Federal Home Loan Bank of Atlanta - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq12017ex321.htm
EX-31.2 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq12017ex312.htm
EX-31.1 - EXHIBIT - Federal Home Loan Bank of Atlanta	fhlb-atlq12017ex311.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, 2017



¨	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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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, 2017 was 48,275,869.

Table of Contents



PART I. FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)	4
	STATEMENTS OF CONDITION	4
	STATEMENTS OF INCOME	5
	STATEMENTS OF COMPREHENSIVE INCOME	6
	STATEMENTS OF CAPITAL	7
	STATEMENTS OF CASH FLOWS	8
	NOTES TO FINANCIAL STATEMENTS	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	59
PART II. OTHER INFORMATION		60
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosure	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
SIGNATURES		62

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, 2017			As of December 31, 2016
Assets
Cash and due from banks	$	1,041		$	1,815
Interest-bearing deposits (including deposits with another FHLBank of $4 and $5 as of March 31, 2017 and December 31, 2016, respectively)	1,207			1,106
Securities purchased under agreements to resell	2,386			1,386
Federal funds sold	11,176			7,770
Investment securities:
Trading securities	260			262
Available-for-sale securities	1,289			1,345
Held-to-maturity securities (fair value of $25,524 and $24,633 as of March 31, 2017 and December 31, 2016, respectively)	25,487			24,641
Total investment securities	27,036			26,248
Advances	90,688			99,077
Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio	513			524
Allowance for credit losses on mortgage loans	(1		)	(1		)
Total mortgage loans held for portfolio, net	512			523
Accrued interest receivable	176			171
Derivative assets	312			355
Premises and equipment, net	23			24
Other assets	173			196
Total assets	$	134,730		$	138,671
Liabilities
Interest-bearing deposits	$	1,205		$	1,118
Consolidated obligations, net:
Discount notes	42,066			41,292
Bonds	84,292			88,647
Total consolidated obligations, net	126,358			129,939
Mandatorily redeemable capital stock	1			1
Accrued interest payable	177			128
Affordable Housing Program payable	73			69
Derivative liabilities	38			107
Other liabilities	213			358
Total liabilities	128,065			131,720
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 as of March 31, 2017 and December 31, 2016	821			787
Subclass B2 issued and outstanding shares: 39 and 42 as of March 31, 2017 and December 31, 2016, respectively	3,829			4,168
Total capital stock Class B putable	4,650			4,955
Retained earnings:
Restricted	326			310
Unrestricted	1,584			1,582
Total retained earnings	1,910			1,892
Accumulated other comprehensive income	105			104
Total capital	6,665			6,951
Total liabilities and capital	$	134,730		$	138,671

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

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(Unaudited)

(In millions)



	For the Three Months Ended March 31,
	2017			2016
Interest income
Advances	$	(81	)	$	127
Prepayment fees, net	1			—
Interest-bearing deposits	5			4
Securities purchased under agreements to resell	1			1
Federal funds sold	19			7
Trading securities	3			16
Available-for-sale securities	27			27
Held-to-maturity securities	85			67
Mortgage loans	7			9
Total interest income	67			258
Interest expense
Consolidated obligations:
Discount notes	68			63
Bonds	199			101
Interest-bearing deposits	2			1
Total interest expense	269			165
Net interest (expense) income	(202		)	93
Noninterest income (loss)
Net losses on trading securities	(2		)	(9		)
Net gains (losses) on derivatives and hedging activities	313			(2		)
Standby letters of credit fees	7			8
Other	1			—
Total noninterest income (loss)	319			(3		)
Noninterest expense
Compensation and benefits	20			20
Other operating expenses	9			9
Finance Agency	2			2
Office of Finance	2			2
Other	1			1
Total noninterest expense	34			34
Income before assessments	83			56
Affordable Housing Program assessments	8			6
Net income	$	75		$	50

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

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)



	For the Three Months Ended March 31,
	2017		2016
Net income	$	75	$	50
Other comprehensive income (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		)
Other comprehensive income related to pension and postretirement benefit plans	1		—
Total other comprehensive income (loss)	1		(9		)
Total comprehensive income	$	76	$	41

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

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, 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

Balance, December 31, 2016	50		$	4,955		$	310	$	1,582		$	1,892		$	104		$	6,951
Issuance of capital stock	20		2,034			—		—			—			—			2,034
Repurchase/redemption of capital stock	(23	)	(2,331		)	—		—			—			—			(2,331		)
Net shares reclassified to mandatorily redeemable capital stock	—		(8		)	—		—			—			—			(8		)
Comprehensive income	—		—			16		59			75			1			76
Cash dividends on capital stock	—		—			—		(57		)	(57		)	—			(57		)
Balance, March 31, 2017	47		$	4,650		$	326	$	1,584		$	1,910		$	105		$	6,665

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

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)



	For the Three Months Ended March 31,
	2017			2016
Operating activities
Net income	$	75		$	50
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	(18		)	(5		)
Net change in fair value adjustment on derivatives and related hedging activities	36			5
Net change in fair value adjustment on trading securities	2			9
Net change in:
Accrued interest receivable	(5		)	(6		)
Other assets	22			6
Affordable Housing Program payable	4			3
Accrued interest payable	49			60
Other liabilities	(31		)	(10		)
Total adjustments	59			62
Net cash provided by operating activities	134			112
Investing activities
Net change in:
Interest-bearing deposits	255			(412		)
Securities purchased under agreements to resell	(1,000		)	(1,007		)
Federal funds sold	(3,406		)	(404		)
Trading securities:
Proceeds from principal collected	—			224
Available-for-sale securities:
Proceeds from principal collected	71			78
Held-to-maturity securities:
Net change in short-term	(350		)	—
Proceeds from principal collected	1,766			1,060
Purchases of long-term	(2,376		)	(2,533		)
Advances:
Proceeds from principal collected	86,936			68,504
Made	(78,979		)	(56,412		)
Mortgage loans:
Proceeds from principal collected	28			29
Purchases from another FHLBank	(18		)	—
Proceeds from sale of foreclosed assets	1			4
Purchase of premise, equipment, and software	(1		)	(1		)
Net cash provided by investing activities	2,927			9,130



FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Three Months Ended March 31,
	2017			2016
Financing activities
Net change in interest-bearing deposits	87			72
Net payments on derivatives containing a financing element	(10		)	(19		)
Proceeds from issuance of consolidated obligations:
Discount notes	158,899			144,787
Bonds	9,260			11,094
Payments for debt issuance costs	(2		)	(2		)
Payments for maturing and retiring consolidated obligations:
Discount notes	(158,123		)	(154,075		)
Bonds	(13,584		)	(11,288		)
Proceeds from issuance of capital stock	2,034			1,264
Payments for repurchase/redemption of capital stock	(2,331		)	(1,735		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(8		)	(2		)
Cash dividends paid	(57		)	(52		)
Net cash used in financing activities	(3,835		)	(9,956		)
Net decrease in cash and due from banks	(774		)	(714		)
Cash and due from banks at beginning of the period	1,815			1,751
Cash and due from banks at end of the period	$	1,041		$	1,037
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	158		$	53
Affordable Housing Program assessments, net	$	4		$	3
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	8		$	1
Held-to-maturity securities acquired with accrued liabilities	$	22		$	—
Transfers of mortgage loans to real estate owned	$	1		$	2

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

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 as of 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, 2017, 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, 2016, which are contained in the Bank’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 9, 2017 (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 Bank's 2016 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, 2017.

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Premium Amortization on Purchased Callable Debt Securities. In March 2017, the Financial Accounting Standards Board (FASB) issued guidance intended to better align the amortization period of callable debt securities held at a premium to expectations incorporated in market pricing on the underlying securities. This guidance shortens the amortization period for certain callable debt securities held at a premium by requiring that the premium be amortized to the earliest call date. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2018. Early application is permitted although the Bank does not intend to adopt this guidance early. This guidance will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the fiscal year in which this guidance is adopted. The Bank is in the process of evaluating this guidance, but this guidance is not expected to have a material impact on the Bank's financial condition or results of operations.

Improving the Presentation of Net Periodic Pension Costs and Net Periodic Postretirement Benefit Cost. In March 2017, the FASB issued guidance intended to improve the presentation of net periodic pension and postretirement benefit costs. This guidance requires an employer to report the service cost component in the same line item as compensation costs on the income statement, while the other components of net benefit cost are required to be presented separately from the service cost component. Additionally, this guidance only allows the service cost component to be eligible for capitalization, when applicable. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2017. Early application is permitted although the Bank does not intend to adopt this guidance early. This guidance will be applied on a retrospective basis for the separate presentation of the service cost component and other components on the income statement. This guidance will be applied on a prospective basis for the capitalization of the service cost component in assets. This guidance is not expected to have a material impact on the Bank's financial condition or results of operations.

Classification of Certain Cash Receipts and Cash Payments. In August 2016, the FASB issued guidance intended to reduce diversity in how cash receipts and cash payments are presented and classified on the Statements of Cash Flows for certain transactions. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2017. Early application is permitted although the Bank does not intend to adopt this guidance early. The adoption of this guidance will not have an impact on the Bank's financial condition, results of operations, or cash flows.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued guidance intended to improve the timeliness of recording credit losses on loans and other financial instruments held by financial institutions and other organizations. This guidance requires all expected credit losses for financial assets that are held at the reporting date to be measured based on historical experience, current conditions, and reasonable and supportable forecasts. Credit losses related to available-for-sale securities will be recorded through an allowance for credit losses. Additionally, this guidance amends the accounting for purchased financial assets with credit deterioration and requires enhanced disclosures that provide additional information to help financial statement users better understand significant estimates and judgments. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2019. Early application is permitted for the interim and annual periods beginning after December 15, 2018, although the Bank does not intend to adopt this guidance early. The Bank is in the process of evaluating this guidance, and its impact on the Bank’s financial condition and results of operations will depend upon the composition of the financial assets held by the Bank at the adoption date, as well as the economic conditions and forecasts at that time.

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, 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. Early application is permitted although the Bank does not intend to adopt this guidance early. 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 adoption of this guidance is not expected to have a material impact on the Bank's financial condition or results of operations.

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 adoption of this guidance is not expected to have a material 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. Financial instruments and other contractual rights are excluded from the scope of this new revenue recognition guidance and will continue to be accounted for under existing guidance. In 2017 and 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 becomes effective for the Bank for the 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. Early application is permitted although the Bank does not intend to adopt this guidance early. Because the majority of contracts with the Bank's members are excluded from the scope of this guidance, the adoption of this guidance is not expected to have a material impact on the Bank's financial condition or results of operations.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Recently Adopted 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 became effective for the Bank for the interim and annual periods beginning on January 1, 2017. The adoption of 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, 2017		As of December 31, 2016
Government-sponsored enterprises debt obligations	$	259	$	261
State or local housing agency debt obligations	1		1
Total	$	260	$	262

The following table presents net losses on trading securities.



	For the Three Months Ended March 31,
	2017			2016
Net losses on trading securities held at period end	$	(2	)	$	(6	)
Net losses on trading securities that matured during the period	—			(3		)
Net losses on trading securities	$	(2	)	$	(9	)

Note 4—Available-for-sale Securities

Major Security Type. The following table presents information on private-label residential mortgage-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, 2017	$	1,165	$	4	$	128	$	—	$	1,289
As of December 31, 2016	$	1,221	$	6	$	130	$	—	$	1,345

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, 2017	2	$	19	$	—	8	$	131	$	4	10	$	150	$	4
As of December 31, 2016	1	$	14	$	—	10	$	189	$	6	11	$	203	$	6

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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, 2017	$	759	$	3	$	98	$	—	$	854
As of December 31, 2016	$	792	$	5	$	102	$	—	$	889

Note 5—Held-to-maturity Securities

Major Security Types. The following table presents held-to-maturity securities.



	As of March 31, 2017								As of December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificates of deposit	$	350	$	—	$	—	$	350	$	—	$	—	$	—	$	—
State or local housing agency debt obligations	76		—		—		76		76		—		—		76
Government-sponsored enterprises debt obligations	6,118		6		5		6,119		6,041		3		5		6,039
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	195		2		—		197		209		2		—		211
Government-sponsored enterprises residential	11,034		58		29		11,063		10,752		44		43		10,753
Government-sponsored enterprises commercial	6,980		8		5		6,983		6,773		2		11		6,764
Private-label residential	734		6		4		736		790		5		5		790
Total	$	25,487	$	80	$	43	$	25,524	$	24,641	$	56	$	64	$	24,633

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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, 2017
	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	11	$	2,427	$	5	—	$	—	$	—	11	$	2,427	$	5
Mortgage-backed securities:
Government-sponsored enterprises residential	15	1,416		15		68	2,229		14		83	3,645		29
Government-sponsored enterprises commercial	42	1,321		3		10	979		2		52	2,300		5
Private-label residential	4	10		—		49	310		4		53	320		4
Total	72	$	5,174	$	23	127	$	3,518	$	20	199	$	8,692	$	43



	As of December 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	10	$	2,532	$	5	—	$	—	$	—	10	$	2,532	$	5
Mortgage-backed securities:
Government-sponsored enterprises residential	46	2,813		22		63	2,206		21		109	5,019		43
Government-sponsored enterprises commercial	52	4,147		6		22	1,540		5		74	5,687		11
Private-label residential	6	10		—		56	432		5		62	442		5
Total	114	$	9,502	$	33	141	$	4,178	$	31	255	$	13,680	$	64

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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, 2017				As of December 31, 2016
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	2,741	$	2,743	$	2,454	$	2,455
Due after one year through five years	3,397		3,397		3,487		3,484
Due after five years through ten years	406		405		176		176
Total non-mortgage-backed securities	6,544		6,545		6,117		6,115
Mortgage-backed securities	18,943		18,979		18,524		18,518
Total	$	25,487	$	25,524	$	24,641	$	24,633

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, 2017	$	163	$	—	$	1	$	162
As of December 31, 2016	$	177	$	—	$	2	$	175

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. The financial amounts related to the Bank's other-than-temporary impairment are not material to the Bank's financial condition or results of operations for the periods presented.

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,
	2017			2016
Balance, beginning of period	$	455		$	505
Increase in cash flows expected to be collected, (accreted as interest income over the remaining lives of the applicable securities)	(15		)	(12		)
Balance, end of period	$	440		$	493

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 7—Advances

Redemption Terms. The following table presents the Bank's advances outstanding.



	As of March 31, 2017			As of December 31, 2016
Due in one year or less	60,532			47,325
Due after one year through two years	6,985			8,244
Due after two years through three years	4,457			5,904
Due after three years through four years	5,345			5,859
Due after four years through five years	4,990			11,846
Due after five years	8,021			19,110
Total par value	90,330			98,288
Discount on AHP ⁽¹⁾advances	(5		)	(5		)
Discount on EDGE ⁽²⁾advances	(3		)	(4		)
Hedging adjustments	366			798
Total	$	90,688		$	99,077

___________

⁽¹⁾ The Affordable Housing Program

⁽²⁾ The Economic Development and Growth Enhancement program

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



	As of March 31, 2017		As of December 31, 2016
Due or convertible in one year or less	60,905		47,935
Due or convertible after one year through two years	6,706		7,724
Due or convertible after two years through three years	4,580		5,943
Due or convertible after three years through four years	5,333		5,867
Due or convertible after four years through five years	5,008		11,866
Due or convertible after five years	7,798		18,953
Total par value	$	90,330	$	98,288

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



	As of March 31, 2017		As of December 31, 2016
Fixed-rate:
Due in one year or less	$	49,557	$	38,597
Due after one year	20,588		24,528
Total fixed-rate	70,145		63,125
Variable-rate:
Due in one year or less	10,975		8,728
Due after one year	9,210		26,435
Total variable-rate	20,185		35,163
Total par value	$	90,330	$	98,288

Credit Risk. The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions, 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 $61,774 and $67,493 as of March 31, 2017 and December 31, 2016, respectively. This concentration

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

represented 68.4 percent and 68.7 percent of total advances outstanding as of March 31, 2017 and December 31, 2016, 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, 2017 and December 31, 2016. No advance was past due as of March 31, 2017 and December 31, 2016.

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, 2017			As of December 31, 2016
Medium-term (15 years or less)	$	34		$	40
Long-term (greater than 15 years)	479			485
Total unpaid principal balance	513			525
Premiums	2			2
Discounts	(2		)	(3		)
Total	$	513		$	524

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



	As of March 31, 2017		As of December 31, 2016
Conventional mortgage loans	$	482	$	492
Government-guaranteed or insured mortgage loans	31		33
Total unpaid principal balance	$	513	$	525

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 residential mortgage loans.



	For the Three Months Ended March 31,
	2017		2016
Balance, beginning of period	$	1	$	2
Provision for credit losses	—		—
Balance, end of period	$	1	$	2

The following table presents the recorded investment in conventional residential mortgage loans by impairment methodology.



	As of March 31, 2017		As of December 31, 2016
Allowance for credit losses:
Collectively evaluated for impairment	$	1	$	1
Recorded investment:
Individually evaluated for impairment	$	12	$	12
Collectively evaluated for impairment	472		481
Total recorded investment	$	484	$	493

Table of Contents

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, 2017
	Conventional Residential Mortgage Loans			Government-guaranteed or Insured Residential Mortgage Loans			Total
Past due 30-59 days	$	15		$	3		$	18
Past due 60-89 days	4			1			5
Past due 90 days or more	11			—			11
Total past due mortgage loans	30			4			34
Total current mortgage loans	454			27			481
Total mortgage loans ⁽¹⁾	$	484		$	31		$	515
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	7		$	—		$	7
Seriously delinquent rate ⁽³⁾	2.31		%	2.24		%	2.31		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	—		$	—
Mortgage loans on nonaccrual status ⁽⁵⁾	$	11		$	—		$	11

____________

(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.



	As of December 31, 2016
	Conventional Residential Mortgage Loans			Government-guaranteed or Insured Residential Mortgage Loans			Total
Past due 30-59 days	$	17		$	4		$	21
Past due 60-89 days	3			1			4
Past due 90 days or more	12			1			13
Total past due mortgage loans	32			6			38
Total current mortgage loans	461			27			488
Total mortgage loans ⁽¹⁾	$	493		$	33		$	526
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	6		$	1		$	7
Seriously delinquent rate ⁽³⁾	2.44		%	3.75		%	2.53		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	1		$	1
Mortgage loans on nonaccrual status ⁽⁵⁾	$	12		$	—		$	12

____________

⁽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.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The financial amounts related to the Bank's troubled debt restructurings and impaired loans 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.

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



	As of March 31, 2017		As of December 31, 2016
Fixed-rate	$	22,336	$	23,674
Step up/down	2,649		2,534
Simple variable-rate	59,308		62,408
Total par value	$	84,293	$	88,616

Redemption Terms. The following table presents the Bank’s participation in consolidated obligation bonds outstanding by year of contractual maturity.



	As of March 31, 2017				As of December 31, 2016
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Due in one year or less	$	66,469		1.03	$	65,378		0.91
Due after one year through two years	11,850			1.21	17,065			1.05
Due after two years through three years	1,630			1.71	1,849			1.67
Due after three years through four years	1,330			1.68	1,482			1.68
Due after four years through five years	1,328			1.68	1,117			1.58
Due after five years	1,686			2.44	1,725			2.37
Total par value	84,293			1.12	88,616			1.00
Premiums	21				24
Discounts	(11		)		(12		)
Hedging adjustments	(11		)		19
Total	$	84,292			$	88,647

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



	As of March 31, 2017		As of December 31, 2016
Noncallable	$	79,024	$	83,487
Callable	5,269		5,129
Total par value	$	84,293	$	88,616

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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, 2017		As of December 31, 2016
Due or callable in one year or less	$	71,463	$	70,232
Due or callable after one year through two years	9,910		15,250
Due or callable after two years through three years	1,260		1,399
Due or callable after three years through four years	981		1,103
Due or callable after four years through five years	193		162
Due or callable after five years	486		470
Total par value	$	84,293	$	88,616

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, 2017	$	42,066	$	42,124	0.62
As of December 31, 2016	$	41,292	$	41,334	0.48

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, 2017						As of December 31, 2016
	Required			Actual			Required			Actual
Risk based capital	$	1,634		$	6,561		$	1,701		$	6,848
Total regulatory capital ratio	4.00		%	4.87		%	4.00		%	4.94		%
Total regulatory capital ⁽¹⁾	$	5,389		$	6,561		$	5,547		$	6,848
Leverage capital ratio	5.00		%	7.31		%	5.00		%	7.41		%
Leverage capital	$	6,736		$	9,842		$	6,934		$	10,273

____________

⁽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,
	2017			2016
Balance, beginning of period	$	1		$	14
Net reclassification from capital during the period	8			1
Repurchase/redemption of mandatorily redeemable capital stock	(8		)	(2		)
Balance, end of period	$	1		$	13

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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, 2017	As of December 31, 2016
Due after three years through four years	1	1

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, 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

Balance, December 31, 2016	$	(20	)	$	124		$	104
Reclassification from accumulated other comprehensive income to net income:
Amortization of pension and postretirement ⁽¹⁾	1			—			1
Net current period other comprehensive income	1			—			1
Balance, March 31, 2017	$	(19	)	$	124		$	105

____________

⁽¹⁾ Included in Compensation and benefits on the Statements of Income.

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. In addition, 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 Derivatives Clearing Organization (Clearinghouse). Once a derivatives transaction has been accepted for clearing by a Clearinghouse, the derivatives 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 2016 audited financial statements contained in the Bank’s Form 10-K.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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.

The following table presents the notional amount, fair value of derivative instruments (excluding fair value adjustments related to variation margin on daily settled contracts), and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments, cash collateral, and variation margin for daily settled contracts. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.



	As of March 31, 2017							As of December 31, 2016
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives in hedging relationships:
Interest rate swaps	$	47,092	$	252	$	598		$	65,027	$	256	$	1,029
Derivatives not designated as hedging instruments:
Interest rate swaps	1,148		10		14			1,158		9		31
Interest rate caps or floors	13,500		10		7			15,000		17		13
Mortgage delivery commitments	—		—		—			12		—		—
Total derivatives not designated as hedging instruments	14,648		20		21			16,170		26		44
Total derivatives before netting and collateral adjustments	$	61,740	272		619			$	81,197	282		1,073
Netting adjustments, cash collateral, and variation margin for daily settled contracts ⁽¹⁾			40		(581		)			73		(966		)
Derivative assets and derivative liabilities			$	312	$	38				$	355	$	107

___________

⁽¹⁾

Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty and includes fair value adjustments on derivatives for which variation margin is characterized as a daily settled contract. Cash collateral posted and related accrued interest was $557 and $1,061 as of March 31, 2017 and December 31, 2016, respectively. Cash collateral received and related accrued interest was $22 as of March 31, 2017 and December 31, 2016. Variation margin for daily settled contracts was $87 as of March 31, 2017.

The following table presents the components of net gains (losses) on derivatives and hedging activities as presented on the Statements of Income.



	For the Three Months Ended March 31,
	2017			2016
Derivatives and hedged items in fair value hedging relationships:
Interest rate swaps	$	314		$	6
Derivatives not designated as hedging instruments:
Interest rate swaps	2			7
Interest rate caps or floors	(1		)	(1		)
Net interest settlements	(2		)	(14		)
Total net losses related to derivatives not designated as hedging instruments	(1		)	(8		)
Net gains (losses) on derivatives and hedging activities	$	313		$	(2	)

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table presents, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank’s net interest income.

For the Three Months Ended March 31,

2017

2016

Hedged Item Type

Gains (Losses) on Derivative

Gains (Losses) on Hedged Item

Net Fair Value
Hedge Ineffectiveness

Effect of Derivatives on Net Interest Income ⁽¹⁾

Gains (Losses) on Derivative

Gains (Losses) on Hedged Item

Federal Home Loan Bank of Atlanta - FORM 10-Q - May 8, 2017

Attached files