Federal Home Loan Bank of Atlanta - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Federal Home Loan Bank of Atlanta	fhlb-atlq32017ex321.htm
EX-31.2 - EXHIBIT 31.2 - Federal Home Loan Bank of Atlanta	fhlb-atlq32017ex312.htm
EX-31.1 - EXHIBIT 31.1 - Federal Home Loan Bank of Atlanta	fhlb-atlq32017ex311.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 September 30, 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 October 31, 2017 was 50,607,834.

Table of Contents



PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	STATEMENTS OF CONDITION	3
	STATEMENTS OF INCOME	4
	STATEMENTS OF COMPREHENSIVE INCOME	5
	STATEMENTS OF CAPITAL	6
	STATEMENTS OF CASH FLOWS	7
	NOTES TO FINANCIAL STATEMENTS	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	64
PART II. OTHER INFORMATION		66
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosure	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
SIGNATURES		68

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CONDITION

(Unaudited)

(In millions, except par value)



	As of September 30, 2017			As of December 31, 2016
Assets
Cash and due from banks	$	1,138		$	1,815
Interest-bearing deposits (including deposits with another FHLBank of $4 and $5 as of September 30, 2017 and December 31, 2016, respectively)	1,751			1,106
Securities purchased under agreements to resell	1,500			1,386
Federal funds sold	13,027			7,770
Investment securities:
Trading securities	57			262
Available-for-sale securities	1,164			1,345
Held-to-maturity securities (fair value of $24,134 and $24,633 as of September 30, 2017 and December 31, 2016, respectively)	24,065			24,641
Total investment securities	25,286			26,248
Advances	99,812			99,077
Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio	462			524
Allowance for credit losses on mortgage loans	(1		)	(1		)
Total mortgage loans held for portfolio, net	461			523
Loan to another FHLBank	250			—
Accrued interest receivable	194			171
Derivative assets	321			355
Premises and equipment, net	22			24
Other assets	162			196
Total assets	$	143,924		$	138,671
Liabilities
Interest-bearing deposits	$	1,080		$	1,118
Consolidated obligations, net:
Discount notes	49,727			41,292
Bonds	85,517			88,647
Total consolidated obligations, net	135,244			129,939
Mandatorily redeemable capital stock	3			1
Accrued interest payable	136			128
Affordable Housing Program payable	72			69
Derivative liabilities	14			107
Other liabilities	239			358
Total liabilities	136,788			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 September 30, 2017 and December 31, 2016	825			787
Subclass B2 issued and outstanding shares: 42 as of September 30, 2017 and December 31, 2016	4,216			4,168
Total capital stock Class B putable	5,041			4,955
Retained earnings:
Restricted	362			310
Unrestricted	1,610			1,582
Total retained earnings	1,972			1,892
Accumulated other comprehensive income	123			104
Total capital	7,136			6,951
Total liabilities and capital	$	143,924		$	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 September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Interest income
Advances	$	306		$	159		$	475		$	425
Prepayment fees, net	—			2			1			2
Interest-bearing deposits	6			5			17			13
Securities purchased under agreements to resell	3			1			7			3
Federal funds sold	41			8			88			24
Trading securities	2			8			8			34
Available-for-sale securities	26			26			80			78
Held-to-maturity securities	106			75			289			213
Mortgage loans	7			8			20			24
Total interest income	497			292			985			816
Interest expense
Consolidated obligations:
Discount notes	130			70			301			196
Bonds	241			128			642			351
Interest-bearing deposits	3			1			7			3
Total interest expense	374			199			950			550
Net interest income	123			93			35			266
Reversal of provision for credit losses	—			(1		)	—			(1		)
Net interest income after reversal of provision for credit losses	123			94			35			267
Noninterest income (loss)
Total other-than-temporary impairment losses	—			—			—			(2		)
Net amount of impairment losses reclassified from accumulated other comprehensive income	—			(1		)	(2		)	—
Net impairment losses recognized in earnings	—			(1		)	(2		)	(2		)
Net losses on trading securities	(1		)	(8		)	(5		)	(23		)
Net gains on derivatives and hedging activities	11			29			331			42
Standby letters of credit fees	6			6			20			21
Other	2			2			5			4
Total noninterest income	18			28			349			42
Noninterest expense
Compensation and benefits	21			20			60			57
Other operating expenses	10			9			27			27
Finance Agency	3			2			7			6
Office of Finance	1			1			4			4
Other	1			2			2			5
Total noninterest expense	36			34			100			99
Income before assessments	105			88			284			210
Affordable Housing Program assessments	10			9			28			21
Net income	$	95		$	79		$	256		$	189

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 September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Net income	$	95	$	79	$	256	$	189
Other comprehensive income:
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
Noncredit losses on available-for-sale securities	—		—		—		(1		)
Net change in fair value on other-than-temporarily impaired available-for-sale securities	9		6		15		24
Reclassification of noncredit portion of impairment losses included in net income	—		1		2		1
Total net noncredit portion of other-than-temporary impairment losses on available-for-sale securities	9		7		17		24
Pension and postretirement benefit plans	1		—		2		1
Total other comprehensive income	10		7		19		25
Total comprehensive income	$	105	$	86	$	275	$	214

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	40		4,020			—		—			—			—		4,020
Repurchase/redemption of capital stock	(42	)	(4,243		)	—		—			—			—		(4,243		)
Net shares reclassified to mandatorily redeemable capital stock	—		(7		)	—		—			—			—		(7		)
Comprehensive income	—		—			38		151			189			25		214
Cash dividends on capital stock	—		—			—		(166		)	(166		)	—		(166		)
Balance, September 30, 2016	49		$	4,871		$	293	$	1,570		$	1,863		$	100	$	6,834

Balance, December 31, 2016	50		$	4,955		$	310	$	1,582		$	1,892		$	104	$	6,951
Issuance of capital stock	7		6,949			—		—			—			—		6,949
Repurchase/redemption of capital stock	(7	)	(6,839		)	—		—			—			—		(6,839		)
Net shares reclassified to mandatorily redeemable capital stock	—		(24		)	—		—			—			—		(24		)
Comprehensive income	—		—			52		204			256			19		275
Cash dividends on capital stock	—		—			—		(176		)	(176		)	—		(176		)
Balance, September 30, 2017	50		$	5,041		$	362	$	1,610		$	1,972		$	123	$	7,136

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 Nine Months Ended September 30,
	2017			2016
Operating activities
Net income	$	256		$	189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3			(34		)
Reversal of provision for credit losses	—			(1		)
Net change in fair value adjustment on derivatives and related hedging activities	47			61
Net change in fair value adjustment on trading securities	5			23
Net impairment losses recognized in earnings	2			2
Net change in:
Accrued interest receivable	(23		)	(4		)
Other assets	34			33
Affordable Housing Program payable	3			(2		)
Accrued interest payable	8			40
Other liabilities	(34		)	(97		)
Total adjustments	45			21
Net cash provided by operating activities	301			210
Investing activities
Net change in:
Interest-bearing deposits	(318		)	(623		)
Securities purchased under agreements to resell	(114		)	1,389
Federal funds sold	(5,257		)	(3,028		)
Loan to another FHLBank	(250		)	—
Trading securities:
Proceeds from principal collected	200			623
Available-for-sale securities:
Proceeds from principal collected	243			318
Held-to-maturity securities:
Proceeds from principal collected	4,691			4,056
Purchases of long-term	(4,203		)	(6,566		)
Advances:
Proceeds from principal collected	269,917			199,870
Made	(271,087		)	(193,356		)
Mortgage loans:
Proceeds from principal collected	78			97
Purchases from another FHLBank	(18		)	—
Proceeds from sale of foreclosed assets	2			11
Purchase of premise, equipment, and software	(3		)	(2		)
Net cash (used in) provided by investing activities	(6,119		)	2,789



FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Nine Months Ended September 30,
	2017			2016
Financing activities
Net change in interest-bearing deposits	(38		)	28
Net payments on derivatives containing a financing element	(25		)	(58		)
Proceeds from issuance of consolidated obligations:
Discount notes	609,565			367,545
Bonds	52,403			54,805
Payments for debt issuance costs	(6		)	(8		)
Payments for maturing and retiring consolidated obligations:
Discount notes	(601,181		)	(381,845		)
Bonds	(55,489		)	(43,726		)
Proceeds from issuance of capital stock	6,949			4,020
Payments for repurchase/redemption of capital stock	(6,839		)	(4,243		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(22		)	(13		)
Cash dividends paid	(176		)	(166		)
Net cash provided by (used in) financing activities	5,141			(3,661		)
Net decrease in cash and due from banks	(677		)	(662		)
Cash and due from banks at beginning of the period	1,815			1,751
Cash and due from banks at end of the period	$	1,138		$	1,089
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	652		$	325
Affordable Housing Program assessments, net	$	25		$	21
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	24		$	7
Held-to-maturity securities acquired with accrued liabilities	$	50		$	—
Transfers of mortgage loans to real estate owned	$	3		$	4

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 September 30, 2017.

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Targeted Improvements to Accounting for Hedging Activities. In August 2017, the Financial Accounting Standards Board (FASB) issued amended guidance intended to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line item that is used to present the earnings effect of the hedged item. In addition, the amendments permit (1) measuring the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedged inception; (2) measuring the hedged item in a partial-term fair value hedge of interest-rate risk by assuming that the hedged item has a term that reflects only the designated cash flows being hedged; and (3) considering only how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest-rate risk. 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. The amended presentation and disclosure guidance will be applied prospectively. 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.

Premium Amortization on Purchased Callable Debt Securities. In March 2017, the 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.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Improving the Presentation of Net Periodic Pension Cost 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 practice 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.

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. While the Bank is in the process of evaluating this guidance, its adoption may result in an increase in the allowance for credit losses, but 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. This guidance requires the following: (1) use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (2) separate presentation of 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 (3) separate presentation 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 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 an impact on the Bank’s financial condition or results of operations.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 the Bank’s financial instruments and other contractual rights that generate revenue are covered by other GAAP, the adoption of this guidance is not expected to have a material impact on the Bank’s financial condition or results of operations.

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 September 30, 2017		As of December 31, 2016
Government-sponsored enterprises debt obligations	$	57	$	261
State or local housing agency debt obligations	—		1
Total	$	57	$	262

The following table presents net losses on trading securities.



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Net gains (losses) on trading securities held at period end	$	1		$	(7	)	$	1		$	(13	)
Net losses on trading securities that matured during the period	(2		)	(1		)	(6		)	(10		)
Net losses on trading securities	$	(1	)	$	(8	)	$	(5	)	$	(23	)

Table of Contents

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 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 September 30, 2017	$	1,023	$	2	$	143	$	—	$	1,164
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 September 30, 2017	1	$	6	$	1	2	$	23	$	1	3	$	29	$	2
As of December 31, 2016	1	$	14	$	—	10	$	189	$	6	11	$	203	$	6

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 September 30, 2017	$	670	$	1	$	110	$	—	$	779
As of December 31, 2016	$	792	$	5	$	102	$	—	$	889

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 5—Held-to-maturity Securities

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



	As of September 30, 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
State or local housing agency debt obligations	$	1	$	—	$	—	$	1	$	76	$	—	$	—	$	76
Government-sponsored enterprises debt obligations	6,078		7		5		6,080		6,041		3		5		6,039
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	169		2		—		171		209		2		—		211
Government-sponsored enterprises residential	9,818		64		13		9,869		10,752		44		43		10,753
Government-sponsored enterprises commercial	7,389		12		5		7,396		6,773		2		11		6,764
Private-label residential	610		8		1		617		790		5		5		790
Total	$	24,065	$	93	$	24	$	24,134	$	24,641	$	56	$	64	$	24,633

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 September 30, 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	8	$	1,943	$	4	2	$	499	$	1	10	$	2,442	$	5
Mortgage-backed securities:
Government-sponsored enterprises residential	11	1,023		5		45	1,216		8		56	2,239		13
Government-sponsored enterprises commercial	25	1,279		3		9	941		2		34	2,220		5
Private-label residential	2	4		—		19	107		1		21	111		1
Total	46	$	4,249	$	12	75	$	2,763	$	12	121	$	7,012	$	24

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)



	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

Redemption Terms. The following table presents the amortized cost and estimated fair value of held-to-maturity securities by contractual maturity. MBS are not presented by contractual maturity because their actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.



	As of September 30, 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	$	3,101	$	3,097	$	2,454	$	2,455
Due after one year through five years	2,462		2,466		3,487		3,484
Due after five years through 10 years	456		458		176		176
Due after ten years	60		60		—		—
Total non-mortgage-backed securities	6,079		6,081		6,117		6,115
Mortgage-backed securities	17,986		18,053		18,524		18,518
Total	$	24,065	$	24,134	$	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 September 30, 2017	$	136	$	1	$	—	$	137
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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
Balance, beginning of period	$	426		$	480		$	455		$	505
Amount related to credit loss for which an other-than-temporary impairment was previously recognized	—			1			2			2
Increase in cash flows expected to be collected, (accreted as interest income over the remaining lives of the applicable securities)	(16		)	(13		)	(47		)	(39		)
Balance, end of period	$	410		$	468		$	410		$	468

Note 7—Advances

Redemption Terms. The following table presents the Bank’s advances outstanding by year of contractual maturity.



	As of September 30, 2017			As of December 31, 2016
Overdrawn demand deposit accounts	$	19		$	—
Due in one year or less	51,920			47,325
Due after one year through two years	13,999			8,244
Due after two years through three years	18,053			5,904
Due after three years through four years	5,188			5,859
Due after four years through five years	2,404			11,846
Due after five years	7,878			19,110
Total par value	99,461			98,288
Discount on AHP ⁽¹⁾advances	(5		)	(5		)
Discount on EDGE ⁽²⁾advances	(3		)	(4		)
Hedging adjustments	359			798
Total	$	99,812		$	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 September 30, 2017		As of December 31, 2016
Overdrawn demand deposit accounts	$	19	$	—
Due or convertible in one year or less	51,999		47,935
Due or convertible after one year through two years	14,038		7,724
Due or convertible after two years through three years	18,149		5,943
Due or convertible after three years through four years	5,212		5,867
Due or convertible after four years through five years	2,375		11,866
Due or convertible after five years	7,669		18,953
Total par value	$	99,461	$	98,288

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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



	As of September 30, 2017		As of December 31, 2016
Fixed-rate:
Due in one year or less	$	38,007	$	38,597
Due after one year	20,925		24,528
Total fixed-rate	58,932		63,125
Variable-rate:
Due in one year or less	13,932		8,728
Due after one year	26,597		26,435
Total variable-rate	40,529		35,163
Total par value	$	99,461	$	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 $68,213 and $67,493 as of September 30, 2017 and December 31, 2016, respectively. This concentration represented 68.6 percent and 68.7 percent of total advances outstanding as of September 30, 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 September 30, 2017 and December 31, 2016. No advance was past due as of September 30, 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 September 30, 2017			As of December 31, 2016
Medium-term (15 years or less)	$	23		$	40
Long-term (greater than 15 years)	439			485
Total unpaid principal balance	462			525
Premiums	2			2
Discounts	(2		)	(3		)
Total	$	462		$	524

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



	As of September 30, 2017		As of December 31, 2016
Conventional mortgage loans	$	434	$	492
Government-guaranteed or insured mortgage loans	28		33
Total unpaid principal balance	$	462	$	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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 9—Allowance for Credit Losses

The following table presents the activity in the allowance for credit losses related to conventional residential mortgage loans.



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017		2016			2017		2016
Balance, beginning of period	$	1	$	2		$	1	$	2
Reversal of provision for credit losses	—		(1		)	—		(1		)
Balance, end of period	$	1	$	1		$	1	$	1

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



	As of September 30, 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	423		481
Total recorded investment	$	435	$	493

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Key credit quality indicators for mortgage loans include the migration of past due 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 September 30, 2017
	Conventional Residential Mortgage Loans			Government-guaranteed or Insured Residential Mortgage Loans			Total
Past due 30-59 days	$	12		$	3		$	15
Past due 60-89 days	2			1			3
Past due 90 days or more	9			—			9
Total past due mortgage loans	23			4			27
Total current mortgage loans	412			25			437
Total mortgage loans ⁽¹⁾	$	435		$	29		$	464
Other delinquency statistics:
In process of foreclosure ⁽²⁾	$	4		$	—		$	4
Seriously delinquent rate ⁽³⁾	2.05		%	1.31		%	2.01		%
Past due 90 days or more and still accruing interest ⁽⁴⁾	$	—		$	—		$	—
Mortgage loans on nonaccrual status ⁽⁵⁾	$	9		$	—		$	9

____________

(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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The financial amounts related to the Bank’s impaired loans and 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 Federal Home Loan Banks Office of Finance (Office of Finance) tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks 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 September 30, 2017		As of December 31, 2016
Fixed-rate	$	19,503	$	23,674
Step up/down	1,799		2,534
Simple variable-rate	64,230		62,408
Total par value	$	85,532	$	88,616

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



	As of September 30, 2017				As of December 31, 2016
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Due in one year or less	$	53,613		1.20	$	65,378		0.91
Due after one year through two years	24,710			1.22	17,065			1.05
Due after two years through three years	3,336			1.66	1,849			1.67
Due after three years through four years	623			1.76	1,482			1.68
Due after four years through five years	2,146			1.99	1,117			1.58
Due after five years	1,104			3.02	1,725			2.37
Total par value	85,532			1.26	88,616			1.00
Premiums	15				24
Discounts	(10		)		(12		)
Hedging adjustments	(20		)		19
Total	$	85,517			$	88,647

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



	As of September 30, 2017		As of December 31, 2016
Noncallable	$	79,588	$	83,487
Callable	5,944		5,129
Total par value	$	85,532	$	88,616

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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 September 30, 2017		As of December 31, 2016
Due or callable in one year or less	$	58,402	$	70,232
Due or callable after one year through two years	23,635		15,250
Due or callable after two years through three years	2,522		1,399
Due or callable after three years through four years	403		1,103
Due or callable after four years through five years	171		162
Due or callable after five years	399		470
Total par value	$	85,532	$	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 September 30, 2017	$	49,727	$	49,814	1.04
As of December 31, 2016	$	41,292	$	41,334	0.48

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 September 30, 2017						As of December 31, 2016
	Required			Actual			Required			Actual
Risk based capital	$	1,502		$	7,016		$	1,701		$	6,848
Total regulatory capital ratio	4.00		%	4.87		%	4.00		%	4.94		%
Total regulatory capital ⁽¹⁾	$	5,757		$	7,016		$	5,547		$	6,848
Leverage capital ratio	5.00		%	7.31		%	5.00		%	7.41		%
Leverage capital	$	7,196		$	10,524		$	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 September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Balance, beginning of period	$	2	$	9	$	1	$	14
Net reclassification from capital during the period	8		5		24		7

Federal Home Loan Bank of Atlanta - FORM 10-Q - November 7, 2017

Attached files