Federal Home Loan Bank of Atlanta - FORM 10-Q

Attached files

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EX-31.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq22015ex311.htm
EX-32.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq22015ex321.htm
EX-31.2 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq22015ex312.htm

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 June 30, 2015



¨	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 July 31, 2015 was 48,390,294.

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	63
Item 4.	Controls and Procedures	66
PART II. OTHER INFORMATION		67
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosure	67
Item 5.	Other Information	67
Item 6.	Exhibits	67
SIGNATURES		68

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 June 30, 2015			As of December 31, 2014
Assets
Cash and due from banks	$	510		$	915
Interest-bearing deposits (includes deposits with another FHLBank of $2 as of June 30, 2015 and December 31, 2014)	1,136			1,010
Securities purchased under agreements to resell	2,140			1,960
Federal funds sold	6,868			6,385
Investment securities:
Trading securities (includes another FHLBank’s bond of $56 and $60 as of June 30, 2015 and December 31, 2014, respectively)	1,242			1,269
Available-for-sale securities	1,823			1,981
Held-to-maturity securities (fair value of $22,681 and $23,988 as of June 30, 2015 and December 31, 2014, respectively)	22,597			23,897
Total investment securities	25,662			27,147
Advances	102,208			99,644
Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio	664			749
Allowance for credit losses on mortgage loans	(2		)	(3		)
Total mortgage loans held for portfolio, net	662			746
Accrued interest receivable	159			179
Derivative assets	155			112
Premises and equipment, net	25			27
Other assets	191			219
Total assets	$	139,716		$	138,344
Liabilities
Interest-bearing deposits	$	1,396		$	1,110
Consolidated obligations, net:
Discount notes	49,759			37,162
Bonds	80,814			92,088
Total consolidated obligations, net	130,573			129,250
Mandatorily redeemable capital stock	16			19
Accrued interest payable	146			145
Affordable Housing Program payable	64			65
Derivative liabilities	145			184
Other liabilities (includes a loan from another FHLBank of $125 and $0 as of June 30, 2015 and December 31, 2014, respectively)	434			580
Total liabilities	132,774			131,353
Commitments and contingencies (Note 15)
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 8 and 7 as of June 30, 2015 and December 31, 2014, respectively	747			726
Subclass B2 issued and outstanding shares: 43 and 45 as of June 30, 2015 and December 31, 2014, respectively	4,305			4,424
Total capital stock Class B putable	5,052			5,150
Retained earnings:
Restricted	229			195
Unrestricted	1,584			1,551
Total retained earnings	1,813			1,746
Accumulated other comprehensive income	77			95
Total capital	6,942			6,991
Total liabilities and capital	$	139,716		$	138,344

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 June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Interest income
Advances	$	(81	)	$	51		$	(19	)	$	108
Prepayment fees on advances, net	—			1			1			1
Interest-bearing deposits	1			1			2			2
Securities purchased under agreements to resell	1			—			2			—
Federal funds sold	2			2			5			4
Trading securities	17			19			34			38
Available-for-sale securities	28			31			56			63
Held-to-maturity securities	58			60			118			122
Mortgage loans	10			13			21			26
Total interest income	36			178			220			364
Interest expense
Consolidated obligations:
Discount notes	9			6			18			14
Bonds	75			79			146			167
Mandatorily redeemable capital stock	—			1			—			1
Total interest expense	84			86			164			182
Net interest (expense) income	(48		)	92			56			182
Provision (reversal) for credit losses	—			2			(1		)	(2		)
Net interest (expense) income after provision (reversal) for credit losses	(48		)	90			57			184
Noninterest income (loss)
Total other-than-temporary impairment losses	—			—			—			—
Net amount of impairment losses reclassified from accumulated other comprehensive income	(3		)	—			(4		)	(1		)
Net impairment losses recognized in earnings	(3		)	—			(4		)	(1		)
Net losses on trading securities	(15		)	(13		)	(27		)	(27		)
Net gains on derivatives and hedging activities	188			16			212			31
Gain on extinguishment of debt	—			—			—			15
Letters of credit fees	7			6			14			13
Other	(1		)	1			1			2
Total noninterest income	176			10			196			33
Noninterest expense
Compensation and benefits	17			18			36			34
Other operating expenses	9			9			18			19
Finance Agency	1			2			4			5
Office of Finance	2			2			3			3
Other	2			1			4			2
Total noninterest expense	31			32			65			63
Income before assessments	97			68			188			154
Affordable Housing Program assessments	10			6			19			15
Net income	$	87		$	62		$	169		$	139

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 June 30,					For the Six Months Ended June 30,
	2015			2014		2015			2014
Net income	$	87		$	62	$	169		$	139
Other comprehensive (loss) income:
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
Net change in fair value on other-than-temporarily impaired available-for-sale securities	(6		)	12		(23		)	16
Reclassification of noncredit portion of impairment losses included in net income	3			—		4			1
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities	(3		)	12		(19		)	17
Other comprehensive income related to pension and postretirement benefit plans	1			1		1			1
Total other comprehensive (loss) income	(2		)	13		(18		)	18
Total comprehensive income	$	85		$	75	$	151		$	157

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			Total Capital
	Shares		Par Value			Restricted		Unrestricted			Total			Accumulated Other Comprehensive Income			Total Capital
Balance, December 31, 2013	49		$	4,883		$	141	$	1,516		$	1,657		$	112		$	6,652
Issuance of capital stock	23		2,296			—		—			—			—			2,296
Repurchase/redemption of capital stock	(23	)	(2,272		)	—		—			—			—			(2,272		)
Net shares reclassified to mandatorily redeemable capital stock	—		(1		)	—		—			—			—			(1		)
Comprehensive income	—		—			28		111			139			18			157
Cash dividends on capital stock	—		—			—		(88		)	(88		)	—			(88		)
Balance, June 30, 2014	49		$	4,906		$	169	$	1,539		$	1,708		$	130		$	6,744

Balance, December 31, 2014	52		$	5,150		$	195	$	1,551		$	1,746		$	95		$	6,991
Issuance of capital stock	29		2,891			—		—			—			—			2,891
Repurchase/redemption of capital stock	(30	)	(2,982		)	—		—			—			—			(2,982		)
Net shares reclassified to mandatorily redeemable capital stock	—		(7		)	—		—			—			—			(7		)
Comprehensive income (loss)	—		—			34		135			169			(18		)	151
Cash dividends on capital stock	—		—			—		(102		)	(102		)	—			(102		)
Balance, June 30, 2015	51		$	5,052		$	229	$	1,584		$	1,813		$	77		$	6,942

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 Six Months Ended June 30,
	2015			2014
Operating activities
Net income	$	169		$	139
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	(70		)	(63		)
Reversal of provision for credit losses	(1		)	(2		)
(Gain) loss due to change in net fair value adjustment on derivative and hedging activities	(3		)	64
Net change in fair value adjustment on trading securities	27			27
Net impairment losses recognized in earnings	4			1
Gain on extinguishment of debt	—			(15		)
Net change in:
Accrued interest receivable	20			7
Other assets	25			11
Affordable Housing Program payable	(2		)	(5		)
Accrued interest payable	2			(7		)
Other liabilities	(33		)	(13		)
Total adjustments	(31		)	5
Net cash provided by operating activities	138			144
Investing activities
Net change in:
Interest-bearing deposits	257			(51		)
Securities purchased under agreements to resell	(180		)	(1,000		)
Federal funds sold	(483		)	(2,865		)
Trading securities:
Proceeds from principal collected	—			200
Available-for-sale securities:
Proceeds from principal collected	155			176
Held-to-maturity securities:
Proceeds from principal collected	3,318			1,216
Purchases of long-term	(2,255		)	(1,973		)
Advances:
Proceeds from principal collected	117,413			84,917
Made	(120,356		)	(90,217		)
Mortgage loans:
Proceeds from principal collected	76			78
Proceeds from sale of foreclosed assets	10			11
Purchase of premises, equipment, and software	(1		)	(2		)
Net cash used in investing activities	(2,046		)	(9,510		)

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FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Six Months Ended June 30,
	2015			2014
Financing activities
Net change in:
Interest-bearing deposits	297			(339		)
Loans from other FHLBanks	125			—
Net payments on derivatives containing a financing element	(49		)	(51		)
Proceeds from issuance of consolidated obligations:
Discount notes	427,635			199,451
Bonds	37,372			43,678
Payments for debt issuance costs	(6		)	(6		)
Payments for maturing and retiring consolidated obligations:
Discount notes	(415,041		)	(200,971		)
Bonds	(48,627		)	(35,139		)
Proceeds from issuance of capital stock	2,891			2,296
Payments for repurchase/redemption of capital stock	(2,982		)	(2,272		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(10		)	(4		)
Cash dividends paid	(102		)	(88		)
Net cash provided by financing activities	1,503			6,555
Net decrease in cash and due from banks	(405		)	(2,811		)
Cash and due from banks at beginning of the period	915			4,374
Cash and due from banks at end of the period	$	510		$	1,563
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	163		$	200
Affordable Housing Program assessments, net	$	20		$	20
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	7		$	1
Held-to-maturity securities acquired with accrued liabilities	$	109		$	—
Transfers of mortgage loans to real estate owned	$	8		$	10

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, 2015, 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, 2014, which are contained in the Bank’s 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 13, 2015 (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.

A description of the Bank’s significant accounting policies is included in Note 2—Summary of Significant Accounting Policies to the 2014 audited financial statements contained in the Bank’s Form 10-K.

Revision

During the third quarter of 2014, the Bank identified a classification error in its previously reported Statements of Cash Flows for the six-month period ended June 30, 2014, contained in the previously filed Quarterly Report on Form 10-Q for that period. 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 the periods presented.

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



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

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

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Simplifying the Presentation of Debt Issuance Costs. In April 2015, the Financial Accounting Standards Board (FASB) issued guidance that requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2015, and early adoption is permitted. The amended guidance will be applied on a retrospective basis. The adoption of this guidance is not expected to have a material effect on the Bank's financial condition or results of operations.

Amendments to the Consolidation Analysis. In February 2015, the FASB issued amended guidance intended to enhance consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The new guidance places more emphasis on risk of loss when determining a controlling financial interest. The guidance also reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity. This guidance becomes effective for the Bank for the interim and annual periods ending after December 15, 2015, and early adoption is permitted. The adoption of this guidance is not expected to effect the Bank's financial condition or results of operations.

Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. In January 2015, the FASB issued amended guidance which eliminates the concept of extraordinary items from GAAP. The amended guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amended guidance prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted, provided that the amended guidance is applied from the beginning of the fiscal year of adoption. The adoption of this guidance will have no effect on the Bank’s financial condition or results of operations.

Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. In August 2014, the 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 disclosure. 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.

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 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. In July 2015, the FASB deferred the effective date of the revenue recognition standard, permitting public entities to apply the new standard to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Bank is in the process of evaluating this guidance and its effects on the Bank’s financial condition and results of operations has not yet been determined.

Recently Adopted Accounting Guidance

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. The Bank adopted this guidance prospectively on January 1, 2015. The adoption of this guidance did not have a material effect on 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,

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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. The Bank adopted this guidance effective January 1, 2015. The adoption of this guidance had no effect on the Bank’s financial condition or results of operations.

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. The Bank adopted this guidance prospectively on January 1, 2015. The adoption of this guidance did not have a material 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 June 30, 2015		As of December 31, 2014
Government-sponsored enterprises debt obligations	$	1,185	$	1,208
Another FHLBank’s bond ⁽¹⁾	56		60
State or local housing agency debt obligations	1		1
Total	$	1,242	$	1,269

____________

⁽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 June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Net losses on trading securities held at period end	$	(15	)	$	(13	)	$	(27	)	$	(27	)

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 4—Available-for-sale Securities

Major Security Type. Private-label residential mortgaged-backed securities (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 June 30, 2015	$	1,724	$	20	$	119	$	—	$	1,823
As of December 31, 2014	$	1,863	$	19	$	137	$	—	$	1,981

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 June 30, 2015	3	$	184	$	5	9	$	161	$	15	12	$	345	$	20
As of December 31, 2014	4	$	140	$	2	9	$	191	$	17	13	$	331	$	19

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 June 30, 2015	$	1,129	$	19	$	77	$	—	$	1,187
As of December 31, 2014	$	1,213	$	17	$	90	$	—	$	1,286

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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 June 30, 2015								As of December 31, 2014
	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	$	78	$	—	$	—	$	78	$	81	$	1	$	—	$	82
Government-sponsored enterprises debt obligations	5,823		3		4		5,822		6,667		2		13		6,656
Mortgage-backed securities:
U.S. agency obligations-guaranteed single-family residential	322		4		—		326		366		5		—		371
Government-sponsored enterprises single-family residential	12,553		112		24		12,641		13,665		125		24		13,766
Government-sponsored enterprises multi-family commercial	2,570		2		6		2,566		1,663		3		7		1,659
Private-label residential	1,251		7		10		1,248		1,455		9		10		1,454
Total	$	22,597	$	128	$	44	$	22,681	$	23,897	$	145	$	54	$	23,988

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 June 30, 2015
	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	2	$	350	$	—	5	$	1,140	$	4	7	$	1,490	$	4
Mortgage-backed securities:
Government-sponsored enterprises single-family residential	31	1,855		10		21	1,028		14		52	2,883		24
Government-sponsored enterprises multi-family commercial	30	1,830		3		4	341		3		34	2,171		6
Private-label residential	21	287		2		35	367		8		56	654		10
Total	84	$	4,322	$	15	65	$	2,876	$	29	149	$	7,198	$	44

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)



	As of December 31, 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	$	899	$	1	6	$	1,233	$	12	10	$	2,132	$	13
Mortgage-backed securities:
Government-sponsored enterprises single-family residential	8	496		1		26	1,828		23		34	2,324		24
Government-sponsored enterprises multi-family commercial	14	758		1		2	285		6		16	1,043		7
Private-label residential	22	229		1		32	415		9		54	644		10
Total	48	$	2,382	$	4	66	$	3,761	$	50	114	$	6,143	$	54

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 June 30, 2015				As of December 31, 2014
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	853	$	853	$	1,166	$	1,166
Due after one year through five years	5,048		5,047		5,582		5,572
Total non-mortgage-backed securities	5,901		5,900		6,748		6,738
Mortgage-backed securities	16,696		16,781		17,149		17,250
Total	$	22,597	$	22,681	$	23,897	$	23,988

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 June 30, 2015	$	335	$	1	$	4	$	332
As of December 31, 2014	$	419	$	2	$	4	$	417

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

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 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 June 30, 2015.

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 third-party 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 with a population of 10,000 or more people. The Bank’s housing price forecast as of June 30, 2015 included a short-term housing price forecast with projected changes ranging from a decrease of two percent to an increase of eight percent over the 12 month period beginning April 1, 2015. For the vast majority of markets, the projected short-term housing price changes range from an increase of two percent to five 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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 June 30, 2015, as well as related current credit enhancement:



	Significant Inputs
Year of Securitization	Prepayment Rates (%)	Default Rates (%)	Loss Severities (%)	Current Credit Enhancement (%)
Prime:
2007	41.56	5.32	51.82	0.27
Alt-A:
2007	12.47	24.70	35.21	0.15
2006	11.06	25.39	38.85	0.46
Alt-A weighted average	12.08	24.89	36.22	0.24
Total weighted average	12.71	24.47	36.55	0.24

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 June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Balance, beginning of period	$	533		$	567		$	542		$	574
Amount related to credit loss for which an other-than-temporary impairment was previously recognized	3			—			4			1
Increase in cash flows expected to be collected, (accreted as interest income over the remaining lives of the applicable securities)	(10		)	(8		)	(20		)	(16		)
Balance, end of period	$	526		$	559		$	526		$	559

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 and illiquidity in the marketplace. 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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 7—Advances

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



	As of June 30, 2015			As of December 31, 2014
Due in one year or less	$	56,894		$	57,675
Due after one year through two years	10,860			12,283
Due after two years through three years	7,797			9,435
Due after three years through four years	3,272			5,146
Due after four years through five years	2,698			2,910
Due after five years	19,325			10,433
Total par value	100,846			97,882
Discount on AHP ⁽¹⁾advances	(6		)	(7		)
Discount on EDGE ⁽²⁾advances	(5		)	(5		)
Hedging adjustments	1,375			1,778
Deferred commitment fees	(2		)	(4		)
Total	$	102,208		$	99,644

___________

⁽¹⁾ The Affordable Housing Program

⁽²⁾ The Economic Development and Growth Enhancement program

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



	As of June 30, 2015		As of December 31, 2014
Due or convertible in one year or less	$	59,487	$	60,551
Due or convertible after one year through two years	10,233		12,040
Due or convertible after two years through three years	6,395		7,866
Due or convertible after three years through four years	2,876		4,241
Due or convertible after four years through five years	2,691		2,900
Due or convertible after five years	19,164		10,284
Total par value	$	100,846	$	97,882

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



	As of June 30, 2015		As of December 31, 2014
Fixed-rate:
Due in one year or less	$	39,601	$	42,839
Due after one year	27,890		30,089
Total fixed-rate	67,491		72,928
Variable-rate:
Due in one year or less	17,292		14,836
Due after one year	16,063		10,118
Total variable-rate	33,355		24,954
Total par value	$	100,846	$	97,882

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. The concentration of the Bank’s advances to its 10 largest

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

borrowers was $73,123 and $72,799, as of June 30, 2015 and December 31, 2014, respectively. This concentration represented 72.5 percent and 74.4 percent, of total advances outstanding as of June 30, 2015 and December 31, 2014, respectively.

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 June 30, 2015 and December 31, 2014. No advance was past due as of June 30, 2015 and December 31, 2014.

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 June 30, 2015			As of December 31, 2014
Fixed-rate medium-term ⁽¹⁾ single-family residential mortgage loans	$	83		$	103
Fixed-rate long-term single-family residential mortgage loans	582			648
Total unpaid principal balance	665			751
Premiums	2			2
Discounts	(3		)	(4		)
Total	$	664		$	749

____________

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

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



	As of June 30, 2015		As of December 31, 2014
Conventional loans	$	618	$	698
Government-guaranteed or insured loans	47		53
Total unpaid principal balance	$	665	$	751

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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 9—Allowance for Credit Losses

The activity in the allowance for credit losses related to conventional single-family residential mortgage loans was as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2015		2014		2015			2014
Balance, beginning of period	$	2	$	4	$	3		$	11
Provision (reversal) for credit losses	—		2		(1		)	(2		)
Charge-offs	—		—		—			(3		)
Balance, end of period	$	2	$	6	$	2		$	6

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



	As of June 30, 2015		As of December 31, 2014
Allowance for credit losses:
Individually evaluated for impairment	$	—	$	1
Collectively evaluated for impairment	2		2
Total allowance for credit losses	$	2	$	3
Recorded investment:
Individually evaluated for impairment	$	15	$	15
Collectively evaluated for impairment	605		685
Total recorded investment	$	620	$	700

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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



	As of June 30, 2015
	Conventional Single-family Residential Mortgage Loans			Government-guaranteed or Insured Single-family Residential Mortgage Loans			Total
Past due 30-59 days	$	18		$	4		$	22
Past due 60-89 days	5			1			6
Past due 90 days or more	23			3			26
Total past due mortgage loans	46			8			54
Total current mortgage loans	574			39			613
Total mortgage loans ⁽¹⁾	$	620		$	47		$	667
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	13		$	1		$	14
Seriously delinquent rate ⁽³⁾	3.61		%	6.99		%	3.86		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	3		$	3
Loans on nonaccrual status ⁽⁵⁾	$	23		$	—		$	23

____________

⁽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, 2014
	Conventional Single-family Residential Mortgage Loans			Government-guaranteed or Insured Single-family Residential Mortgage Loans			Total
Past due 30-59 days	$	22		$	6		$	28
Past due 60-89 days	6			2			8
Past due 90 days or more	33			6			39
Total past due mortgage loans	61			14			75
Total current mortgage loans	639			39			678
Total mortgage loans ⁽¹⁾	$	700		$	53		$	753
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	19		$	1		$	20
Seriously delinquent rate ⁽³⁾	4.73		%	10.33		%	5.13		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	6		$	6
Loans on nonaccrual status ⁽⁵⁾	$	33		$	—		$	33

____________

⁽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 31.0 percent housing expense ratio is not achieved through re-amortization, the interest rate is reduced in 0.125 percent increments below the original note rate, to a floor rate of 3.00 percent, resulting in reduced principal and interest payments, for the temporary payment modification period of up to 36 months, until the target 31.0 percent housing expense ratio is met. A conventional single-family residential mortgage loan in which the borrower filed for Chapter 7 bankruptcy and the bankruptcy court discharged the borrower's obligation to the Bank is considered a troubled debt restructuring. Troubled debt restructurings are evaluated individually for impairment.

The table below presents the Bank's recorded investment balance in mortgage loans classified as troubled debt restructurings:



	As of June 30, 2015						As of December 31, 2014
	Performing		Non-performing		Total		Performing		Non-performing		Total
Conventional single-family residential loans	$	12	$	3	$	15	$	11	$	4	$	15

Due to the minimal change in terms of modified loans (i.e., no write-offs of principal), the Bank's pre-modification recorded investment was not materially different than the post-modification recorded investment in troubled debt restructurings during the three and six months ended June 30, 2015 and 2014.

The financial amounts related to the Bank's troubled debt restructurings are not material to the Bank's financial condition or results of operations for the periods presented.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 10—Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are the joint and several obligations of the 11 Federal Home Loan Banks (FHLBanks) and are backed only by the financial resources of the FHLBanks. The Federal Home Loan Banks Office of Finance (Office of Finance) tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of consolidated obligations for which it is the primary obligor.

Interest-rate Payment Terms. The following table details the Bank’s consolidated obligation bonds by interest-rate payment type:



	As of June 30, 2015		As of December 31, 2014
Fixed-rate	$	66,860	$	77,912
Step up/down	5,712		6,301
Simple variable-rate	7,950		7,550
Variable-rate capped floater	—		25
Total par value	$	80,522	$	91,788

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding, by year of contractual maturity:



	As of June 30, 2015				As of December 31, 2014
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Due in one year or less	$	45,693		0.48	$	52,081		0.24
Due after one year through two years	14,624			1.64	16,116			1.27
Due after two years through three years	8,575			1.80	9,683			2.22
Due after three years through four years	2,876			1.58	4,971			1.67
Due after four years through five years	3,678			1.85	3,094			1.56
Due after five years	5,076			2.11	5,843			2.12
Total par value	80,522			1.03	91,788			0.86
Premiums	57				73
Discounts	(17		)		(21		)
Hedging adjustments	252				248
Total	$	80,814			$	92,088

The following presents the Bank’s consolidated obligation bonds outstanding by call feature:



	As of June 30, 2015		As of December 31, 2014
Noncallable	$	59,134	$	69,164
Callable	21,388		22,624
Total par value	$	80,522	$	91,788

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table summarizes the Bank’s consolidated obligation bonds outstanding, by year of contractual maturity, or for callable consolidated obligation bonds, next call date:

Federal Home Loan Bank of Atlanta - FORM 10-Q - August 7, 2015

Attached files