) financing activities	1,834			(11,503		)
Net increase (decrease) in cash and due from banks	12			(607		)
Cash and due from banks at beginning of the period	4,374			4,083
Cash and due from banks at end of the period	$	4,386		$	3,476
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	261		$	327
Affordable Housing Program assessments, net	$	31		$	34
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	4		$	8
Held-to-maturity securities acquired with accrued liabilities	$	282		$	41
Transfer of held-to-maturity securities to available-for-sale securities	$	—		$	11
Transfers of mortgage loans to real estate owned	$	15		$	23

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

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 1—Basis of Presentation

The accompanying unaudited interim financial statements of the Federal Home Loan Bank of Atlanta (Bank) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could be different from these estimates. The foregoing interim financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods, have been included. The results of operations for interim periods are not necessarily indicative of results to be expected for the year ending December 31, 2014, or for other interim periods. The unaudited interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2013, which are contained in the Bank’s 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 14, 2014 (Form 10-K).

The Bank has certain financial instruments, including derivative instruments and securities purchased under agreements to resell, that are subject to offset under master netting arrangements or by operation of law. Additional information regarding derivative instruments is provided in Note 13—Derivatives and Hedging Activities to the Bank’s interim financial statements. The Bank does not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented. Based on the fair value of the related securities held as collateral, the securities purchased under agreements to resell were fully collateralized for the periods presented.

During the three-month period ended March 31, 2014, the Bank made certain enhancements to its allowance for credit loss calculation related to the Bank’s conventional single-family residential mortgage loan portfolio. The allowance for conventional single-family residential mortgage loans is determined by an analysis (performed at least quarterly) that includes segregating the portfolio into various aging groups. For loans that are 60 days or less past due, the Bank calculates a loss severity, default rate, and the expected loss based on individual loan characteristics. For loans that are more than 60 days past due, the allowance is determined using an automated valuation model. Inherent in the Bank’s evaluation of loan performance is an analysis of various credit enhancements at the individual master commitment level to determine the credit enhancement available to recover losses on conventional single-family residential mortgage loans under each individual master commitment.

Additionally, during the three-month period ended March 31, 2014, the Bank began to classify as a loss and charge-off the portion of outstanding conventional single-family residential mortgage loan balances in excess of the fair value of the underlying property, less costs to sell and adjusted for any available credit enhancements, once the loans are 180 days delinquent. These changes did not have a material effect on the Bank's financial condition or results of operations.

A description of all of the Bank’s significant accounting policies is included in Note 2—Summary of Significant Accounting Policies to the 2013 audited financial statements contained in the Bank’s Form 10-K. There have been no material changes to these policies as of September 30, 2014.

Revision

During the three-month period ended September 30, 2014, the Bank identified a classification error in its previously reported Statements of Cash Flows for the three-month period ended March 31, 2014 and the six-month period ended June 30, 2014, contained in the previously filed Quarterly Reports on Form 10-Q for those periods. After evaluating the quantitative and qualitative aspects of the classification error, the Bank determined that the error was not material to the previously issued Statements of Cash Flows. Accordingly, the classification error has been corrected in this Quarterly Report on Form 10-Q. The correction had no impact on the Bank’s financial condition or results of operations for any period.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table summarizes the revisions made to the Bank’s Statement of Cash Flows for the three-month period ended March 31, 2014 and the six-month period ended June 30, 2014:



	For the Three Months Ended March 31, 2014						For the Six Months Ended June 30, 2014
	As Originally Reported			As Revised			As Originally Reported			As Revised
Operating activities
Net change in:
Other liabilities	$	(320	)	$	(11	)	$	(322	)	$	(13	)
Total adjustments	(304		)	5			(304		)	5
Net cash (used in) provided by operating activities	(227		)	82			(165		)	144

Investing activities
Held-to-maturity securities:
Purchases of long-term	(1,436		)	(1,745		)	(1,664		)	(1,973		)
Net cash provided by (used in) investing activities	331			22			(9,201		)	(9,510		)

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. In August 2014, the Financial Accounting Standards Board (FASB) issued guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. The guidance becomes effective for the Bank for the interim and annual periods ending after December 15, 2016, and early application is permitted. The adoption of this guidance will have no effect on the Bank's financial condition or results of operations.

Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure. In August 2014, the FASB issued amended guidance related to the classification and measurement of certain government-guaranteed mortgage loans upon foreclosure. The amendments in this guidance require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if certain conditions are met. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2014, and may be adopted using either the modified retrospective transition method or the prospective transition method. The adoption of this guidance is not expected to materially effect the Bank’s financial condition or results of operations.

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In June 2014, the FASB issued amended guidance for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings. Specifically, this guidance requires entities to account for (1) repurchase-to-maturity transactions as secured borrowings rather than as sales with forward repurchase agreements; and (2) repurchase agreements executed contemporaneously with the initial transfer of the underlying financial asset with the same counterparty as separate transactions only. In addition, this guidance requires a transferor to disclose additional information about certain transactions, including those in which it retains substantially all of the exposure to the economic returns of the underlying transferred asset over the transaction’s term. This guidance becomes effective for the Bank for the first interim or annual period beginning after December 15, 2014. The changes in accounting for transactions outstanding on the effective date are required to be presented on a cumulative-effect approach. The adoption of this guidance is not expected to materially effect the Bank’s financial condition or results of operations.

Revenue from Contracts with Customers. In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual reporting periods beginning after December

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

15, 2016, including interim periods within that reporting period, and will be applied retrospectively either to each prior reporting period or with a cumulative effect recognized at the date of initial application. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition or results of operations is not expected to be material.

Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. In January 2014, the FASB issued guidance intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. The guidance clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure; or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. This guidance is effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2014. The adoption of this guidance will result in increased disclosures, but is not expected to materially affect the Bank’s financial condition or results of operations.

Recently Adopted Accounting Guidance

Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. In February 2013, the FASB issued guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This guidance requires an entity to measure these obligations as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The Bank adopted this guidance effective January 1, 2014. The adoption of this guidance did not have any effect on the Bank's financial condition or results of operations.

Note 3—Trading Securities

Major Security Types. Trading securities were as follows:



	As of September 30, 2014		As of December 31, 2013
Government-sponsored enterprises debt obligations	$	1,366	$	1,601
Another FHLBank’s bond ⁽¹⁾	61		65
State or local housing agency debt obligations	1		1
Total	$	1,428	$	1,667

____________


⁽¹⁾	The Federal Home Loan Bank of Chicago is the primary obligor of this consolidated obligation bond.

Net losses on trading securities were as follows:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
Net losses on trading securities held at period end	$	(19	)	$	(15	)	$	(46	)	$	(77	)
Net losses on trading securities sold or matured during the period	—			—			—			(2		)
Net losses on trading securities	$	(19	)	$	(15	)	$	(46	)	$	(79	)

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 4—Available-for-sale Securities

The Bank transferred a private-label residential mortgaged-backed security (MBS) from its held-to-maturity portfolio to its available-for-sale portfolio on March 31, 2013. This security represents a private-label residential MBS in the Bank’s held-to-maturity portfolio for which the Bank has recorded an other-than-temporary impairment loss. The Bank believes the other-than-temporary impairment loss constitutes evidence of a significant deterioration in the issuer’s creditworthiness. The Bank has no current plans to sell this security nor is the Bank under any requirement to sell this security.

The following table presents information on the private-label residential MBS transferred. The amounts below represent the value as of the transfer date.



	Amortized Cost		Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income		Estimated Fair Value
Transferred at March 31, 2013	$	12	$	1	$	11

Major Security Types. Private-label residential MBS were as follows:



	Amortized Cost		Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of September 30, 2014	$	1,934	$	17	$	156	$	—	$	2,073



As of December 31, 2013	$	2,174	$	27	$	152	$	—	$	2,299

The following tables summarize the private-label residential MBS with unrealized losses. The unrealized losses are 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
	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
As of September 30, 2014	3	$	135	$	1	9	$	202	$	16	12	$	337	$	17

As of December 31, 2013	6	$	137	$	1	10	$	243	$	26	16	$	380	$	27

A summary of available-for-sale MBS issued by members or affiliates of members, Bank of America Corporation, Charlotte, NC, follows:



	Amortized Cost		Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of September 30, 2014	$	1,250	$	16	$	103	$	—	$	1,337

As of December 31, 2013	$	1,390	$	26	$	98	$	—	$	1,462

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 5—Held-to-maturity Securities

Major Security Types. Held-to-maturity securities were as follows:



	As of September 30, 2014								As of December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
State or local housing agency debt obligations	$	84	$	1	$	—	$	85	$	92	$	1	$	—	$	93
Government-sponsored enterprises debt obligations	4,913		2		16		4,899		3,738		—		24		3,714
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	388		5		—		393		465		7		—		472
Government-sponsored enterprises residential	14,104		126		62		14,168		13,952		109		115		13,946
Private-label residential	1,593		13		10		1,596		1,929		12		20		1,921
Total	$	21,082	$	147	$	88	$	21,141	$	20,176	$	129	$	159	$	20,146

The following tables summarize the held-to-maturity securities with unrealized losses. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.



	As of September 30, 2014
	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
Government-sponsored enterprises debt obligations	4	$	399	$	1	5	$	1,129	$	15	9	$	1,528	$	16
Mortgage-backed securities:
Government-sponsored enterprises residential	8	298		2		47	3,248		60		55	3,546		62
Private-label residential	15	176		1		31	434		9		46	610		10
Total	27	$	873	$	4	83	$	4,811	$	84	110	$	5,684	$	88



	As of December 31, 2013
	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
Government-sponsored enterprises debt obligations	9	$	1,970	$	24	—	$	—	$	—	9	$	1,970	$	24
Mortgage-backed securities:
Government-sponsored enterprises residential	65	3,932		108		1	147		7		66	4,079		115
Private-label residential	40	817		12		18	241		8		58	1,058		20
Total	114	$	6,719	$	144	19	$	388	$	15	133	$	7,107	$	159

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Redemption Terms. The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity are shown below. Expected maturities of some securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.



	As of September 30, 2014				As of December 31, 2013
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	568	$	568	$	430	$	430
Due after one year through five years	4,429		4,416		3,400		3,377
Total non-mortgage-backed securities	4,997		4,984		3,830		3,807
Mortgage-backed securities	16,085		16,157		16,346		16,339
Total	$	21,082	$	21,141	$	20,176	$	20,146

A summary of held-to-maturity MBS issued by members or affiliates of members, Bank of America Corporation, Charlotte, NC, follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of September 30, 2014	$	490	$	3	$	4	$	489

As of December 31, 2013	$	619	$	4	$	8	$	615

Note 6—Other-than-temporary Impairment

The Bank evaluates its individual available-for-sale and held-to-maturity securities holdings in an unrealized loss position for other-than-temporary impairment on a quarterly basis. As part of this process, the Bank considers its intent to sell each debt security and whether it is more likely than not the Bank will be required to sell the security before its anticipated recovery. If either of these conditions is met, the Bank recognizes the maximum impairment loss in earnings which is equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statements of Condition dates. For securities in an unrealized loss position that meet neither of these conditions, the Bank evaluates whether there is other-than-temporary impairment by performing an analysis to determine if any of these securities will incur a credit loss, which could be up to the difference between the security’s amortized cost basis and its fair value.

Mortgage-backed Securities. The Bank’s investments in MBS consist of U.S. agency guaranteed securities and senior tranches of private-label MBS. The Bank has increased exposure to the risk of loss on its investments in MBS when the loans backing the MBS exhibit high rates of delinquency and foreclosures, as well as losses on the sale of foreclosed properties. The Bank regularly requires high levels of credit enhancements from the structure of the collateralized mortgage obligation to reduce its risk of loss on such securities. Credit enhancements are defined as the percentage of subordinate tranches, overcollateralization, or excess spread, or the support of monoline insurance, if any, in a security structure that will absorb the losses before the security the Bank purchased will take a loss. The Bank does not purchase credit enhancements for its MBS from monoline insurance companies.

The Bank’s investments in private-label MBS were rated “AAA” (or its equivalent) by a nationally recognized statistical rating organization (NRSRO), such as Moody’s Investors Service (Moody’s) and Standard and Poor’s Ratings Services (S&P), at their purchase dates. The “AAA”-rated securities achieved their ratings through credit enhancement, overcollateralization, and senior-subordinated shifting interest features; the latter results in subordination of payments by junior classes to ensure cash flows to the senior classes. The ratings on all of the Bank’s private-label MBS have changed since their purchase dates.

Non-private-label MBS. The unrealized losses related to U.S. agency MBS are caused by interest rate changes and not credit quality. These securities are guaranteed by government agencies or government-sponsored enterprises (GSEs) and the Bank does not expect these securities to be settled at a price less than their amortized cost basis. In addition, the Bank does not

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

intend to sell these investments and it is not more likely than not that the Bank will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The Bank does not consider these investments to be other-than-temporarily impaired as of September 30, 2014.

Private-label MBS. To assess whether the entire amortized cost basis of its private-label MBS will be recovered, the Bank performs a cash flow analysis for each of its private-label MBS. In performing the cash flow analysis for each of these securities, the Bank uses 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 United States 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, 2014 included a short-term housing price forecast with projected changes ranging from a decrease of three percent to an increase of nine percent over the 12 month period beginning July 1, 2014. For the vast majority of markets, the projected short-term housing price changes range from zero percent to an increase of six percent. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults, and loss severities, were 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. The model classifies securities based on current characteristics and performance, which may be different from the securities’ classification as determined by the originator at the time of origination.

At each quarter end, the Bank compares the present value of the cash flows (discounted at the securities' effective yield) expected to be collected with respect to its private-label MBS to the amortized cost basis of the security to determine whether a credit loss exists. For the Bank’s variable rate and hybrid private-label MBS, the Bank uses a forward interest rate curve to project the future estimated cash flows. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows. For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a quarterly basis.

The following table represents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings for those securities for which an other-than-temporary impairment was determined to have occurred during the three-month period ended September 30, 2014, as well as related current credit enhancement:



	Significant Inputs
	Prepayment Rate	Default Rates	Loss Severities	Current Credit Enhancement
Year of Securitization	Weighted Average (%)	Weighted Average (%)	Weighted Average (%)	Weighted Average (%)
Prime:
2005	15.79	7.96	32.82	0.16
Alt-A:
2007	13.49	26.94	40.27	0.00

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table presents a roll-forward of the amount of credit losses on the Bank’s investment securities recognized in earnings during the life of the securities for which a portion of the other-than-temporary loss was recognized in accumulated other comprehensive income:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013
Balance, beginning of period	$	559		$	584		$	574		$	586
Amount related to credit loss for which an other-than-temporary impairment was previously recognized	2			—			3			—
Increase in cash flows expected to be collected, recognized over the remaining life of the securities	(9		)	(4		)	(25		)	(6		)
Balance, end of period	$	552		$	580		$	552		$	580

Certain other private-label MBS that have not been designated as other-than-temporarily impaired have experienced unrealized losses and decreases in fair value due to interest rate volatility, illiquidity in the marketplace, and general disruption in the U.S. mortgage markets. These declines in fair value are considered temporary as the Bank expects to recover the amortized cost basis of the securities, the Bank does not intend to sell these securities, and it is not more likely than not that the Bank will be required to sell these securities before the anticipated recovery of the securities’ remaining amortized cost basis, which may be at maturity. This assessment is based on the fact that the Bank has sufficient capital and liquidity to operate its business and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would require the Bank to sell these securities.

Note 7—Advances

Redemption Terms. The Bank had advances outstanding, as summarized below.



	As of September 30, 2014			As of December 31, 2013
Overdrawn demand deposit accounts	$	—		$	2
Due in one year or less	47,104			51,331
Due after one year through two years	11,049			5,366
Due after two years through three years	9,554			6,136
Due after three years through four years	6,241			8,495
Due after four years through five years	2,868			5,088
Due after five years	10,268			11,464
Total par value	87,084			87,882
Discount on AHP ⁽¹⁾advances	(7		)	(8		)
Discount on EDGE ⁽²⁾advances	(6		)	(7		)
Hedging adjustments	1,560			1,726
Deferred commitment fees	(4		)	(5		)
Total	$	88,627		$	89,588

___________

⁽¹⁾ The Affordable Housing Program

⁽²⁾ The Economic Development and Growth Enhancement program

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table summarizes advances by year of contractual maturity or, for convertible advances, next conversion date:



	As of September 30, 2014		As of December 31, 2013
Overdrawn demand deposit accounts	$	—	$	2
Due or convertible in one year or less	50,223		54,522
Due or convertible after one year through two years	10,886		5,414
Due or convertible after two years through three years	8,203		5,867
Due or convertible after three years through four years	4,872		6,643
Due or convertible after four years through five years	2,787		4,168
Due or convertible after five years	10,113		11,266
Total par value	$	87,084	$	87,882

Interest-rate Payment Terms. The following table details interest-rate payment terms for advances:



	As of September 30, 2014		As of December 31, 2013
Fixed-rate:
Due in one year or less	$	34,599	$	46,343
Due after one year	29,691		28,535
Total fixed-rate	64,290		74,878
Variable-rate:
Due in one year or less	12,505		4,990
Due after one year	10,289		8,014
Total variable-rate	22,794		13,004
Total par value	$	87,084	$	87,882

Credit Risk. The Bank’s potential credit risk from advances is concentrated in commercial banks, thrifts, and credit unions and further is concentrated in certain larger borrowing relationships. As of September 30, 2014 and December 31, 2013, the concentration of the Bank’s advances was $62,761 and $65,472, respectively, to 10 member institutions, representing 72.1 percent and 74.5 percent, respectively, of total advances outstanding.

Based on the collateral pledged as security for advances, the Bank's credit analysis of members’ financial condition, and prior repayment history, no allowance for credit losses on advances was deemed necessary by the Bank as of September 30, 2014 and December 31, 2013. No advance was past due as of September 30, 2014 and December 31, 2013.

Note 8—Mortgage Loans Held for Portfolio

The following table presents information on mortgage loans held for portfolio by contractual maturity at the time of purchase:



	As of September 30, 2014			As of December 31, 2013
Fixed-rate medium-term ⁽¹⁾ single-family residential mortgage loans	$	113		$	150
Fixed-rate long-term single-family residential mortgage loans	680			781
Total unpaid principal balance	793			931
Premiums	3			3
Discounts	(4		)	(5		)
Total	$	792		$	929

____________

⁽¹⁾ Medium-term is defined as a term of 15 years or less.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table details the unpaid principal balance of mortgage loans held for portfolio by collateral or guarantee type:



	As of September 30, 2014		As of December 31, 2013
Conventional loans	$	737	$	864
Government-guaranteed or insured loans	56		67
Total unpaid principal balance	$	793	$	931

For information related to the Bank's credit risk on mortgage loans and allowance for credit losses, see Note 9—Allowance for Credit Losses to the Bank’s interim financial statements.

Note 9—Allowance for Credit Losses

The activity in the allowance for credit losses was as follows:



	For the Three Months Ended September 30,
	2014			2013
	Conventional Single-family Residential Mortgage Loans			Conventional Single-family Residential Mortgage Loans			Multifamily Residential Mortgage Loans			Total
Balance, beginning of period	$	6		$	11		$	1		$	12
(Reversal) provision for credit losses	(2		)	1			—			1
Charge-offs	—			(1		)	—			(1		)
Mortgage loans transferred to held for sale	—			—			(1		)	(1		)
Balance, end of period	$	4		$	11		$	—		$	11



	For the Nine Months Ended September 30,
	2014			2013
	Conventional Single-family Residential Mortgage Loans			Conventional Single-family Residential Mortgage Loans			Multifamily Residential Mortgage Loans			Total
Balance, beginning of period	$	11		$	10		$	1		$	11
(Reversal) provision for credit losses	(4		)	4			—			4
Charge-offs	(3		)	(3		)	—			(3		)
Mortgage loans transferred to held for sale	—			—			(1		)	(1		)
Balance, end of period	$	4		$	11		$	—		$	11

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The recorded investment in conventional single-family residential mortgage loans by impairment methodology was as follows:



	As of September 30, 2014		As of December 31, 2013
Allowance for credit losses:
Individually evaluated for impairment	$	1	$	2
Collectively evaluated for impairment	3		9
Total allowance for credit losses	$	4	$	11
Recorded investment:
Individually evaluated for impairment	$	15	$	15
Collectively evaluated for impairment	724		851
Total recorded investment	$	739	$	866

Key credit quality indicators for mortgage loans include the migration of past due loans, nonaccrual loans, loans in process of foreclosure, and impaired loans. The tables below summarize the Bank's recorded investment in mortgage loans by these key credit quality indicators:



	As of September 30, 2014
	Conventional Single-family Residential Mortgage Loans			Government-guaranteed or Insured Single-family Residential Mortgage Loans			Total
Past due 30-59 days	$	21		$	6		$	27
Past due 60-89 days	7			2			9
Past due 90 days or more	35			5			40
Total past due mortgage loans	63			13			76
Total current mortgage loans	676			43			719
Total mortgage loans ⁽¹⁾	$	739		$	56		$	795
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	21		$	2		$	23
Seriously delinquent rate ⁽³⁾	4.65		%	9.27		%	4.98		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	5		$	5
Loans on nonaccrual status ⁽⁵⁾	$	34		$	—		$	34

____________

⁽¹⁾ The difference between the recorded investment and the carrying value of total mortgage loans of $3 relates to accrued interest.

⁽²⁾ Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in lieu has been reported. Loans in the process of foreclosure are included in past due or current loans depending on their delinquency status.

⁽³⁾ Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total loan portfolio segment.

⁽⁴⁾ Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.

⁽⁵⁾ Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)



	As of December 31, 2013
	Conventional Single-family Residential Mortgage Loans			Government-guaranteed or Insured Single-family Residential Mortgage Loans			Total
Past due 30-59 days	$	30		$	7		$	37
Past due 60-89 days	9			3			12
Past due 90 days or more	51			9			60
Total past due mortgage loans	90			19			109
Total current mortgage loans	776			48			824
Total mortgage loans ⁽¹⁾	$	866		$	67		$	933
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	38		$	3		$	41
Seriously delinquent rate ⁽³⁾	5.90		%	13.13		%	6.42		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	9		$	9
Loans on nonaccrual status ⁽⁵⁾	$	51		$	—		$	51

____________

⁽¹⁾ The difference between the recorded investment and the carrying value of total mortgage loans of $4 relates to accrued interest.

⁽³⁾ Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total loan portfolio segment.

⁽⁴⁾Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.

⁽⁵⁾ Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest.

A troubled debt restructuring is considered to have occurred when a concession is granted to a borrower for economic or legal reasons related to the borrower's financial difficulties and that concession would not have been considered otherwise. The Bank has granted a concession when it does not expect to collect all amounts due under the original contract as a result of the restructuring. The Bank's conventional single-family residential mortgage loan troubled debt restructurings primarily involve modifying the borrower's monthly payment for a period of up to 36 months to achieve a target housing expense ratio of 31.0 percent of their qualifying monthly income. The outstanding principal balance is first re-amortized to reflect a principal and interest payment for a term not to exceed 40 years. This would result in a balloon payment at the original maturity date of the loan as the maturity date and number of remaining monthly payments are not adjusted. If the

Federal Home Loan Bank of Atlanta - FORM 10-Q - November 7, 2014

Attached files