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EX-32.1 - EXHIBIT - Federal Home Loan Bank of Atlanta | fhlb-atlq12016ex321.htm |
EX-31.2 - EXHIBIT - Federal Home Loan Bank of Atlanta | fhlb-atlq12016ex312.htm |
EX-31.1 - EXHIBIT - Federal Home Loan Bank of Atlanta | fhlb-atlq12016ex311.htm |
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 March 31, 2016
OR
¨ | 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 April 30, 2016 was 48,559,571.
Table of Contents
PART I. FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
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 March 31, 2016 | As of December 31, 2015 | ||||||
Assets | |||||||
Cash and due from banks | $ | 1,037 | $ | 1,751 | |||
Interest-bearing deposits (includes deposits with another FHLBank of $7 and $3 as of March 31, 2016 and December 31, 2015, respectively) | 1,093 | 1,088 | |||||
Securities purchased under agreements to resell | 3,506 | 2,500 | |||||
Federal funds sold | 5,825 | 5,421 | |||||
Investment securities: | |||||||
Trading securities (includes another FHLBank’s bond of $0 and $52 as of March 31, 2016 and December 31, 2015, respectively) | 1,031 | 1,265 | |||||
Available-for-sale securities | 1,587 | 1,662 | |||||
Held-to-maturity securities (fair value of $24,622 and $23,263 as of March 31, 2016 and December 31, 2015, respectively) | 24,578 | 23,239 | |||||
Total investment securities | 27,196 | 26,166 | |||||
Advances | 92,536 | 104,168 | |||||
Mortgage loans held for portfolio, net: | |||||||
Mortgage loans held for portfolio | 555 | 586 | |||||
Allowance for credit losses on mortgage loans | (2 | ) | (2 | ) | |||
Total mortgage loans held for portfolio, net | 553 | 584 | |||||
Accrued interest receivable | 177 | 171 | |||||
Derivative assets | 240 | 176 | |||||
Premises and equipment, net | 25 | 25 | |||||
Other assets | 188 | 196 | |||||
Total assets | $ | 132,376 | $ | 142,246 | |||
Liabilities | |||||||
Interest-bearing deposits | $ | 1,156 | $ | 1,084 | |||
Consolidated obligations, net: | |||||||
Discount notes | 60,166 | 69,434 | |||||
Bonds | 63,830 | 63,953 | |||||
Total consolidated obligations, net | 123,996 | 133,387 | |||||
Mandatorily redeemable capital stock | 13 | 14 | |||||
Accrued interest payable | 187 | 127 | |||||
Affordable Housing Program payable | 65 | 63 | |||||
Derivative liabilities | 139 | 124 | |||||
Other liabilities | 287 | 431 | |||||
Total liabilities | 125,843 | 135,230 | |||||
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 March 31, 2016 and December 31, 2015, respectively | 784 | 745 | |||||
Subclass B2 issued and outstanding shares: 38 and 44 as of March 31, 2016 and December 31, 2015, respectively | 3,845 | 4,356 | |||||
Total capital stock Class B putable | 4,629 | 5,101 | |||||
Retained earnings: | |||||||
Restricted | 265 | 255 | |||||
Unrestricted | 1,573 | 1,585 | |||||
Total retained earnings | 1,838 | 1,840 | |||||
Accumulated other comprehensive income | 66 | 75 | |||||
Total capital | 6,533 | 7,016 | |||||
Total liabilities and capital | $ | 132,376 | $ | 142,246 |
The accompanying notes are an integral part of these financial statements.
3
FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF INCOME
(Unaudited)
(In millions)
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Interest income | |||||||
Advances | $ | 127 | $ | 62 | |||
Prepayment fees, net | — | 1 | |||||
Interest-bearing deposits | 4 | 1 | |||||
Securities purchased under agreements to resell | 1 | 1 | |||||
Federal funds sold | 7 | 3 | |||||
Trading securities | 16 | 17 | |||||
Available-for-sale securities | 27 | 28 | |||||
Held-to-maturity securities | 67 | 60 | |||||
Mortgage loans | 9 | 11 | |||||
Total interest income | 258 | 184 | |||||
Interest expense | |||||||
Consolidated obligations: | |||||||
Discount notes | 63 | 9 | |||||
Bonds | 101 | 71 | |||||
Interest-bearing deposits | 1 | — | |||||
Total interest expense | 165 | 80 | |||||
Net interest income | 93 | 104 | |||||
Reversal of provision for credit losses | — | (1 | ) | ||||
Net interest income after reversal of provision for credit losses | 93 | 105 | |||||
Noninterest income (loss) | |||||||
Total other-than-temporary impairment losses | — | — | |||||
Net amount of impairment losses reclassified from accumulated other comprehensive income | — | (1 | ) | ||||
Net impairment losses recognized in earnings | — | (1 | ) | ||||
Net losses on trading securities | (9 | ) | (12 | ) | |||
Net (losses) gains on derivatives and hedging activities | (2 | ) | 24 | ||||
Standby letters of credit fees | 8 | 7 | |||||
Other | — | 2 | |||||
Total noninterest (loss) income | (3 | ) | 20 | ||||
Noninterest expense | |||||||
Compensation and benefits | 20 | 19 | |||||
Other operating expenses | 9 | 9 | |||||
Finance Agency | 2 | 3 | |||||
Office of Finance | 2 | 1 | |||||
Other | 1 | 2 | |||||
Total noninterest expense | 34 | 34 | |||||
Income before assessments | 56 | 91 | |||||
Affordable Housing Program assessments | 6 | 9 | |||||
Net income | $ | 50 | $ | 82 |
The accompanying notes are an integral part of these financial statements.
4
FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net income | $ | 50 | $ | 82 | |||
Other comprehensive loss: | |||||||
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 | (9 | ) | (17 | ) | |||
Reclassification of noncredit portion of impairment losses included in net income | — | 1 | |||||
Total other comprehensive loss | (9 | ) | (16 | ) | |||
Total comprehensive income | $ | 41 | $ | 66 |
The accompanying notes are an integral part of these financial statements.
5
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 | ||||||||||||||||||||||
Balance, December 31, 2014 | 52 | $ | 5,150 | $ | 195 | $ | 1,551 | $ | 1,746 | $ | 95 | $ | 6,991 | |||||||||||||
Issuance of capital stock | 9 | 994 | — | — | — | — | 994 | |||||||||||||||||||
Repurchase/redemption of capital stock | (18 | ) | (1,821 | ) | — | — | — | — | (1,821 | ) | ||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | — | (4 | ) | — | — | — | — | (4 | ) | |||||||||||||||||
Comprehensive income (loss) | — | — | 17 | 65 | 82 | (16 | ) | 66 | ||||||||||||||||||
Cash dividends on capital stock | — | — | — | (51 | ) | (51 | ) | — | (51 | ) | ||||||||||||||||
Balance, March 31, 2015 | 43 | $ | 4,319 | $ | 212 | $ | 1,565 | $ | 1,777 | $ | 79 | $ | 6,175 | |||||||||||||
Balance, December 31, 2015 | 51 | $ | 5,101 | $ | 255 | $ | 1,585 | $ | 1,840 | $ | 75 | $ | 7,016 | |||||||||||||
Issuance of capital stock | 12 | 1,264 | — | — | — | — | 1,264 | |||||||||||||||||||
Repurchase/redemption of capital stock | (17 | ) | (1,735 | ) | — | — | — | — | (1,735 | ) | ||||||||||||||||
Net shares reclassified to mandatorily redeemable capital stock | — | (1 | ) | — | — | — | — | (1 | ) | |||||||||||||||||
Comprehensive income (loss) | — | — | 10 | 40 | 50 | (9 | ) | 41 | ||||||||||||||||||
Cash dividends on capital stock | — | — | — | (52 | ) | (52 | ) | — | (52 | ) | ||||||||||||||||
Balance, March 31, 2016 | 46 | $ | 4,629 | $ | 265 | $ | 1,573 | $ | 1,838 | $ | 66 | $ | 6,533 |
The accompanying notes are an integral part of these financial statements.
6
FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Operating activities | |||||||
Net income | $ | 50 | $ | 82 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | (5 | ) | (45 | ) | |||
Reversal of provision for credit losses | — | (1 | ) | ||||
Loss (gain) due to change in net fair value adjustment on derivative and hedging activities | 5 | (13 | ) | ||||
Net change in fair value adjustment on trading securities | 9 | 12 | |||||
Net impairment losses recognized in earnings | — | 1 | |||||
Net change in: | |||||||
Accrued interest receivable | (6 | ) | 1 | ||||
Other assets | 6 | 22 | |||||
Affordable Housing Program payable | 3 | — | |||||
Accrued interest payable | 60 | 64 | |||||
Other liabilities | (10 | ) | (27 | ) | |||
Total adjustments | 62 | 14 | |||||
Net cash provided by operating activities | 112 | 96 | |||||
Investing activities | |||||||
Net change in: | |||||||
Interest-bearing deposits | (412 | ) | 533 | ||||
Securities purchased under agreements to resell | (1,007 | ) | 215 | ||||
Federal funds sold | (404 | ) | 1,605 | ||||
Trading securities: | |||||||
Proceeds from principal collected | 224 | — | |||||
Available-for-sale securities: | |||||||
Proceeds from principal collected | 78 | 69 | |||||
Held-to-maturity securities: | |||||||
Proceeds from principal collected | 1,060 | 950 | |||||
Purchases of long-term | (2,533 | ) | (1,455 | ) | |||
Advances: | |||||||
Proceeds from principal collected | 68,504 | 57,614 | |||||
Made | (56,412 | ) | (43,198 | ) | |||
Mortgage loans: | |||||||
Proceeds from principal collected | 29 | 35 | |||||
Proceeds from sale of foreclosed assets | 4 | 5 | |||||
Purchase of premises, equipment, and software | (1 | ) | (1 | ) | |||
Net cash provided by investing activities | 9,130 | 16,372 | |||||
7
FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions) | |||||||
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Financing activities | |||||||
Net change in interest-bearing deposits | 72 | 390 | |||||
Net payments on derivatives containing a financing element | (19 | ) | (21 | ) | |||
Proceeds from issuance of consolidated obligations: | |||||||
Discount notes | 144,787 | 209,007 | |||||
Bonds | 11,094 | 19,926 | |||||
Payments for debt issuance costs | (2 | ) | (3 | ) | |||
Payments for maturing and retiring consolidated obligations: | |||||||
Discount notes | (154,075 | ) | (219,266 | ) | |||
Bonds | (11,288 | ) | (26,013 | ) | |||
Proceeds from issuance of capital stock | 1,264 | 994 | |||||
Payments for repurchase/redemption of capital stock | (1,735 | ) | (1,821 | ) | |||
Payments for repurchase/redemption of mandatorily redeemable capital stock | (2 | ) | (6 | ) | |||
Cash dividends paid | (52 | ) | (51 | ) | |||
Net cash used in financing activities | (9,956 | ) | (16,864 | ) | |||
Net decrease in cash and due from banks | (714 | ) | (396 | ) | |||
Cash and due from banks at beginning of the period | 1,751 | 915 | |||||
Cash and due from banks at end of the period | $ | 1,037 | $ | 519 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for: | |||||||
Interest | $ | 53 | $ | 19 | |||
Affordable Housing Program assessments, net | $ | 3 | $ | 9 | |||
Noncash investing and financing activities: | |||||||
Net shares reclassified to mandatorily redeemable capital stock | $ | 1 | $ | 4 | |||
Transfers of mortgage loans to real estate owned | $ | 2 | $ | 5 |
The accompanying notes are an integral part of these financial statements.
8
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 affect 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, 2016, 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, 2015, which are contained in the Bank’s 2015 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 10, 2016 (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.
Refer to Note 2—Summary of Significant Accounting Policies to the 2015 audited financial statements for a description of all the Bank’s significant accounting policies. There have been no changes to these policies as of March 31, 2016, except for a policy update concerning concessions, which is described below.
The Bank pays concessions to dealers in connection with the issuance of certain consolidated obligations. The Federal Home Loan Banks Office of Finance (Office of Finance) prorates the amount of the concession to the Bank based upon the percentage of the debt issued that is assumed by the Bank. As a result of adopting the Financial Accounting Standards Board’s (FASB) guidance, Simplifying the Presentation of Debt Issuance Costs, the Bank records concessions paid on consolidated obligations as a direct deduction from their carrying amounts, consistent with the presentation of discounts on consolidated obligations. The concessions are amortized, using the interest method, over the contractual term of the corresponding consolidated obligations. The amortization of those concessions is included in consolidated obligation interest expense. For additional discussion on this guidance, refer to Note 2—Recently Issued and Adopted Accounting Guidance to the Bank's interim financial statements.
Note 2—Recently Issued and Adopted Accounting Guidance
Recently Issued Accounting Guidance
Contingent Put and Call Options in Debt Instruments. In March 2016, the FASB issued amended guidance to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. This guidance requires entities to apply only the four-step decision sequence when performing this assessment. Consequently, when a call (put) option is contingently exercisable, an entity should not assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2016, and early application is permitted. This guidance will be applied on a modified retrospective basis to existing debt instruments as of the beginning of the period for which the amendments are effective. The adoption of this guidance will have no impact on the Bank's financial condition or results of operations.
Leases. In February 2016, the FASB issued guidance on accounting for leases and disclosure of key information about leasing arrangements. This guidance requires lessees to recognize the following for all operating and finance leases at the commencement date: (1) a lease liability, which is the obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset representing the lessee’s right to use, or control the use of, the underlying asset for the lease term. A lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities for short-term leases with a term of 12 months or less. This guidance does not fundamentally change lessor accounting; however,
9
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
some changes have been made to align that guidance with the lessee guidance and other areas within GAAP. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2018, and early application is permitted. This guidance will be applied on a modified retrospective basis for leases existing at, or entered into after, the earliest period presented in the financial statements. The Bank is in the process of evaluating this guidance, and its impact on the Bank’s financial condition and results of operations has not yet been determined.
Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued guidance designed to improve the recognition, measurement, presentation, and disclosure of financial instruments through targeted changes to existing GAAP. These changes require the following: (1) entities to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (3) entities to separately present financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (4) reporting entities to separately present in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as “own credit”) when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. Additionally, these changes eliminate the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 31, 2017. The Bank is in the process of evaluating this guidance, and its impact on the Bank’s financial condition and results of operations has not yet been determined.
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 the 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 that the financial statements are issued. This 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 impact 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 this 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. In 2016, the FASB issued amendments, which did not change the core principle of the original guidance, but clarified certain aspects of the guidance. This guidance was originally effective for public entities for interim and annual reporting periods beginning after December 15, 2016; however, in August 2015, the FASB issued amended guidance that deferred the effective date of the revenue recognition standard by one year, which makes the standard effective for interim and annual reporting periods beginning after December 15, 2017. This guidance will be applied retrospectively either to each prior reporting period or with a cumulative effect recognized at the date of initial application, and early application is permitted only as of interim and annual reporting periods beginning after December 15, 2016. The Bank is in the process of evaluating this guidance, and its impact on the Bank’s financial condition and results of operations has not yet been determined.
Recently Adopted Accounting Guidance
Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. In March 2016, the FASB issued amended guidance designed to clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The Bank early adopted this guidance prospectively, and it became effective for the interim and annual periods beginning on January 1, 2016. However, the adoption of this guidance did not have an impact on the Bank's financial condition or results of operations.
Simplifying the Presentation of Debt Issuance Costs. In April 2015, the 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 became effective for the Bank for the interim and annual periods beginning on January 1, 2016. This amended guidance is required to be applied on a retrospective basis to each individual period presented on the Statements of Condition. As a result, $7 of debt issuance costs that were included in other
10
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
assets were reclassified as a reduction in the corresponding consolidated obligations balance. Specifically, the reclassification resulted in a $5 reduction in the consolidated bonds balance and a $2 reduction in the consolidated discount notes balance on the Bank's Statement of Condition as of December 31, 2015. Accordingly, the Bank's total assets and total liabilities each decreased by $7 as of December 31, 2015. However, the adoption of this guidance did not have any impact on the Bank's 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. Additionally, this guidance reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2016. However, this guidance did not have an impact on 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 that eliminates the concept of extraordinary items from GAAP. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2016. However, this guidance did not have an impact on the Bank’s financial condition or results of operations.
Note 3—Trading Securities
Major Security Types. The following table presents trading securities.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Government-sponsored enterprises debt obligations | $ | 1,030 | $ | 1,212 | |||
Another FHLBank’s bond (1) | — | 52 | |||||
State or local housing agency debt obligations | 1 | 1 | |||||
Total | $ | 1,031 | $ | 1,265 |
____________
(1) The Federal Home Loan Bank of Chicago is the primary obligor of this consolidated obligation bond.
The following table presents net losses on trading securities.
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net losses on trading securities held at period end | $ | (6 | ) | $ | (12 | ) | |
Net losses on trading securities sold or matured during the period | (3 | ) | — | ||||
Net losses on trading securities | $ | (9 | ) | $ | (12 | ) |
11
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
Note 4—Available-for-sale Securities
Major Security Type. The following table presents information on private-label residential mortgaged-backed securities (MBS) that are classified as available-for-sale.
Amortized Cost | Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||
As of March 31, 2016 | $ | 1,501 | $ | 19 | $ | 105 | $ | — | $ | 1,587 | |||||||||
As of December 31, 2015 | $ | 1,566 | $ | 19 | $ | 115 | $ | — | $ | 1,662 |
The following table presents private-label residential MBS that are classified as available-for-sale with unrealized losses. The unrealized losses are aggregated by the length of time that the 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 March 31, 2016 | 3 | $ | 102 | $ | 3 | 10 | $ | 236 | $ | 16 | 13 | $ | 338 | $ | 19 | |||||||||||||||||
As of December 31, 2015 | 3 | $ | 107 | $ | 2 | 10 | $ | 247 | $ | 17 | 13 | $ | 354 | $ | 19 |
The following table presents private-label residential MBS that are classified as available-for-sale and issued by members or affiliates of members, all of which have been issued by Bank of America Corporation, Charlotte, NC.
Amortized Cost | Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||
As of March 31, 2016 | $ | 995 | $ | 16 | $ | 75 | $ | — | $ | 1,054 | |||||||||
As of December 31, 2015 | $ | 1,037 | $ | 16 | $ | 77 | $ | — | $ | 1,098 |
12
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
Note 5—Held-to-maturity Securities
Major Security Types. The following table presents held-to-maturity securities.
As of March 31, 2016 | As of December 31, 2015 | ||||||||||||||||||||||||||||||
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 | $ | 75 | $ | — | $ | — | $ | 75 | $ | 76 | $ | — | $ | — | $ | 76 | |||||||||||||||
Government-sponsored enterprises debt obligations | 5,780 | 1 | 4 | 5,777 | 5,693 | — | 12 | 5,681 | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||
U.S. agency obligations-guaranteed single-family residential | 262 | 3 | — | 265 | 279 | 4 | — | 283 | |||||||||||||||||||||||
Government-sponsored enterprises single-family residential | 11,507 | 83 | 14 | 11,576 | 11,958 | 88 | 31 | 12,015 | |||||||||||||||||||||||
Government-sponsored enterprises multifamily commercial | 5,930 | 7 | 16 | 5,921 | 4,140 | — | 16 | 4,124 | |||||||||||||||||||||||
Private-label residential | 1,024 | 3 | 19 | 1,008 | 1,093 | 4 | 13 | 1,084 | |||||||||||||||||||||||
Total | $ | 24,578 | $ | 97 | $ | 53 | $ | 24,622 | $ | 23,239 | $ | 96 | $ | 72 | $ | 23,263 |
The following tables present held-to-maturity securities with unrealized losses. The unrealized losses are aggregated by major security type and by the length of time that the individual securities have been in a continuous unrealized loss position.
As of March 31, 2016 | ||||||||||||||||||||||||||||||||
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 | 14 | $ | 3,345 | $ | 3 | 3 | $ | 749 | $ | 1 | 17 | $ | 4,094 | $ | 4 | |||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Government-sponsored enterprises single-family residential | 67 | 2,575 | 11 | 8 | 429 | 3 | 75 | 3,004 | 14 | |||||||||||||||||||||||
Government-sponsored enterprises multifamily commercial | 21 | 1,321 | 10 | 11 | 817 | 6 | 32 | 2,138 | 16 | |||||||||||||||||||||||
Private-label residential | 36 | 432 | 6 | 49 | 434 | 13 | 85 | 866 | 19 | |||||||||||||||||||||||
Total | 138 | $ | 7,673 | $ | 30 | 71 | $ | 2,429 | $ | 23 | 209 | $ | 10,102 | $ | 53 |
13
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
As of December 31, 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 | 20 | $ | 4,535 | $ | 7 | 3 | $ | 745 | $ | 5 | 23 | $ | 5,280 | $ | 12 | |||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||||||
Government-sponsored enterprises single-family residential | 41 | 3,233 | 21 | 8 | 443 | 10 | 49 | 3,676 | 31 | |||||||||||||||||||||||
Government-sponsored enterprises multifamily commercial | 31 | 2,680 | 9 | 25 | 1,037 | 7 | 56 | 3,717 | 16 | |||||||||||||||||||||||
Private-label residential | 29 | 407 | 2 | 47 | 428 | 11 | 76 | 835 | 13 | |||||||||||||||||||||||
Total | 121 | $ | 10,855 | $ | 39 | 83 | $ | 2,653 | $ | 33 | 204 | $ | 13,508 | $ | 72 |
Redemption Terms. The following table presents the amortized cost and estimated fair value of held-to-maturity securities by contractual maturity. 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 March 31, 2016 | As of December 31, 2015 | ||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
Non-mortgage-backed securities: | |||||||||||||||
Due in one year or less | $ | 1,300 | $ | 1,300 | $ | 651 | $ | 651 | |||||||
Due after one year through five years | 4,555 | 4,552 | 5,118 | 5,106 | |||||||||||
Total non-mortgage-backed securities | 5,855 | 5,852 | 5,769 | 5,757 | |||||||||||
Mortgage-backed securities | 18,723 | 18,770 | 17,470 | 17,506 | |||||||||||
Total | $ | 24,578 | $ | 24,622 | $ | 23,239 | $ | 23,263 |
The following table presents private-label residential MBS that are classified as held-to-maturity and issued by members or affiliates of members, all of which have been issued by Bank of America Corporation, Charlotte, NC.
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
As of March 31, 2016 | $ | 264 | $ | — | $ | 5 | $ | 259 | ||||||||
As of December 31, 2015 | $ | 286 | $ | — | $ | 5 | $ | 281 |
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 that the Bank will be required to sell the security before its anticipated recovery of its amortized cost basis. 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
14
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
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. To reduce its risk of loss on such securities, the Bank regularly requires high levels of credit enhancements from the structure of the collateralized mortgage obligation. 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 that 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, not credit quality. These securities are guaranteed by government agencies or government-sponsored enterprises, 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 March 31, 2016.
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 using 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 (CBSA), 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 March 31, 2016, included a short-term housing price forecast with projected changes ranging from a decrease of one percent to an increase of eight percent over the 12 month period beginning January 1, 2016. For the vast majority of markets, the projected short-term housing price changes range from an increase of three 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. The second model 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.
15
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 March 31, | |||||||
2016 | 2015 | ||||||
Balance, beginning of period | $ | 505 | $ | 542 | |||
Amount related to credit loss for which an other-than-temporary impairment was previously recognized | — | 1 | |||||
Increase in cash flows expected to be collected, (accreted as interest income over the remaining lives of the applicable securities) | (12 | ) | (10 | ) | |||
Balance, end of period | $ | 493 | $ | 533 |
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.
Note 7—Advances
Redemption Terms. The following table presents the Bank's advances outstanding.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Overdrawn demand deposit accounts | $ | — | $ | 16 | |||
Due in one year or less | 41,926 | 46,673 | |||||
Due after one year through two years | 12,810 | 12,747 | |||||
Due after two years through three years | 5,250 | 6,360 | |||||
Due after three years through four years | 3,190 | 2,994 | |||||
Due after four years through five years | 5,120 | 4,616 | |||||
Due after five years | 22,479 | 29,458 | |||||
Total par value | 90,775 | 102,864 | |||||
Discount on AHP (1) advances | (6 | ) | (6 | ) | |||
Discount on EDGE (2) advances | (4 | ) | (4 | ) | |||
Hedging adjustments | 1,772 | 1,315 | |||||
Deferred commitment fees | (1 | ) | (1 | ) | |||
Total | $ | 92,536 | $ | 104,168 |
___________
(1) The Affordable Housing Program
(2) The Economic Development and Growth Enhancement program
16
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
The following table presents advances by year of contractual maturity or, for convertible advances, next conversion date.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Overdrawn demand deposit accounts | $ | — | $ | 16 | |||
Due or convertible in one year or less | 43,647 | 48,743 | |||||
Due or convertible after one year through two years | 11,580 | 11,434 | |||||
Due or convertible after two years through three years | 4,916 | 5,768 | |||||
Due or convertible after three years through four years | 3,229 | 3,020 | |||||
Due or convertible after four years through five years | 5,063 | 4,609 | |||||
Due or convertible after five years | 22,340 | 29,274 | |||||
Total par value | $ | 90,775 | $ | 102,864 |
Interest-rate Payment Terms. The following table presents interest-rate payment terms for advances.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Fixed-rate: | |||||||
Due in one year or less | $ | 30,781 | $ | 32,011 | |||
Due after one year | 27,593 | 27,051 | |||||
Total fixed-rate | 58,374 | 59,062 | |||||
Variable-rate: | |||||||
Due in one year or less | 11,146 | 14,678 | |||||
Due after one year | 21,255 | 29,124 | |||||
Total variable-rate | 32,401 | 43,802 | |||||
Total par value | $ | 90,775 | $ | 102,864 |
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 borrowers was $63,623 and $75,842 as of March 31, 2016 and December 31, 2015, respectively. This concentration represented 70.1 percent and 73.7 percent of total advances outstanding as of March 31, 2016 and December 31, 2015, 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 March 31, 2016 and December 31, 2015. No advance was past due as of March 31, 2016 and December 31, 2015.
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 March 31, 2016 | As of December 31, 2015 | |||||||
Fixed-rate medium-term (1) single-family residential mortgage loans | $ | 59 | $ | 66 | ||||
Fixed-rate long-term single-family residential mortgage loans | 497 | 521 | ||||||
Total unpaid principal balance | 556 | 587 | ||||||
Premiums | 2 | 2 | ||||||
Discounts | (3 | ) | (3 | ) | ||||
Total | $ | 555 | $ | 586 |
____________
(1) Medium-term is defined as a term of 15 years or less.
The following table presents the unpaid principal balance of mortgage loans held for portfolio by collateral or guarantee type.
As of March 31, 2016 | As of December 31, 2015 | |||||||
Conventional mortgage loans | $ | 516 | $ | 546 | ||||
Government-guaranteed or insured mortgage loans | 40 | 41 | ||||||
Total unpaid principal balance | $ | 556 | $ | 587 |
Refer to Note 9—Allowance for Credit Losses to the Bank’s interim financial statements for information related to the Bank's credit risk on mortgage loans and allowance for credit losses.
Note 9—Allowance for Credit Losses
The following table presents the activity in the allowance for credit losses related to conventional single-family residential mortgage loans.
For the Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Balance, beginning of period | $ | 2 | $ | 3 | ||||
Reversal of provision for credit losses | — | (1 | ) | |||||
Balance, end of period | $ | 2 | $ | 2 |
The following table presents the recorded investment in conventional single-family residential mortgage loans by impairment methodology.
As of March 31, 2016 | As of December 31, 2015 | |||||||
Allowance for credit losses: | ||||||||
Collectively evaluated for impairment | $ | 2 | $ | 2 | ||||
Recorded investment: | ||||||||
Individually evaluated for impairment | $ | 15 | $ | 15 | ||||
Collectively evaluated for impairment | 503 | 532 | ||||||
Total recorded investment | $ | 518 | $ | 547 |
17
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 mortgage loans, nonaccrual mortgage loans, and mortgage loans in process of foreclosure. The following tables present the Bank's recorded investment in mortgage loans by these key credit quality indicators.
As of March 31, 2016 | |||||||||||
Conventional Single-family Residential Mortgage Loans | Government-guaranteed or Insured Single-family Residential Mortgage Loans | Total | |||||||||
Past due 30-59 days | $ | 23 | $ | 5 | $ | 28 | |||||
Past due 60-89 days | 4 | — | 4 | ||||||||
Past due 90 days or more | 16 | 2 | 18 | ||||||||
Total past due mortgage loans | 43 | 7 | 50 | ||||||||
Total current mortgage loans | 475 | 32 | 507 | ||||||||
Total mortgage loans (1) | $ | 518 | $ | 39 | $ | 557 | |||||
Other delinquency statistics: | |||||||||||
In process of foreclosure (2) | $ | 8 | $ | 1 | $ | 9 | |||||
Seriously delinquent rate (3) | 3.03 | % | 5.99 | % | 3.24 | % | |||||
Past due 90 days or more and still accruing interest (4) | $ | — | $ | 2 | $ | 2 | |||||
Mortgage loans on nonaccrual status (5) | $ | 16 | $ | — | $ | 16 |
____________
(1) The difference between the recorded investment and the carrying value of total mortgage loans of $2 relates to accrued interest.
(2) Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in lieu, has been reported. Mortgage loans in the process of foreclosure are included in past due or current mortgage loans depending on their delinquency status.
(3) Mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total mortgage 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.
18
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
As of December 31, 2015 | |||||||||||
Conventional Single-family Residential Mortgage Loans | Government-guaranteed or Insured Single-family Residential Mortgage Loans | Total | |||||||||
Past due 30-59 days | $ | 17 | $ | 4 | $ | 21 | |||||
Past due 60-89 days | 5 | 1 | 6 | ||||||||
Past due 90 days or more | 18 | 3 | 21 | ||||||||
Total past due mortgage loans | 40 | 8 | 48 | ||||||||
Total current mortgage loans | 507 | 34 | 541 | ||||||||
Total mortgage loans (1) | $ | 547 | $ | 42 | $ | 589 | |||||
Other delinquency statistics: | |||||||||||
In process of foreclosure (2) | $ | 9 | $ | 1 | $ | 10 | |||||
Seriously delinquent rate (3) | 3.32 | % | 6.65 | % | 3.55 | % | |||||
Past due 90 days or more and still accruing interest (4) | $ | — | $ | 3 | $ | 3 | |||||
Mortgage loans on nonaccrual status (5) | $ | 18 | $ | — | $ | 18 |
____________
(1) The difference between the recorded investment and the carrying value of total mortgage loans of $3 relates to accrued interest.
(2) Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in lieu, has been reported. Mortgage loans in the process of foreclosure are included in past due or current mortgage loans depending on their delinquency status.
(3) Mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total mortgage 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.
The following table presents the Bank's recorded investment balance in mortgage loans classified as troubled debt restructurings as of March 31, 2016 and December 31, 2015.
Performing | Non-performing | Total | ||||||||||
Conventional single-family residential mortgage loans | $ | 13 | $ | 2 | $ | 15 |
Due to the minimal change in terms of modified mortgage 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 months ended March 31, 2016 and 2015.
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.
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 Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks its specific portion of consolidated obligations for which it is the primary obligor and records it as a liability.
19
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
Interest-rate Payment Terms. The following table presents the Bank’s consolidated obligation bonds by interest-rate payment type.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Fixed-rate | $ | 35,310 | $ | 40,512 | |||
Step up/down | 2,995 | 4,239 | |||||
Simple variable-rate | 25,272 | 19,022 | |||||
Total par value | $ | 63,577 | $ | 63,773 |
Redemption Terms. The following table presents the Bank’s participation in consolidated obligation bonds outstanding by year of contractual maturity.
As of March 31, 2016 | As of December 31, 2015 | ||||||||||
Amount | Weighted- average Interest Rate (%) | Amount | Weighted- average Interest Rate (%) | ||||||||
Due in one year or less | $ | 39,010 | 0.79 | $ | 32,559 | 0.74 | |||||
Due after one year through two years | 13,420 | 1.70 | 17,132 | 1.41 | |||||||
Due after two years through three years | 5,359 | 1.61 | 5,959 | 1.63 | |||||||
Due after three years through four years | 1,506 | 1.78 | 2,124 | 1.67 | |||||||
Due after four years through five years | 1,579 | 1.73 | 1,975 | 1.72 | |||||||
Due after five years | 2,703 | 2.26 | 4,024 | 2.18 | |||||||
Total par value | 63,577 | 1.16 | 63,773 | 1.16 | |||||||
Premiums | 31 | 36 | |||||||||
Discounts | (17 | ) | (20 | ) | |||||||
Hedging adjustments | 239 | 164 | |||||||||
Total | $ | 63,830 | $ | 63,953 |
The following table presents the Bank’s consolidated obligation bonds outstanding by call feature.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Noncallable | $ | 57,025 | $ | 53,432 | |||
Callable | 6,552 | 10,341 | |||||
Total par value | $ | 63,577 | $ | 63,773 |
The following table presents the Bank’s consolidated obligation bonds outstanding, by year of contractual maturity, or for callable consolidated obligation bonds, by next call date.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Due or callable in one year or less | $ | 44,693 | $ | 41,410 | |||
Due or callable after one year through two years | 13,164 | 16,277 | |||||
Due or callable after two years through three years | 3,316 | 3,461 | |||||
Due or callable after three years through four years | 931 | 1,055 | |||||
Due or callable after four years through five years | 939 | 1,023 | |||||
Due or callable after five years | 534 | 547 | |||||
Total par value | $ | 63,577 | $ | 63,773 |
20
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
Consolidated Obligation Discount Notes. Consolidated obligation discount notes are issued to raise short-term funds and have original contractual maturities of up to one year. These consolidated obligation discount notes are issued at less than their face amounts and redeemed at par value when they mature.
The following table presents the Bank’s participation in consolidated obligation discount notes.
Book Value | Par Value | Weighted-average Interest Rate (%) | |||||||
As of March 31, 2016 | $ | 60,166 | $ | 60,215 | 0.37 | ||||
As of December 31, 2015 | $ | 69,434 | $ | 69,481 | 0.27 |
Note 11—Capital and Mandatorily Redeemable Capital Stock
Capital. The following table presents the Bank's compliance with the Federal Housing Finance Agency's (Finance Agency) regulatory capital rules and requirements.
As of March 31, 2016 | As of December 31, 2015 | ||||||||||||||
Required | Actual | Required | Actual | ||||||||||||
Risk based capital | $ | 1,474 | $ | 6,479 | $ | 1,621 | $ | 6,956 | |||||||
Total regulatory capital ratio | 4.00 | % | 4.89 | % | 4.00 | % | 4.89 | % | |||||||
Total regulatory capital (1) | $ | 5,295 | $ | 6,479 | $ | 5,690 | $ | 6,956 | |||||||
Leverage capital ratio | 5.00 | % | 7.34 | % | 5.00 | % | 7.33 | % | |||||||
Leverage capital | $ | 6,619 | $ | 9,719 | $ | 7,113 | $ | 10,433 |
____________
(1) Total regulatory capital does not include accumulated other comprehensive income, but does include mandatorily redeemable capital stock.
Mandatorily Redeemable Capital Stock. The following table presents the activity in mandatorily redeemable capital stock.
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Balance, beginning of period | $ | 14 | $ | 19 | |||
Net reclassification from capital during the period | 1 | 4 | |||||
Repurchase/redemption of mandatorily redeemable capital stock | (2 | ) | (6 | ) | |||
Balance, end of period | $ | 13 | $ | 17 |
The following table presents the amount of mandatorily redeemable capital stock by year of redemption. The year of redemption in the table is the end of the five-year redemption period, or with respect to activity-based stock, the later of the expiration of the five-year redemption period or the activity’s maturity date.
As of March 31, 2016 | As of December 31, 2015 | ||||||
Due in one year or less | $ | 6 | $ | 7 | |||
Due after one year through two years | — | 1 | |||||
Due after two years through three years | 1 | — | |||||
Due after three years through four years | 1 | — | |||||
Due after four years through five years | 5 | 6 | |||||
Total | $ | 13 | $ | 14 |
21
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
Note 12—Accumulated Other Comprehensive Income
The following table presents the components comprising accumulated other comprehensive income.
Pension and Postretirement Benefits | Noncredit Portion of Other-than- temporary Impairment Losses on Available-for- sale Securities | Total Accumulated Other Comprehensive Income | |||||||||
Balance, December 31, 2014 | $ | (23 | ) | $ | 118 | $ | 95 | ||||
Other comprehensive income before reclassifications: | |||||||||||
Net change in fair value | — | (17 | ) | (17 | ) | ||||||
Reclassification from accumulated other comprehensive income to net income: | |||||||||||
Noncredit other-than-temporary impairment losses | — | 1 | 1 | ||||||||
Net current period other comprehensive loss | — | (16 | ) | (16 | ) | ||||||
Balance, March 31, 2015 | $ | (23 | ) | $ | 102 | $ | 79 | ||||
Balance, December 31, 2015 | $ | (20 | ) | $ | 95 | $ | 75 | ||||
Other comprehensive income before reclassifications: | |||||||||||
Net change in fair value | — | (9 | ) | (9 | ) | ||||||
Net current period other comprehensive loss | — | (9 | ) | (9 | ) | ||||||
Balance, March 31, 2016 | $ | (20 | ) | $ | 86 | $ | 66 |
____________
(1) Included in "Compensation and benefits" on the Statements of Income.,march
Note 13—Derivatives and Hedging Activities
Nature of Business Activity
The Bank is exposed to interest-rate risk primarily from the effect of interest rate changes on its interest-earning assets and on its funding sources that finance these assets. To mitigate the risk of loss, the Bank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes that it is willing to accept. The Bank monitors the risk to its interest income, net interest margin, and average maturity of its interest-earning assets and funding sources. The goal of the Bank’s interest-rate risk management strategies is not to eliminate interest-rate risk, but to manage it within appropriate limits.
The Bank enters into derivatives to manage the interest-rate risk exposure that is inherent in its otherwise unhedged assets and funding sources, to achieve the Bank's risk management objectives, and to act as an intermediary between its members and counterparties. The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The Bank's over-the-counter derivative transactions may either be (1) uncleared derivatives, which are executed bilaterally with a counterparty; or (2) cleared derivatives, which are cleared through a Futures Commission Merchant (clearing agent) with a Derivative Clearing Organization (Clearinghouse). Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated, and the executing counterparty is replaced with the Clearinghouse as the counterparty. The Bank is not a derivative dealer and does not trade derivatives for short-term profit. For additional information on the Bank’s derivatives and hedging activities, see Note 18—Derivatives and Hedging Activities to the 2015 audited financial statements contained in the Bank’s Form 10-K.
Financial Statement Effect and Additional Financial Information
Derivative Notional Amounts. The notional amount of derivatives serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk; the overall risk is much smaller. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.
22
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)
The following table presents the fair value of derivative instruments, including the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.
As of March 31, 2016 | As of December 31, 2015 | ||||||||||||||||||||||
Notional Amount of Derivatives | Derivative Assets | Derivative Liabilities | Notional Amount of Derivatives | Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Derivatives in hedging relationships: | |||||||||||||||||||||||
Interest rate swaps | $ | 77,516 | $ | 356 | $ | 1,872 | $ | 80,290 | $ | 312 | $ | 1,467 | |||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||||||
Interest rate swaps | 2,354 | 16 | 75 | 3,008 | 10 | 74 | |||||||||||||||||
Interest rate caps or floors | 16,500 | 8 | 4 | 16,500 | 15 | 10 | |||||||||||||||||
Total derivatives not designated as hedging instruments | 18,854 | 24 | 79 | 19,508 | 25 | 84 | |||||||||||||||||
Total derivatives before netting and collateral adjustments | $ | 96,370 | 380 | 1,951 | $ | 99,798 | 337 | 1,551 | |||||||||||||||
Netting adjustments and cash collateral (1) |