UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

FORM 10-Q

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



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

For the quarterly period ended March 31, ~~2019~~2020



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

☐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, Georgia~~		~~30309~~
~~(Address of principal executive offices)~~		(~~Zip Code)~~I.R.S. Employer Identification No.)

1475 Peachtree Street, NE, Atlanta, GA

(Address of principal executive offices)

30309

(Zip Code)

Registrant’s telephone number, including area code: ~~(404)~~ (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~~ ¨Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ý☒ ~~Yes~~ ¨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 ☑		Smaller reporting company	¨
		~~Emerging growth company~~	¨☐

~~If an emerging~~			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. ¨	☐

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

The number of shares outstanding of the registrant’s Class B Stock, par value $100, as of April 30, ~~2019~~2020 was ~~49,969,584.~~56,645,411.

Table of Contents

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CONDITION

(Unaudited)

(In millions, except par value)


	As of March 31, 2019			As of December 31, 2018			As of March 31, 2020			As of December 31, 2019
Assets
Cash and due from banks	$	70		$	35		$	4,247		$	911
Interest-bearing deposits (including deposits with other FHLBanks of $5 and $20 as of March 31, 2019 and December 31, 2018, respectively)	3,444			6,782
Interest-bearing deposits (including deposits with other FHLBanks of $5 as of March 31, 2020 and December 31, 2019)							3,322			3,810
Securities purchased under agreements to resell	4,500			3,750			—			8,800
Federal funds sold	12,775			8,978			17,945			9,826
Investment securities:
Trading securities	1,055			55			1,563			1,558
Available-for-sale securities	823			865
Held-to-maturity securities (fair value of $24,149 and $23,846 as of March 31, 2019 and December 31, 2018, respectively)	24,184			23,879
Available-for-sale securities (amortized cost of $0 and $643 as of March 31, 2020 and December 31, 2019, respectively)							—			684
Held-to-maturity securities (fair value of $23,476 and $25,903 as of March 31, 2020 and December 31, 2019, respectively)							23,599			25,939
Total investment securities	26,062			24,799			25,162			28,181
Advances	90,929			108,462			137,037			97,167
Mortgage loans held for portfolio, net:
Mortgage loans held for portfolio	347			361
Allowance for credit losses on mortgage loans	(1		)	(1		)
Total mortgage loans held for portfolio, net	346			360
Loan to another FHLBank	—			500
Mortgage loans held for portfolio, net of allowance for credit losses of $1 as of March 31, 2020 and December 31, 2019							281			296
Accrued interest receivable	261			295			205			259
Derivative assets	380			314			989			380
Other assets	173			201			204			227
Total assets	$	138,940		$	154,476		$	189,392		$	149,857
Liabilities
Interest-bearing deposits	$	1,163		$	1,176		$	1,766		$	1,492
Consolidated obligations, net:
Discount notes	61,166			66,025			96,490			52,134
Bonds	69,186			79,114			81,856			88,503
Total consolidated obligations, net	130,352			145,139			178,346			140,637
Mandatorily redeemable capital stock	1			1			1			1
Accrued interest payable	217			204			158			212
Affordable Housing Program payable	89			85			95			89
Derivative liabilities	13			17			10			7
Other liabilities	182			207			198			256
Total liabilities	132,017			146,829			180,574			142,694
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 13)
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 9 as of March 31, 2019 and December 31, 2018	913			891
Subclass B2 issued and outstanding shares: 39 and 46 as of March 31, 2019 and December 31, 2018, respectively	3,840			4,595
Subclass B1 issued and outstanding shares: 10 and 9 as of March 31, 2020 and December 31, 2019, respectively							935			899
Subclass B2 issued and outstanding shares: 57 and 41 as of March 31, 2020 and December 31, 2019, respectively							5,717			4,089
Total capital stock Class B putable	4,753			5,486			6,652			4,988
Retained earnings:
Restricted	484			463			559			537
Unrestricted	1,642			1,647			1,626			1,616
Total retained earnings	2,126			2,110			2,185			2,153
Accumulated other comprehensive income	44			51
Accumulated other comprehensive (loss) income							(19		)	22
Total capital	6,923			7,647			8,818			7,163
Total liabilities and capital	$	138,940		$	154,476		$	189,392		$	149,857

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

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(Unaudited)

(In millions)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2019			2018			2020			2019
Interest income
Advances	$	656		$	455		$	419		$	656
Interest-bearing deposits	28			14			15			28
Securities purchased under agreements to resell	26			6			27			26
Federal funds sold	78			49			40			78
Trading securities	1			—			5			1
Available-for-sale securities	23			26			3			23
Held-to-maturity securities	172			127			130			172
Mortgage loans	4			6			4			4
Total interest income	988			683			643			988
Interest expense
Consolidated obligations:
Discount notes	372			224			211			372
Bonds	466			320			342			466
Interest-bearing deposits	6			4			5			6
Total interest expense	844			548			558			844
Net interest income	144			135			85			144
Noninterest income (loss)
Total other-than-temporary impairment losses	—			—
Net amount of impairment losses reclassified from accumulated other comprehensive income	(1		)	—
Net impairment losses recognized in earnings	(1		)	—			—			(1		)
Net gains (losses) on trading securities	1			(1		)
Net (losses) gains on derivatives and hedging activities	(2		)	22
Net gains on trading securities							5			1
Net realized gains from sale of available-for-sale securities							82			—
Net realized gains from sale of held-to-maturity securities							3			—
Net losses on derivatives and hedging activities							(6		)	(2		)
Standby letters of credit fees	7			6			7			7
Other	2			—			2			2
Total noninterest income	7			27			93			7
Noninterest expense
Compensation and benefits	20			20			41			20
Other operating expenses	9			9			9			9
Finance Agency	3			2
Federal Housing Finance Agency							3			3
Office of Finance	2			2			2			2
Other	5			2			3			5
Total noninterest expense	39			35			58			39
Income before assessment	112			127			120			112
Affordable Housing Program assessment	11			13			12			11
Net income	$	101		$	114		$	108		$	101

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

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

For the Three Months Ended March 31,
2019 2018
Net income $ 101
$ 114
Other comprehensive loss income:
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
Net change in fair value on other-than-temporarily impaired available-for-sale securities (9 ) (16 )
Reclassification of noncredit portion of impairment losses included in net income 1
—
Total net noncredit portion of other-than-temporary impairment losses on available-for-sale securities (8 ) (16 )
Pension and postretirement benefit plans 1
1
Total other comprehensive loss (7 ) (15 )
Total comprehensive income $ 94
$ 99



	For the Three Months Ended March 31,
	2020			2019
Net income	$	108		$	101
Other comprehensive loss:
Reclassification of unrealized gains related to the sale of available-for-sale securities	(41		)	—
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities	—			(8		)
Pension and postretirement benefits	—			1
Total other comprehensive loss	(41		)	(7		)
Total comprehensive income	$	67		$	94

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

Table of Contents

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			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																Accumulated Other Comprehensive Income			Total Capital
Balance, December 31, 2017	52		$	5,154		$	380	$	1,623		$	2,003		$	110		$	7,267
Issuance of capital stock	35		3,495			—		—			—			—			3,495
Repurchase/redemption of capital stock	(40	)	(3,869		)	—		—			—			—			(3,869		)
Net shares reclassified to mandatorily redeemable capital stock	—		(32		)	—		—			—			—			(32		)
Comprehensive income (loss)	—		—			23		91			114			(15		)	99
Cash dividends on capital stock	—		—			—		(65		)	(65		)	—			(65		)
Balance, March 31, 2018	47		$	4,748		$	403	$	1,649		$	2,052		$	95		$	6,895
																				Shares		Par Value			Restricted		Unrestricted			Total			Accumulated Other Comprehensive Income			Total Capital
Balance, December 31, 2018	55		$	5,486		$	463	$	1,647		$	2,110		$	51		$	7,647		55		$	5,486		$	463	$	1,647		$	2,110		Accumulated Other Comprehensive Income			Total Capital
Issuance of capital stock	20		2,029			—		—			—			—			2,029			20		2,029			—		—			—			—			2,029
Repurchase/redemption of capital stock	(27	)	(2,762		)	—		—			—			—			(2,762		)	(27	)	(2,762		)	—		—			—			—			(2,762		)
Net shares reclassified to mandatorily redeemable capital stock	—		—			—		—			—			—			—			—		—			—		—			—			—			—
Comprehensive income (loss)	—		—			21		80			101			(7		)	94			—		—			21		80			101			(7		)	94
Cash dividends on capital stock	—		—			—		(85		)	(85		)	—			(85		)	—		—			—		(85		)	(85		)	—			(85		)
Balance, March 31, 2019	48		$	4,753		$	484	$	1,642		$	2,126		$	44		$	6,923		48		$	4,753		$	484	$	1,642		$	2,126		$	44		$	6,923

Balance, December 31, 2019																				50		$	4,988		$	537	$	1,616		$	2,153		$	22		$	7,163
Issuance of capital stock																				37		3,702			—		—			—			—			3,702
Repurchase/redemption of capital stock																				(20	)	(2,036		)	—		—			—			—			(2,036		)
Net shares reclassified to mandatorily redeemable capital stock																				—		(2		)	—		—			—			—			(2		)
Comprehensive income (loss)																				—		—			22		86			108			(41		)	67
Cash dividends on capital stock																				—		—			—		(76		)	(76		)	—			(76		)
Balance, March 31, 2020																				67		$	6,652		$	559	$	1,626		$	2,185		$	(19	)	$	8,818

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

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2019			2018			2020			2019
Operating activities
Net income	$	101		$	114		$	108		$	101
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	(53		)	8			2			(53		)
Net change in fair value adjustment on derivatives and related hedging activities	(295		)	179
Net change in derivative and hedging activities							(1,018		)	(295		)
Net change in fair value adjustment on trading securities	(1		)	1			(5		)	(1		)
Net impairment losses recognized in earnings	1			—			—			1
Net realized gains from sale of available-for-sale securities							(82		)	—
Net realized gains from sale of held-to-maturity securities							(3		)	—
Net change in:
Accrued interest receivable	34			(27		)	54			34
Other assets	25			22			22			25
Affordable Housing Program payable	3			3			5			3
Accrued interest payable	14			2			(54		)	14
Other liabilities	(25		)	(33		)	(23		)	(25		)
Total adjustments	(297		)	155			(1,102		)	(297		)
Net cash (used in) provided by operating activities	(196		)	269
Net cash used in operating activities							(994		)	(196		)
Investing activities
Net change in:
Interest-bearing deposits	3,369			(475		)	(502		)	3,369
Securities purchased under agreements to resell	(750		)	(3,500		)	8,800			(750		)
Federal funds sold	(3,797		)	(1,348		)	(8,119		)	(3,797		)
Loan to another FHLBank	500			200
Loans to other FHLBanks							—			500
Trading securities:
Purchases of long-term	(999		)	—			—			(999		)
Available-for-sale securities:
Proceeds from sales							726			—
Proceeds from principal collected	48			51			—			48
Held-to-maturity securities:
Proceeds from sales							195			—
Proceeds from principal collected	891			1,273			3,044			891
Purchases of long-term	(1,196		)	(2,945		)	(930		)	(1,196		)
Advances:
Proceeds from principal collected	99,457			140,699			83,012			99,457
Made	(81,655		)	(130,323		)	(121,387		)	(81,655		)
Mortgage loans:
Proceeds from principal collected	14			19			15			14
Proceeds from sale of foreclosed assets	—			1			1			—
Purchases of premises, equipment, and software	—			(1		)	(1		)	—
Net cash provided by investing activities	15,882			3,651
Net cash (used in) provided by investing activities							(35,146		)	15,882

Table of Contents


FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)	FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)						FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2019			2018			2020			2019
Financing activities
Net change in interest-bearing deposits	3			3			251			3
Net payments on derivatives containing a financing element	—			(1		)	(1		)	—
Proceeds from issuance of consolidated obligations:
Discount notes	274,674			280,479			175,309			274,674
Bonds	13,719			14,051			32,434			13,719
Payments for debt issuance costs	(4		)	(3		)	(5		)	(4		)
Payments for maturing and retiring consolidated obligations:
Discount notes	(279,491		)	(275,982		)	(130,976		)	(279,491		)
Bonds	(23,734		)	(24,275		)	(39,124		)	(23,734		)
Proceeds from issuance of capital stock	2,029			3,495			3,702			2,029
Payments for repurchase/redemption of capital stock	(2,762		)	(3,869		)	(2,036		)	(2,762		)
Payments for repurchase/redemption of mandatorily redeemable capital stock	—			(30		)	(2		)	—
Cash dividends paid	(85		)	(65		)	(76		)	(85		)
Net cash used in financing activities	(15,651		)	(6,197		)
Net increase (decrease) in cash and due from banks	35			(2,277		)
Net cash provided by (used in) financing activities							39,476			(15,651		)
Net increase in cash and due from banks							3,336			35
Cash and due from banks at beginning of the period	35			2,357			911			35
Cash and due from banks at end of the period	$	70		$	80		$	4,247		$	70
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	871		$	523		$	609		$	871
Affordable Housing Program assessment, net	$	8		$	9		$	6		$	8
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	—		$	32		$	2		$	—
Held-to-maturity securities acquired with accrued liabilities	$	—		$	97
Transfers of mortgage loans to real estate owned	$	—		$	1

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

Table of Contents

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, 2019,~~2020, 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, ~~2018,~~2019, which are contained in the Bank’s ~~2018~~2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March ~~7, 2019~~5, 2020 (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 1311—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 ~~2018~~2019 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, ~~2019,~~2020, except for policy updates related to new accounting guidance ~~for derivatives and hedging activities, which is described in Note 13~~—~~Derivatives and Hedging Activities~~pertaining to the ~~Bank’s interim~~measurement of credit losses on financial ~~statements, and leases~~instruments which is described below.

Beginning on January 1, ~~2019, as a result of adopting~~2020, the Bank adopted new accounting guidance pertaining to the measurement of credit losses on financial instruments that requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments as well as available-for-sale securities to be recorded through the allowance for ~~leases,~~credit losses. Key changes as compared to prior accounting guidance are detailed below. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. Refer to Note 2—Summary of Significant Accounting Policies to the Bank’s 2019 audited financial statements for information on the prior accounting treatment.

Interest-bearing Deposits, Securities Purchased under Agreements to resell, and Federal Funds Sold. Interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO) including the the following: Standard and Poor’s (S&P), Moody’s Investors Service (Moody’s), and Fitch Ratings. All of these investments were with counterparties rated investment grade as of March 31, 2020. These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense).

The Bank uses the collateral maintenance provision practical expedient to evaluate potential credit losses related to securities purchased under agreements to resell. Consequently, a credit loss would be recognized if there is a collateral shortfall which the Bank ~~recognized right-of-use assets~~does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and ~~lease liabilities on its existing leases.~~the investment’s amortized cost. Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. The ~~adoption of this guidance~~Bank did not have ~~a material impact~~any securities purchased under agreements to resell as of March 31, 2020.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. All investments in interest-bearing deposits and federal funds sold were repaid or expected to be repaid according to the ~~Bank’s financial condition or results~~contractual terms as of ~~operations.~~

March 31, 2020

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

and December 31, 2019. NaN allowance for credit losses was recorded for these assets as of March 31, 2020 and December 31, 2019. The carrying values of interest-bearing deposits excludes accrued interest receivable that was not material as of March 31, 2020 and December 31, 2019. The carrying values of federal funds sold excludes accrued interest receivable of $3 and $10 as of March 31, 2020 and December 31, 2019, respectively.

Held-to-maturity Securities. Securities that the Bank has both the ability and intent to hold to maturity are classified as held-to-maturity and carried at amortized cost, which is original cost net of periodic principal repayments and amortization of premiums and accretion of discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense). The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. Prior to January 1, 2020, credit losses were recorded as a direct write-down of the held-to-maturity security carrying value.

The Bank’s held-to-maturity securities consist of U.S. agency obligations, government-sponsored enterprise debt obligations, state or local housing agency debt obligations, and MBS issued by the Government National Mortgage Association (Ginnie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae) that are backed by single-family or multifamily mortgage loans. The Bank only purchase securities considered investment quality. All of these investments were rated double-A, or above, by a NRSRO as of March 31, 2020, based on the lowest long-term credit rating for each security.

The Bank evaluates its held-to-maturity securities for impairment on a collective, or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. The Bank has not established an allowance for credit loss on any of its held-to-maturity securities as of March 31, 2020 because the securities: (1) were all highly-rated and/or had short remaining terms to maturity, (2) had not experienced, nor did the Bank expect, any payment default on the instruments, and (3) in the case of U.S., government-sponsored enterprises, or other agency obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.

Advances. Advances are carried at amortized cost, which is original cost net of periodic principal repayments and amortization of premiums and accretion of discounts (including discounts related to the Affordable Housing Program and Economic Development and Growth Enhancement Program), net deferred fees or costs, and fair value hedge adjustments. Accrued interest receivable is recorded separately on the Statements of Condition. The advances are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense). Refer to Note 2—Summary of Significant Accounting Policies to the Bank’s 2019 audited financial statements for details on the allowance methodologies related to advances.

Mortgage Loans Held for Portfolio. Mortgage loans held for portfolio are recorded at amortized cost, which is original cost, net of periodic principal repayments and amortization of premiums and accretion of discounts, fair value hedge adjustments on loans initially classified as mortgage loan commitments, and direct write-downs. Accrued interest receivable is recorded separately on the Statements of Condition. The Bank performs at least quarterly an assessment of its mortgage loans held for portfolio to estimate expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense).

The Bank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis. When developing the allowance for credit losses, the Bank measures the estimated loss over the remaining life of a mortgage loan, which also considers how the Bank’s credit enhancements mitigate credit losses. If a loan was purchased at a discount, the discount does not offset the allowance for credit losses. The allowance excludes uncollectible accrued interest receivable, as the Bank write-off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status. Refer to Note 2—Summary of Significant Accounting Policies to the Bank’s 2019 audited financial statements for details on the allowance methodologies related to mortgage loans.

Off-Balance Sheet Credit Exposures. The Bank evaluates its off-balance sheet credit exposure on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding credit loss expense (or reversal of credit loss expense).

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank monitors the creditworthiness of its standby letters of credit based on an evaluation of the member. In addition, standby letters of credit are fully collateralized from the time of issuance. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit that result in an internal credit rating, which focuses primarily on an institution’s overall financial health and takes into account the quality of assets, earnings, and capital position. In general, borrowers categorized into the highest risk rating category have more restrictions on the types of collateral that they may use to secure standby letters of credit, may be required to maintain higher collateral maintenance levels and deliver loan collateral, and may face more stringent collateral reporting requirements. Based on the Bank’s credit analyses and collateral requirements, the Bank does not deem it necessary to record any additional liability on the Statements of Condition for these commitments as of March 31, 2020.

Note 2—Recently Issued and Adopted Accounting Guidance

The following tables provide a summary of accounting guidance issued by the Financial Accounting Standards Board that was adopted, and recently issued guidance not yet adopted, which may impact the Bank’s financial statements.

Recently Adopted Accounting Guidance



Accounting Standard Update (ASU)	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
~~Inclusion of~~ Disclosure Framework–Changes to the ~~Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate~~Disclosure Requirements for ~~Hedging Purposes~~ Fair Value Measurement (ASU ~~2018-16)~~ 2018-13)	This guidance ~~permits~~amends the ~~use of the OIS rate based~~disclosure requirements on ~~SOFR as a U.S. benchmark interest rate for hedge accounting purposes.~~fair value measurements.	January 1, ~~2019~~2020	The adoption of this guidance did not have an impact on the Bank’s financial condition or results of operations.
~~Targeted Improvements to Accounting for Hedging Activities~~ Measurement of Credit Losses on Financial Instruments (ASU ~~2017-12)~~2016-13)	This guidance ~~amends~~replaces the incurred loss impairment methodology in current generally accepted accounting ~~for derivatives~~principles in the United States of America (GAAP) with a methodology that reflects lifetime expected credit losses and ~~hedging activities~~requires consideration of a broader range of reasonable and supportable information to ~~better portray the economics of the transactions.~~inform credit loss estimates.	January 1, ~~2019~~2020	The adoption of this guidance did not have an impact on the Bank’s financial condition or results of operations.
~~Premium Amortization~~Facilitation of the Effects of Reference Rate Reform on Purchased Callable Debt Securities (ASU 2017-08)Financial Reporting (ASU 2020-04)	This guidance ~~shortens the amortization period~~provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain ~~callable debt securities held at a premium by requiring that the premium be amortized to the earliest call date, rather than contractual maturity.~~criteria are met.	~~January 1, 2019~~March 12, 2020 through December 31, 2022	The ~~adoption~~Bank is in the process of evaluating this guidance ~~did not have an~~and its impact on the Bank’s financial condition orand results of ~~operations.~~
Leases (ASU 2016-02)	~~The guidance amends the accounting for leases. It will require lessees to recognize a right-of-use asset and lease liability for virtually all leases.~~	~~January 1, 2019~~	~~The adoption of this guidance did~~operations has not ~~have a material impact on the Bank’s financial condition or results of operations.~~yet been determined.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

Recently Issued Accounting Guidance Not Yet Adopted



Accounting Standard Update (ASU)	Description	Effective Date	Effect on Financial Statements or Other Significant Matters
Disclosure Framework–Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14)	This guidance amends the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.	December 31, 2020 Early adoption is permitted	The Bank does not intend to adopt this guidance early. This guidance is not expected to have any impact on the Bank’s financial condition or results of operations.
~~Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement~~ ~~(ASU 2018-13)~~	~~This guidance amends the disclosure requirements on fair value measurements.~~	~~January 1, 2020~~ ~~Early adoption is permitted~~	~~The Bank does not intend to adopt this guidance early. This guidance is not expected to have any impact on the Bank’s financial condition or results of operations.~~
~~Measurement of Credit Losses on Financial Instruments~~ ~~(ASU 2016-13)~~	This guidance replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.	~~January 1, 2020~~ ~~Early adoption is permitted~~	The Bank does not intend to adopt this guidance early. The Bank has completed its preliminary assessment of the impact of this guidance on all its financial assets, including advances, investments, and other financial assets, and does not expect the adoption of this guidance to have a material impact on its financial condition or results of operations. However, the Bank will continue to evaluate this guidance, as well as the economic conditions and forecasts at the time of adoption. The ultimate 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.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

Note 3—Trading Securities

Major Security Types. The following table presents trading securities.


	As of March 31, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
U.S. Treasury obligations	$	999	$	—	$	1,501	$	1,499
Government-sponsored enterprises debt obligations	56		55		62		59
Total	$	1,055	$	55	$	1,563	$	1,558

The following table presents net gains ~~(losses)~~ on trading securities.

For the Three Months Ended March 31,
2019 2018
Net gains (losses) on trading securities held at period end $ 1
$ (1 )



	For the Three Months Ended March 31,
	2020		2019
Net gains on trading securities held at period end	$	5	$	1

Note 4—Available-for-sale Securities

During the three-months ended March 31, 2020, the Bank sold all of its available-for-sale private-label mortgage-backed securities (MBS). Proceeds from the sale of the available-for-sale private-label MBS totaled $726, which resulted in a net realized gain of $82 determined by the specific identification method. There were no sales during the three-months ended March 31, 2019.

Major Security Type. The following table presents information on private-label residential ~~mortgage-backed securities (MBS)~~MBS that are classified as available-for-sale.

Amortized
Cost

Other-than-temporary
Impairment
Recognized in
Accumulated Other
Comprehensive Income ⁽¹⁾

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Estimated Fair Value
As of March 31, 2019 $ 758
$ —
$ 65
$ —
$ 823
As of December 31, 2018 $ 793
$ (1 ) $ 73
$ —
$ 865



	Amortized Cost		Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income ⁽¹⁾			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of March 31, 2020	$	—	$	—		$	—	$	—	$	—
As of December 31, 2019	$	643	$	(1	)	$	42	$	—	$	684

____________

⁽¹⁾ Amounts represent the non-credit portion of an other-than-temporary impairment during the life of the security.

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, 2019 1
$ 3
$ —
2
$ 4
$ —
3
$ 7
$ —
As of December 31, 2018 1
$ 3
$ —
2
$ 4
$ (1 ) 3
$ 7
$ (1 )



	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, 2020	—	$	—	$	—	—	$	—	$	—		—	$	—	$	—
As of December 31, 2019	4	$	14	$	—	2	$	3	$	(1	)	6	$	17	$	(1	)

1211

Table of Contents

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 ⁽¹⁾

Gross
  Unrealized
Gains

Gross
  Unrealized
Losses

Estimated
  Fair Value
As of March 31, 2019 $ 521
$ —
$ 47
$ —
$ 568
As of December 31, 2018 $ 539
$ —
$ 54
$ —
$ 593



	Amortized Cost		Other-than-temporary Impairment Recognized in Accumulated Other Comprehensive Income ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of March 31, 2020	$	—	$	—	$	—	$	—	$	—
As of December 31, 2019	$	456	$	—	$	31	$	—	$	487

____________

⁽¹⁾ Amounts represent the non-credit portion of an other-than-temporary impairment during the life of the security.

Note 5—Held-to-maturity Securities

During the three-months ended March 31, 2020, for strategic, economic and operational reasons, the Bank sold all of its held-to-maturity private-label MBS. The amortized cost of the held-to-maturity private-label MBS sold was $192. Proceeds from the sale of the held-to-maturity private-label MBS totaled $195, which resulted in a net realized gain of $3. For each of the held-to-maturity securities which were sold, the Bank had previously collected at least 85 percent of the principal outstanding at the time of acquisition due to prepayments or scheduled prepayments over the term of the security. As such, the sales were considered maturities for purposes of security classification. There were no sales of held-to-maturity securities during the three-months ended March 31, 2019.

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


	As of March 31, 2019									As of December 31, 2018									As of March 31, 2020									As of December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost ⁽¹⁾		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
State or local housing agency debt obligations	$	1	$	—	$	—		$	1	$	1	$	—	$	—		$	1	$	1	$	—	$	—		$	1	$	1	$	—	$	—		$	1
Government-sponsored enterprises debt obligations	3,172		4		(1		)	3,175		2,672		5		(2		)	2,675		3,575		7		(1		)	3,581		4,497		7		—			4,504
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	112		1		—			113		118		2		—			120		83		—		—			83		89		—		—			89
Government-sponsored enterprises residential	8,991		31		(40		)	8,982		9,304		40		(43		)	9,301		8,574		43		(64		)	8,553		8,642		20		(29		)	8,633
Government-sponsored enterprises commercial	11,516		3		(36		)	11,483		11,368		4		(41		)	11,331		11,366		—		(108		)	11,258		12,518		—		(34		)	12,484
Private-label residential	392		4		(1		)	395		416		4		(2		)	418		—		—		—			—		192		1		(1		)	192
Total	$	24,184	$	43	$	(78	)	$	24,149	$	23,879	$	55	$	(88	)	$	23,846	$	23,599	$	50	$	(173	)	$	23,476	$	25,939	$	28	$	(64	)	$	25,903

____________

⁽¹⁾Excludes accrued interest receivable of $25 and $27 as of March 31, 2020 and December 31, 2019, respectively.

~~Table of Contents~~

~~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, 2019
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
State or local housing agency debt obligations —
$ —
$ —
1
$ 1
$ —
1
$ 1
$ —
Government-sponsored enterprises debt obligations 12
1,204
(1 ) 1
100
—
13
1,304
(1 )
Mortgage-backed securities:
Government-sponsored enterprises residential 70
1,784
(6 ) 22
2,568
(34 ) 92
4,352
(40 )
Government-sponsored enterprises commercial 43
6,906
(30 ) 34
1,310
(6 ) 77
8,216
(36 )
Private-label residential 22
98
—
13
37
(1 ) 35
135
(1 )
Total 147
$ 9,992
$ (37 ) 71
$ 4,016
$ (41 ) 218
$ 14,008
$ (78 )

As of December 31, 2018
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
State or local housing agency debt obligations —
$ —
$ —
1
$ 1
$ —
1
$ 1
$ —
Government-sponsored enterprises debt obligations 12
1,235
(1 ) 1
99
(1 ) 13
1,334
(2 )
Mortgage-backed securities:
Government-sponsored enterprises residential 54
2,704
(13 ) 22
1,382
(30 ) 76
4,086
(43 )
Government-sponsored enterprises commercial 58
7,406
(34 ) 18
1,015
(7 ) 76
8,421
(41 )
Private-label residential 26
139
(1 ) 11
25
(1 ) 37
164
(2 )
Total 150
$ 11,484
$ (49 ) 53
$ 2,522
$ (39 ) 203
$ 14,006
$ (88 )

1412

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. 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 March 31, 2019				As of December 31, 2018				As of March 31, 2020				As of December 31, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost ⁽¹⁾		Estimated Fair Value		Amortized Cost ⁽¹⁾		Estimated Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	597	$	597	$	225	$	225	$	890	$	890	$	1,202	$	1,203
Due after one year through five years	2,315		2,316		2,057		2,058		2,425		2,428		3,035		3,037
Due after five years through 10 years	201		203		331		333		201		203		201		204
Due after 10 years	60		60		60		60		60		61		60		61
Total non-mortgage-backed securities	3,173		3,176		2,673		2,676		3,576		3,582		4,498		4,505
Mortgage-backed securities	21,011		20,973		21,206		21,170		20,023		19,894		21,441		21,398
Total	$	24,184	$	24,149	$	23,879	$	23,846	$	23,599	$	23,476	$	25,939	$	25,903

____________

⁽¹⁾Excludes accrued interest receivable of $25 and $27 as of March 31, 2020 and December 31, 2019, respectively.

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, 2019 $ 87
$ 1
$ (1 ) $ 87
As of December 31, 2018 $ 91
$ 1
$ (1 ) $ 91



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
As of March 31, 2020	$	—	$	—	$	—	$	—
As of December 31, 2019	$	65	$	—	$	—	$	65

Note 6—~~Other-than-temporary Impairment~~Advances

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.

Redemption Terms.

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~~advances outstanding by year of ~~the securities for which a portion~~contractual maturity.



	As of March 31, 2020			As of December 31, 2019
Due in one year or less	$	82,693		$	64,413
Due after one year through two years	8,784			7,421
Due after two years through three years	11,395			5,420
Due after three years through four years	8,100			3,382
Due after four years through five years	10,764			4,778
Due after five years	13,097			11,042
Total par value	134,833			96,456
Deferred prepayment fees	(10		)	(9		)
Discount on AHP ⁽¹⁾advances	(3		)	(3		)
Discount on EDGE ⁽²⁾advances	(2		)	(2		)
Hedging adjustments	2,219			725
Total ⁽³⁾	$	137,037		$	97,167

___________

⁽¹⁾ The Affordable Housing Program

⁽²⁾ The Economic Development and Growth Enhancement Program

⁽³⁾ Carrying amounts exclude accrued interest receivable of ~~the other-than-temporary loss was previously recognized in accumulated other comprehensive income.~~

For the Three Months Ended March 31,
2019 2018
Balance, beginning of period $ 335
$ 394
Amount related to credit loss for which an other-than-temporary impairment was previously recognized 1
—
Increase in cash flows expected to be collected, (accreted as interest income over the remaining lives of the applicable securities) (14 ) (16 )
Balance, end of period $ 322
$ 378

$173 and $214 as of March 31, 2020 and December 31, 2019, respectively.

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 by year of contractual maturity.~~

As of March 31, 2019 As of December 31, 2018
Overdrawn demand deposit accounts $ —
$ 33
Due in one year or less 52,086
72,300
Due after one year through two years 15,962
13,298
Due after two years through three years 4,584
5,403
Due after three years through four years 4,722
4,678
Due after four years through five years 4,509
3,997
Due after five years 8,749
8,705
Total par value 90,612
108,414
Deferred prepayment fees (15 ) (17 )
Discount on AHP ⁽¹⁾advances
(4 ) (4 )
Discount on EDGE ⁽²⁾advances
(2 ) (2 )
Hedging adjustments 338
71
Total $ 90,929
$ 108,462

~~___________~~

⁽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, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Overdrawn demand deposit accounts	$	—	$	33
Due or convertible in one year or less	52,919		73,009		$	88,496	$	68,520
Due or convertible after one year through two years	16,049		13,484		9,058		7,437
Due or convertible after two years through three years	4,606		5,437		11,368		5,319
Due or convertible after three years through four years	4,704		4,642		8,048		3,342
Due or convertible after four years through five years	4,444		3,951		10,512		4,529
Due or convertible after five years	7,890		7,858		7,351		7,309
Total par value	$	90,612	$	108,414	$	134,833	$	96,456

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


	As of March 31, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Fixed-rate:
Due in one year or less	$	28,110	$	40,578	$	41,548	$	36,366
Due after one year	25,206		24,043		46,865		25,985
Total fixed-rate	53,316		64,621		88,413		62,351
Variable-rate:
Due in one year or less	23,976		31,755		41,145		28,047
Due after one year	13,320		12,038		5,275		6,058
Total variable-rate	37,296		43,793		46,420		34,105
Total par value	$	90,612	$	108,414	$	134,833	$	96,456

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

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 ~~$65,680~~$105,912 and ~~$80,211~~$71,769 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. This concentration represented ~~72.5~~78.6 percent and ~~74.0~~74.4 percent of total advances outstanding as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Based on the collateral pledged as security for advances, the Bank’s credit analysis of members’ financial condition, and prior repayment history, no0 allowance for credit losses on advances was deemed necessary by the Bank as of March 31, ~~2019~~2020 and December 31, ~~2018. No~~2019. NaN advance was past due as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 8—7—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, 2019			As of December 31, 2018			As of March 31, 2020			As of December 31, 2019
Medium-term (15 years or less)	$	7		$	8		$	4		$	5
Long-term (greater than 15 years)	340			353			278			292
Total unpaid principal balance	347			361			282			297
Premiums	1			1			1			1
Discounts	(1		)	(1		)	(1		)	(1		)
Total	$	347		$	361
Total mortgage loans held for portfolio ⁽¹⁾							282			297
Allowance for credit losses on mortgage loans							(1		)	(1		)
Mortgage loans held for portfolio, net							$	281		$	296

____________

⁽¹⁾Exclude accrued interest receivable of $1 as of March 31, 2020 and December 31, 2019.

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


	As of March 31, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Conventional mortgage loans	$	324	$	338	$	263	$	278
Government-guaranteed or insured mortgage loans	23		23		19		19
Total unpaid principal balance	$	347	$	361	$	282	$	297

~~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,
	2020		2019
Balance, beginning of period	$	1	$	1
Provision for credit losses	—		—
Balance, end of period	$	1	$	1

Payment status is a key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. Other delinquency statistics include, non-accrual loans and loans in process of foreclosure. The following tables present the payment status for conventional mortgage loans.

For the Three Months Ended March 31,
2019 2018
Balance, beginning of period $ 1
$ 1
Provision for credit losses —
—
Balance, end of period $ 1
$ 1



	As of March 31, 2020
	Origination Year
	2017		Prior to 2016		Total
Payment status, at amortized cost:⁽¹⁾
Past due 30-59 days	$	—	$	7	$	7
Past due 60-89 days	—		2		2
Past due 90 days or more	—		5		5
Total past due mortgage loans	—		14		14
Current mortgage loans	66		183		249
Total conventional mortgage loans	$	66	$	197	$	263

____________

⁽¹⁾Amortized cost excludes accrued interest receivable of $1 as of March 31, 2020.



	As of December 31, 2019
Payment status, at recorded investment:⁽¹⁾
Past due 30-59 days	$	8
Past due 60-89 days	2
Past due 90 days or more	6
Total past due mortgage loans	16
Current mortgage loans	263
Total conventional mortgage loans	$	279

____________

⁽¹⁾Recorded investment includes accrued interest receivable of $1 as of December 31, 2019.

The following ~~table presents~~tables present the ~~recorded investment in conventional residential~~other delinquency statistics for all mortgage loans.



	As of March 31, 2020
	Conventional Residential Mortgage Loans			Government-guaranteed or Insured Residential Mortgage Loans			Total
Other delinquency statistics, at amortized cost:
In process of foreclosure ⁽¹⁾	$	1		$	—		$	1
Seriously delinquent rate ⁽²⁾	1.76		%	0.70		%	1.69		%
Past due 90 days or more and still accruing interest ⁽³⁾	$	—		$	—		$	—
Mortgage loans on nonaccrual status ⁽⁴⁾	$	5		$	—		$	5

____________

⁽¹⁾ Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in-lieu, has been reported.

⁽²⁾ 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.

⁽³⁾ Mortgage loans insured or guaranteed by ~~impairment methodology.~~the Federal Housing Administration or the Department of Veterans Affairs.

As of March 31, 2019 As of December 31, 2018
Allowance for credit losses:
   Collectively evaluated for impairment $ 1
$ 1
Recorded investment:
   Individually evaluated for impairment $ 9
$ 9
   Collectively evaluated for impairment 316
330
Total recorded investment $ 325
$ 339

⁽⁴⁾ Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest. As of March 31, 2020, NaN of these conventional mortgage loans on non-accrual status had an associated allowance for credit losses.



	As of December 31, 2019
	Conventional Residential Mortgage Loans			Government-guaranteed or Insured Residential Mortgage Loans			Total
Other delinquency statistics, at recorded investment:
In process of foreclosure ⁽¹⁾	$	1		$	—		$	1
Seriously delinquent rate ⁽²⁾	1.96		%	0.39		%	1.86		%
Past due 90 days or more and still accruing interest ⁽³⁾	$	—		$	—		$	—
Mortgage loans on nonaccrual status ⁽⁴⁾	$	5		$	—		$	5

____________

⁽¹⁾ Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in-lieu, has been reported.

⁽²⁾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.

⁽³⁾ Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.

⁽⁴⁾ 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)

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, 2019
Conventional Residential Mortgage Loans Government-guaranteed or Insured Residential Mortgage Loans Total
Past due 30-59 days $ 10
$ 2
$ 12
Past due 60-89 days 2
1
3
Past due 90 days or more 6
—
6
Total past due mortgage loans 18
3
21
Total current mortgage loans 307
20
327
Total mortgage loans ⁽¹⁾
$ 325
$ 23
$ 348
Other delinquency statistics:
  In process of foreclosure ⁽²⁾
$ 2
$ —
$ 2
  Seriously delinquent rate ⁽³⁾
1.77 % 0.68 % 1.70 %
  Past due 90 days or more and still accruing interest ⁽⁴⁾
$ —
$ —
$ —
  Mortgage loans on nonaccrual status ⁽⁵⁾
$ 6
$ —
$ 6

~~____________~~

~~(1) The difference between the recorded investment and the carrying value of total mortgage loans of $1 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 categories 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)~~

As of December 31, 2018
Conventional Residential Mortgage Loans Government-guaranteed or Insured Residential Mortgage Loans Total
Past due 30-59 days $ 8
$ 2
$ 10
Past due 60-89 days 3
—
3
Past due 90 days or more 6
—
6
Total past due mortgage loans 17
2
19
Total current mortgage loans 322
21
343
Total mortgage loans ⁽¹⁾
$ 339
$ 23
$ 362
Other delinquency statistics:
  In process of foreclosure ⁽²⁾
$ 2
$ —
$ 2
  Seriously delinquent rate ⁽³⁾
1.93 % 1.23 % 1.89 %
Past due 90 days or more and still accruing interest ⁽⁴⁾
$ —
$ —
$ —
  Mortgage loans on nonaccrual status ⁽⁵⁾
$ 6
$ —
$ 6

~~____________~~

⁽¹⁾ ~~The difference between the recorded investment and the carrying value of total mortgage loans of $1 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 categories depending on their delinquency status.

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

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

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

~~The 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—~~8—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 March 31, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Simple variable-rate					$	62,567	$	56,938
Fixed-rate	$	23,032	$	21,217	18,956		30,810
Step up/down	3,370		4,379		260		735
Simple variable-rate	42,853		53,670
Total par value	$	69,255	$	79,266	$	81,783	$	88,483

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

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


	As of March 31, 2019				As of December 31, 2018				As of March 31, 2020				As of December 31, 2019
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Due in one year or less	$	46,956		2.35	$	55,386		2.26	$	68,923		0.92	$	79,699		1.75
Due after one year through two years	10,197			2.27	13,292			2.30	8,729			1.12	4,426			1.90
Due after two years through three years	2,921			2.52	3,387			2.44	762			2.15	817			2.32
Due after three years through four years	3,910			2.28	3,884			2.27	1,706			2.61	546			2.84
Due after four years through five years	3,368			2.86	1,429			2.87	458			2.39	1,635			2.47
Due after five years	1,903			3.22	1,888			3.23	1,205			3.74	1,360			3.54
Total par value	69,255			2.39	79,266			2.31	81,783			1.04	88,483			1.82
Premiums	6				7				14				4
Discounts	(23		)		(18		)		(20		)		(20		)
Hedging adjustments	(52		)		(141		)		79				36
Total	$	69,186			$	79,114			$	81,856			$	88,503

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


	As of March 31, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Noncallable	$	53,732	$	65,237	$	80,318	$	76,243
Callable	15,523		14,029		1,465		12,240
Total par value	$	69,255	$	79,266	$	81,783	$	88,483

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, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Due or callable in one year or less	$	57,283	$	65,560	$	69,733	$	81,624
Due or callable after one year through two years	8,118		10,874		8,644		3,746
Due or callable after two years through three years	834		982		547		432
Due or callable after three years through four years	400		429		1,371		171
Due or callable after four years through five years	1,367		168		298		1,320
Due or callable after five years	1,253		1,253		1,190		1,190
Total par value	$	69,255	$	79,266	$	81,783	$	88,483

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.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

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, 2019 $ 61,166
$ 61,417
2.42
As of December 31, 2018 $ 66,025
$ 66,270
2.33



	Book Value		Par Value		Weighted-average Interest Rate (%)
As of March 31, 2020	$	96,490	$	96,636	0.86
As of December 31, 2019	$	52,134	$	52,298	1.64

Note ~~11—~~9—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, 2019						As of December 31, 2018						As of March 31, 2020						As of December 31, 2019
	Required			Actual			Required			Actual			Required			Actual			Required			Actual
Risk-based capital	$	1,633		$	6,880		$	1,654		$	7,597		$	1,663		$	8,838		$	1,423		$	7,142
Total regulatory capital ratio	4.00		%	4.95		%	4.00		%	4.92		%	4.00		%	4.67		%	4.00		%	4.77		%
Total regulatory capital ⁽¹⁾	$	5,558		$	6,880		$	6,179		$	7,597		$	7,576		$	8,838		$	5,994		$	7,142
Leverage capital ratio	5.00		%	7.43		%	5.00		%	7.38		%	5.00		%	7.00		%	5.00		%	7.15		%
Leverage capital	$	6,947		$	10,321		$	7,724		$	11,396		$	9,470		$	13,256		$	7,493		$	10,713

____________

⁽¹⁾ Total regulatory capital does not include accumulated other comprehensive income, but does include mandatorily redeemable capital stock.

The Bank declares and pays any dividends only after net income is calculated for the preceding quarter. The following table presents the Bank’s declared and paid quarterly cash dividends in ~~2019~~2020 and ~~2018.~~2019.

2019 2018
Amount Annualized Rate (%) Amount Annualized Rate (%)
First quarter $ 85
6.47 $ 65
5.16



	2020			2019
	Amount		Annualized Rate (%)	Amount		Annualized Rate (%)
First quarter	$	76	5.93	$	85	6.47

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Mandatorily Redeemable Capital Stock. The following table presents the activity in mandatorily redeemable capital stock.


	For the Three Months Ended March 31,					For the Three Months Ended March 31,
	2019		2018			2020			2019
Balance, beginning of period	$	1	$	1		$	1		$	1
Net reclassification from capital during the period	—		32			2			—
Repurchase/redemption of mandatorily redeemable capital stock	—		(30		)	(2		)	—
Balance, end of period	$	1	$	3		$	1		$	1

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, 2019		As of December 31, 2018		As of March 31, 2020		As of December 31, 2019
Due after two years through three years					$	1	$	—
Due after three years through four years	$	1	$	—	—		1
Due after four years through five years	—		1
Total	$	1	$	1	$	1	$	1

Note 10—Accumulated Other Comprehensive (Loss) Income

The following table presents the components comprising accumulated other comprehensive (loss) income.



	Net Unrealized Gains (Losses) on Available-for-sale Securities			Net Noncredit Portion of Other-than-temporary Impairment Losses on Available-for-sale Securities			Pension and Postretirement Benefits			Total Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2018	$	—		$	72		$	(21	)	$	51
Other comprehensive income before reclassifications:
Net change in fair value	—			(9		)	—			(9		)
Reclassification from accumulated other comprehensive income to net income:
Noncredit other-than-temporary impairment losses	—			1			—			1
Amortization of pension and postretirement ⁽¹⁾	—			—			1			1
Net current period other comprehensive (loss) income	—			(8		)	1			(7		)
Balance, March 31, 2019	$	—		$	64		$	(20	)	$	44

Balance, December 31, 2019	$	—		$	41		$	(19	)	$	22
Other comprehensive income before reclassifications:
Adoption of ASU 2016-13 as amended	41			(41		)	—			—
Net unrealized gains on available-for-sale securities	41			—			—			41
Reclassification from accumulated other comprehensive income to net income:
Net realized gains from sale of available-for-sale securities	(82		)	—			—			(82		)
Net current period other comprehensive loss	—			(41		)	—			(41		)
Balance, March 31, 2020	$	—		$	—		$	(19	)	$	(19	)

____________

⁽¹⁾ Included in Noninterest expense - Other on the Statements of Income.

2118

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note ~~12—Accumulated Other Comprehensive Income~~

~~The following tables present 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, 2017 $ (24 ) $ 134
$ 110
Other comprehensive income before reclassifications:
     Net change in fair value —
(16 ) (16 )
Reclassification from accumulated other comprehensive income to net income:
     Amortization of pension and postretirement ⁽¹⁾
1
—
1
Net current period other comprehensive income (loss) 1
(16 ) (15 )
Balance, March 31, 2018 $ (23 ) $ 118
$ 95

Balance, December 31, 2018 $ (21 ) $ 72
$ 51
Other comprehensive income before reclassifications:
     Net change in fair value —
(9 ) (9 )
Reclassification from accumulated other comprehensive income to net income:
     Noncredit other-than-temporary impairment losses —
1
1
     Amortization of pension and postretirement ⁽¹⁾
1
—
1
Net current period other comprehensive income (loss) 1
(8 ) (7 )
Balance, March 31, 2019 $ (20 ) $ 64
$ 44

~~____________~~

⁽¹⁾ ~~Included in Noninterest expense - Other on the Statements of Income.~~

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

~~Note 13—~~11—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 interest-bearing liabilities 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~~derivatives 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 derivatives dealer and does not trade derivatives for short-term profit. For additional information on the Bank’s derivatives and hedging activities, see Note 17—Derivatives and Hedging Activities to the ~~2018~~2019 audited financial statements contained in the Bank’s Form 10-K.

Financial Statement Effect and Additional Financial Information

Derivative Notional Amounts. The notional amount of derivatives serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk; the overall risk is much smaller. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.

The following table presents the notional amount, fair value of derivative instruments, and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.


	As of March 31, 2019							As of December 31, 2018							As of March 31, 2020							As of December 31, 2019
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives in hedging relationships:
Interest-rate swaps ⁽¹⁾	$	50,790	$	76	$	87		$	50,427	$	32	$	151		$	94,576	$	70	$	631		$	73,637	$	71	$	221
Derivatives not designated as hedging instruments:
Interest-rate swaps ⁽¹⁾	657		4		4			1,008		3		11			611		11		3			478		5		1
Interest-rate caps or floors	8,083		1		—			8,083		1		1			7,083		1		1			7,084		—		—
Total derivatives not designated as hedging instruments	8,740		5		4			9,091		4		12			7,694		12		4			7,562		5		1
Total derivatives before netting and collateral adjustments	$	59,530	81		91			$	59,518	36		163			$	102,270	82		635			$	81,199	76		222
Netting adjustments and cash collateral ⁽²⁾			299		(78		)			278		(146		)			907		(625		)			304		(215		)
Derivative assets and derivative liabilities			$	380	$	13				$	314	$	17				$	989	$	10				$	380	$	7

___________

⁽¹⁾Includes variation margin for daily settled contracts of ~~$322~~$1,575 and ~~$21~~$503 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

⁽²⁾Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty. Cash collateral posted and related accrued interest was ~~$402~~$1,533 and ~~$433~~$543 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Cash collateral received and related accrued interest was ~~$25~~$2 and $9$25 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

2319

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Beginning on January 1, 2019, as a result of adopting new accounting guidance related to derivatives and hedging activities, changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. Prior to January 1, 2019, for fair value hedges, any hedge ineffectiveness (which represented the amount by which the change in the fair value of the derivative differed from the change in the fair value of the hedge item) was recorded in noninterest income as net gains (losses) on derivatives and hedging activities. The change in fair value of the derivative hedging instruments and the related hedged items increased net interest income by $1 for the three months ended March 31, 2019.

The following tables present the net gains (losses) on fair value hedging relationships.


	For the Three Months Ended March 31, 2019						For the Three Months Ended March 31, 2020
	Interest Income/Expense						Interest Income (Expense)
	Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds			Consolidated Obligation Discount Notes
Total interest income (expense) recorded in the Statements of Income	$	656		$	(466	)	$	419		$	(342	)	$	(211	)
Net interest income effect from fair value hedging relationships
Interest-rate contracts:
Changes in fair value:
Hedged items							$	1,505		$	(43	)	$	(25	)
Derivatives ⁽¹⁾	$	(250	)	$	67		(1,514		)	50			9
Hedged items	268			(89		)
Net changes in fair value							(9		)	7			(16		)
Net interest settlements on derivatives ^{(1) (2)}							(30		)	7			12
Amortization/accretion of active hedging relationships							(11		)	—			—
Other							2			—			—
Total net interest income effect from fair value hedging relationships	$	18		$	(22	)	$	(48	)	$	14		$	(4	)

____________

⁽¹⁾~~Includes net~~ Represents interest ~~settlements.~~

For the Three Months Ended March 31, 2018 ⁽²⁾
Interest Income/Expense Noninterest Income
Advances Consolidated Obligation Bonds Consolidated Obligation Discount Notes Net gains (losses) on derivatives and hedging activities
Interest-rate contracts:
Derivatives ⁽¹⁾
$ (33 ) $ 4
$ (1 ) $ 206
Hedged items —
—
—
(187 )
Net (losses) gains on fair value hedging relationships $ (33 ) $ 4
$ (1 ) $ 19

~~___________~~

⁽¹⁾~~Includes net~~income/expense on derivatives in qualifying fair-value hedging relationships. Net interest ~~settlements.~~settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.

⁽²⁾ ~~Prior period amounts were~~Excludes the interest income/expense of the respective hedged items.



	For the Three Months Ended March 31, 2019
	Interest Income (Expense)
	Advances			Consolidated Obligation Bonds
Total interest income (expense) recorded in the Statements of Income	$	656		$	(466	)
Changes in fair value:
Hedged items	$	275		$	(89	)
Derivatives	(271		)	85
Net changes in fair value	4			(4		)
Net interest settlements on derivatives ^{(1) (2)}	21			(18		)
Amortization/accretion of active hedging relationships	(6		)	—
Other	(1		)	—
Total net interest income effect from fair value hedging relationships	$	18		$	(22	)

____________

⁽¹⁾ Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not ~~conformed to new hedge accounting guidance adopted January 1, 2019.~~in qualifying fair-value hedging relationships are reported in other income.

⁽²⁾ Excludes the interest income/expense of the respective hedged items.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related

amortized cost of the hedged items.


	As of March 31, 2019										As of March 31, 2020								As of December 31, 2019
Line Item in Statement of Conditions of Hedged Item	Amortized Cost of Hedged Asset or Liability ⁽¹⁾		Basis Adjustments for Active Hedging Relationships Included in Amortized Cost			Basis Adjustments for Discontinued Hedging Relationships included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments			Amortized Cost of Hedged Asset or Liability ⁽¹⁾		Basis Adjustments for Active Hedging Relationships Included in Amortized Cost		Basis Adjustments for Discontinued Hedging Relationships included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments		Amortized Cost of Hedged Asset or Liability ⁽¹⁾		Basis Adjustments for Active Hedging Relationships Included in Amortized Cost		Basis Adjustments for Discontinued Hedging Relationships included in Amortized Cost		Cumulative Amount of Fair Value Hedging Basis Adjustments
Advances	$	29,780	$	324		$	14	$	338		$	54,205	$	2,209	$	10	$	2,219	$	29,984	$	716	$	9	$	725
Consolidated obligations:
Bonds	20,758		(52		)	—		(52		)	14,596		79		—		79		26,348		36		—		36
Discount notes											26,231		25		—		25		17,742		—		—		—

___________

⁽¹⁾Includes only the portion of amortized cost representing the hedged items in fair value hedging relationships.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

The following table presents net ~~gains (losses)~~losses related to derivatives and hedging activities recorded in noninterest income ~~(loss)~~ on the Statements of Income. ~~For fair value hedging relationships, the portion of net gains (losses) representing hedge ineffectiveness are recorded in noninterest income (loss) for periods prior to January 1, 2019.~~


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2019			2018			2020			2019
Derivatives and hedged items in fair value hedging relationships:
Interest-rate swaps	N/A ⁽¹⁾			$	19
Derivatives not designated as hedging instruments:
Interest-rate swaps	$	(1	)	3			$	(6	)	$	(1	)
Interest-rate caps or floors	(1		)	1			—			(1		)
Net interest settlements	—			(1		)
Total net gains (losses) related to derivatives not designated as hedging instruments	(2		)	3
Net (losses) gains on derivatives and hedging activities	$	(2	)	$	22
Total net losses related to derivatives not designated as hedging instruments							(6		)	(2		)
Net losses on derivatives and hedging activities							$	(6	)	$	(2	)

~~__________~~

⁽¹⁾~~Not applicable due to new hedge accounting guidance adopted January 1, 2019.~~

Managing Credit Risk on Derivatives

The Bank is subject to credit risk to its derivative transactions due to the risk of nonperformance by counterparties and manages this risk through credit analysis, collateral requirements, and adherence to the requirements set forth in its policies, U.S. Commodity Futures Trading Commission regulations, and Finance Agency regulations.

For uncleared derivatives, the degree of credit risk depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The Bank requires collateral agreements with collateral delivery thresholds on all uncleared derivatives. Additionally, collateral related to derivatives with member institutions includes collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.

Certain of the Bank’s uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating. If the Bank’s credit rating is lowered by a ~~nationally recognized statistical rating organization (NRSRO),~~NRSRO, the Bank may be required to deliver additional collateral on uncleared derivative instruments in net liability positions. The aggregate fair value of all uncleared derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest) as of March 31, ~~2019~~2020 was ~~$6,~~$10, for which the Bank was not required to post collateral as of March 31, ~~2019.~~2020. If the Bank’s credit ratings had been lowered from its current rating to the next lower rating, the Bank would have been required to deliver $1$5 of collateral at fair value to its uncleared derivative counterparties as of March 31, ~~2019.~~2020.

For cleared derivatives, the Clearinghouse is the Bank’s counterparty. The Clearinghouse notifies the clearing agent of the required initial and variation margin, and the clearing agent notifies the Bank. The Bank ~~currently~~ utilizes ~~the following~~ two Clearinghouses for all cleared derivative ~~transactions:~~transactions, LCH Ltd. and CME Clearing. At both Clearinghouses, variation margin is characterized as daily settlement payments, and initial margin is considered cash collateral. Because the Bank is required to post initial and variation margin through the clearing agent to the Clearinghouse, it exposes the Bank to institutional credit risk if the clearing agent or

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties, and collateral/payments is posted daily through a clearing agent for changes in the fair value of cleared derivatives. The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the Clearinghouse or the Bank’s clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.

The Bank presents derivative instruments and the related cash collateral that is received or pledged, plus the associated accrued interest, on a net basis by clearing agent and/or by counterparty when it has met the netting requirements.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

The following table presents the fair value of derivative instruments meeting or not meeting netting requirements, including the related collateral received from or pledged to counterparties.


	As of March 31, 2019						As of December 31, 2018						As of March 31, 2020					As of December 31, 2019
	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities			Derivative Assets		Derivative Liabilities			Derivative Assets			Derivative Liabilities
Gross recognized amount:
Uncleared derivatives	$	45		$	88		$	35		$	128		$	30	$	608		$	59		$	219
Cleared derivatives	36			3			1			35			52		27			17			3
Total gross recognized amount	81			91			36			163			82		635			76			222
Gross amounts of netting adjustments and cash collateral:
Uncleared derivatives	(43		)	(75		)	(33		)	(111		)	1		(598		)	(47		)	(212		)
Cleared derivatives	342			(3		)	311			(35		)	906		(27		)	351			(3		)
Total gross amounts of netting adjustments and cash collateral	299			(78		)	278			(146		)	907		(625		)	304			(215		)
Net amounts after netting adjustments and cash collateral:
Uncleared derivatives	2			13			2			17			31		10			12			7
Cleared derivatives	378			—			312			—			958		—			368			—
Total net amounts after netting adjustments and cash collateral	380			13			314			17			989		10			380			7
Non-cash collateral received or pledged not offset-cannot be sold or repledged: ⁽¹⁾
Uncleared derivatives	1			—			—			—			11		—			4			—
Cleared derivatives	—			—			—			—			—		—			—			—
Total cannot be sold or repledged ⁽¹⁾	1			—			—			—			11		—			4			—
Net unsecured amounts: ⁽¹⁾
Uncleared derivatives	1			13			2			17			20		10			8			7
Cleared derivatives	378			—			312			—			958		—			368			—
Total net unsecured amount ⁽¹⁾	$	379		$	13		$	314		$	17		$	978	$	10		$	376		$	7

____________

⁽¹⁾The Bank had net credit exposure of $1$20 and $2$6 as of March 31, ~~2019~~2020 and December 31, ~~2018, respectively,~~2019, due to instances where the Bank’s pledged collateral to a counterparty exceeded the Bank’s net derivative liability position.

Note ~~14—~~12—Estimated Fair Values

The Bank records trading securities, available-for-sale securities, derivative assets and liabilities, and grantor trust assets (publicly-traded mutual funds) at estimated fair value on a recurring basis. Fair value is defined under GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. In general, the transaction price will equal the exit price and therefore, represents the fair value of the asset or liability at initial recognition. In determining whether a transaction price represents the fair value of the asset or liability at initial recognition, each reporting entity is required to consider factors specific to the transaction, the asset or liability, the principal or most advantageous market for the asset or liability, and market participants with whom the entity would transact in the market.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

A fair value hierarchy is used to prioritize the inputs of valuation techniques used to measure fair value. The inputs are evaluated, and an overall level for the fair value measurement is determined. This overall level is an indication of how market-observable the fair value measurement is and defines the level of disclosure. In order to determine the fair value or the exit price, entities must determine the unit of account, highest and best use, principal market, and market participants. These determinations allow the reporting entity to define the inputs for fair value and level of hierarchy.

Outlined below is the application of the “fair value hierarchy” to the Bank’s financial assets and liabilities that are carried at fair value or disclosed in the notes to the financial statements.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Bank carried grantor trust assets at fair value hierarchy Level 1 as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Bank carried trading securities and derivatives at fair value hierarchy Level 2 as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are supported by limited market activity and reflect the entity’s own assumptions. The Bank carried available-for-sale securities at fair value hierarchy Level 3 as of ~~March 31, 2019 and~~ December 31, ~~2018.~~2019.

The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

For financial instruments carried at fair value, the Bank reviews the fair value hierarchy classification of financial assets and liabilities on a quarterly basis. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities within the fair value hierarchy. Such reclassifications are reported as transfers in/out at fair value as of the beginning of the quarter in which the changes occur. There were no such transfers during the periods presented.

Estimated Fair Value Measurements on a Recurring Basis. The following tables present, for each fair value hierarchy level, the Bank’s financial assets and liabilities that are measured at fair value on a recurring basis on its Statements of Condition.


	As of March 31, 2019											As of March 31, 2020
	Fair Value Measurements Using						Netting Adjustments and Cash Collateral ⁽¹⁾					Fair Value Measurements Using						Netting Adjustments and Cash Collateral ⁽¹⁾
	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total
Assets
Trading securities:
U.S. Treasury obligations	$	—	$	999	$	—	$	—		$	999	$	—	$	1,501	$	—	$	—		$	1,501
Government-sponsored enterprises debt obligations	—		56		—		—			56		—		62		—		—			62
Total trading securities	$	—	$	1,055	$	—	$	—		$	1,055	—		1,563		—		—			1,563
Available-for-sale securities:
Private-label residential MBS	$	—	$	—	$	823	$	—		$	823
Derivative assets:
Interest-rate related	—		81		—		299			380		—		82		—		907			989
Grantor trust (included in Other assets)	45		—		—		—			45		64		—		—		—			64
Total assets at fair value	$	45	$	1,136	$	823	$	299		$	2,303	$	64	$	1,645	$	—	$	907		$	2,616
Liabilities
Derivative liabilities:
Interest-rate related	$	—	$	91	$	—	$	(78	)	$	13	$	—	$	635	$	—	$	(625	)	$	10
Total liabilities at fair value	$	—	$	91	$	—	$	(78	)	$	13	$	—	$	635	$	—	$	(625	)	$	10

____________

⁽¹⁾ Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.

2723

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of December 31, 2018											As of December 31, 2019
	Fair Value Measurements Using						Netting Adjustments and Cash Collateral ⁽¹⁾					Fair Value Measurements Using						Netting Adjustments and Cash Collateral ⁽¹⁾
	Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Total
Assets
Trading securities:
U.S. Treasury obligations												$	—	$	1,499	$	—	$	—		$	1,499
Government-sponsored enterprises debt obligations	$	—	$	55	$	—	$	—		$	55	—		59		—		—			59
Total trading securities												—		1,558		—		—			1,558
Available-for-sale securities:
Private-label residential MBS	—		—		865		—			865		—		—		684		—			684
Derivative assets:
Interest-rate related	—		36		—		278			314		—		76		—		304			380
Grantor trust (included in Other assets)	52		—		—		—			52		68		—		—		—			68
Total assets at fair value	$	52	$	91	$	865	$	278		$	1,286	$	68	$	1,634	$	684	$	304		$	2,690
Liabilities
Derivative liabilities:
Interest-rate related	$	—	$	163	$	—	$	(146	)	$	17	$	—	$	222	$	—	$	(215	)	$	7
Total liabilities at fair value	$	—	$	163	$	—	$	(146	)	$	17	$	—	$	222	$	—	$	(215	)	$	7

____________

⁽¹⁾Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.

The following table presents a reconciliation of available-for-sale securities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2019			2018			2020			2019
Balance, beginning of period	$	865		$	1,104		$	684		$	865
Total (losses) gains realized and unrealized: ⁽¹⁾
Included in net impairment losses recognized in earnings	(1		)	—
Included in other comprehensive income	(8		)	(16		)
Net realized gains from sale of available-for-sale securities							82			—
Net impairment losses recognized in earnings							—			(1		)
Included in other comprehensive loss							(41		)	(8		)
Accretion of credit losses in net interest income	15			16			1			15
Sales							(726		)	—
Settlements	(48		)	(51		)	—			(48		)
Balance, end of period	$	823		$	1,053		$	—		$	823

____________

⁽¹⁾ Related to available-for-sale securities held at period end.

Described below are the Bank’s fair value measurement methodologies for financial assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition and categorized within Level 2 and Level 3 of the fair value hierarchy.

Investment securities. The Bank obtains prices from multiple designated third-party pricing vendors, when available, to estimate the fair value of its investment securities. The pricing vendors use various proprietary models to price investment securities. The inputs to those models are derived from various sources including, but not limited to, the following: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers, and other market-related data. Since many investment securities do not trade on a daily basis, the pricing vendors use available information as applicable, such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all investment securities valuations, which facilitates resolution of potentially erroneous prices identified by the Bank.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank periodically conducts reviews of its pricing vendors to confirm and further augment its understanding of the vendors’ pricing processes, methodologies, and control procedures for U.S. agency ~~and private-label~~ MBS.

The Bank’s valuation technique for estimating the fair value of its investment securities first requires the establishment of a “median” price for each security.

~~Table of Contents~~

~~FEDERAL HOME LOAN BANK OF ATLANTA~~

~~NOTES TO FINANCIAL STATEMENTS (Unaudited)~~

~~(Dollars in millions)~~

All prices that are within a specified tolerance threshold of the median price are included in the “cluster” of prices that are averaged to compute a “resultant” price. All prices that are outside the threshold (“outliers”) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price rather than the resultant price. Alternatively, if the analysis does not provide evidence that an outlier is more representative of the fair value, and the resultant price is the best estimate, then the resultant price is used as the final price. In all cases, the final price is used to determine the fair value of the security.

If all prices received for a security are outside the tolerance threshold level of the median price, then there is no resultant price, and the final price is determined by an evaluation of all outlier prices as described above.

Multiple third-party vendor prices were received for a majority of the Bank’s investment securities holdings, and the final prices for those securities were computed by averaging the prices received as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. Based on the Bank’s review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or the Bank’s additional analysis in those instances in which there were outliers or significant yield variances), the Bank believes that its final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further, that the fair value measurements are classified appropriately in the fair value hierarchy. Based on the lack of significant market activity for private-label MBS, the fair value measurement for those securities were classified as Level 3 within the fair value hierarchy as of ~~March 31, 2019 and~~ December 31, ~~2018.~~2019.

Derivative assets and liabilities. The Bank calculates the fair values of interest-rate related derivatives using a discounted cash flow analysis which utilizes market-observable inputs. The inputs for interest-rate related derivatives uses the Overnight Index Swap curve for collateralized derivatives.

Derivative instruments are transacted primarily in the institutional dealer market and priced with observable market assumptions at a mid-market valuation point. The Bank does not provide a credit valuation adjustment based on aggregate exposure by derivative counterparty when measuring the fair value of its derivatives. This is because the collateral provisions pertaining to the Bank’s derivatives obviate the need to provide such a credit valuation adjustment. The fair values of the Bank’s derivatives take into consideration the effects of legally enforceable master netting agreements, where applicable, that allow the Bank to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The Bank and each uncleared derivative counterparty have collateral thresholds that take into account both the Bank’s and the counterparty’s credit ratings. As a result of these practices and agreements, the Bank has concluded that the impact of the credit differential between the Bank and its derivative counterparties was mitigated to an immaterial level, and no further adjustments were deemed necessary to the recorded fair values of derivative assets and liabilities on the Statements of Condition as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

The following estimated fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. Although the Bank uses its best judgment in estimating the fair values of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions although they do reflect the Bank’s judgment of how a market participant would estimate the fair value. The fair value tables presented below do not represent an estimate of the overall fair value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets versus liabilities.

2925

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following tables present the carrying values and estimated fair values of the Bank’s financial instruments.


	As of March 31, 2019													As of March 31, 2020
			Estimated Fair Value													Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks	$	70	$	70	$	70	$	—	$	—	$	—		$	4,247	$	4,247	$	4,247	$	—	$	—	$	—
Interest-bearing deposits	3,444		3,444		—		3,444		—		—			3,322		3,322		—		3,322		—		—
Securities purchased under agreements to resell	4,500		4,500		—		4,500		—		—
Federal funds sold	12,775		12,775		—		12,775		—		—			17,945		17,945		—		17,945		—		—
Trading securities	1,055		1,055		—		1,055		—		—			1,563		1,563		—		1,563		—		—
Available-for-sale securities	823		823		—		—		823		—
Held-to-maturity securities	24,184		24,149		—		23,754		395		—			23,599		23,476		—		23,476		—		—
Advances	90,929		91,017		—		91,017		—		—			137,037		137,121		—		137,121		—		—
Mortgage loans held for portfolio, net	346		363		—		363		—		—			281		309		—		309		—		—
Accrued interest receivable	261		261		—		261		—		—			205		205		—		205		—		—
Derivative assets	380		380		—		81		—		299			989		989		—		82		—		907
Grantor trust assets (included in Other assets)	45		45		45		—		—		—			64		64		64		—		—		—
Liabilities:
Interest-bearing deposits	1,163		1,163		—		1,163		—		—			1,766		1,766		—		1,766		—		—
Consolidated obligations, net:
Discount notes	61,166		61,164		—		61,164		—		—			96,490		96,586		—		96,586		—		—
Bonds	69,186		69,262		—		69,262		—		—			81,856		82,318		—		82,318		—		—
Mandatorily redeemable capital stock	1		1		1		—		—		—			1		1		1		—		—		—
Accrued interest payable	217		217		—		217		—		—			158		158		—		158		—		—
Derivative liabilities	13		13		—		91		—		(78		)	10		10		—		635		—		(625		)

____________

3026

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of December 31, 2018													As of December 31, 2019
			Estimated Fair Value													Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾			Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustments and Cash Collateral ⁽¹⁾
Assets:
Cash and due from banks	$	35	$	35	$	35	$	—	$	—	$	—		$	911	$	911	$	911	$	—	$	—	$	—
Interest-bearing deposits	6,782		6,782		—		6,782		—		—			3,810		3,810		—		3,810		—		—
Securities purchased under agreements to resell	3,750		3,750		—		3,750		—		—			8,800		8,800		—		8,800		—		—
Federal funds sold	8,978		8,978		—		8,978		—		—			9,826		9,826		—		9,826		—		—
Trading securities	55		55		—		55		—		—			1,558		1,558		—		1,558		—		—
Available-for-sale securities	865		865		—		—		865		—			684		684		—		—		684		—
Held-to-maturity securities	23,879		23,846		—		23,428		418		—			25,939		25,903		—		25,711		192		—
Advances	108,462		108,448		—		108,448		—		—			97,167		97,365		—		97,365		—		—
Mortgage loans held for portfolio, net	360		374		—		374		—		—			296		324		—		324		—		—
Loan to another FHLBank	500		500		—		500		—		—
Accrued interest receivable	295		295		—		295		—		—			259		259		—		259		—		—
Derivative assets	314		314		—		36		—		278			380		380		—		76		—		304
Grantor trust assets (included in Other assets)	52		52		52		—		—		—			68		68		68		—		—		—
Liabilities:
Interest-bearing deposits	1,176		1,176		—		1,176		—		—			1,492		1,492		—		1,492		—		—
Consolidated obligations, net:
Discount notes	66,025		66,014		—		66,014		—		—			52,134		52,138		—		52,138		—		—
Bonds	79,114		79,086		—		79,086		—		—			88,503		88,764		—		88,764		—		—
Mandatorily redeemable capital stock	1		1		1		—		—		—			1		1		1		—		—		—
Accrued interest payable	204		204		—		204		—		—			212		212		—		212		—		—
Derivative liabilities	17		17		—		163		—		(146		)	7		7		—		222		—		(215		)

____________

⁽¹⁾Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.

Note ~~15—~~13—Commitments and Contingencies

Consolidated obligations are backed only by the financial resources of the FHLBanks. At any time, the Finance Agency may require any FHLBank to make principal or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation. No FHLBank has ever had to assume or pay the consolidated obligation of another FHLBank.

The par value of the other FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was ~~$880,223~~$996,251 and ~~$886,081~~$885,114 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, exclusive of the Bank’s own outstanding consolidated obligations. None of the other FHLBanks defaulted on their consolidated obligations, the Finance Agency was not required to allocate any obligation among the FHLBanks, and no amount of the joint and several obligation was fixed as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. Accordingly, the Bank has not recognized a liability for its joint and several obligation related to the other FHLBanks’ consolidated obligations as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

3127

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table presents the Bank’s outstanding commitments, which represent off-balance sheet obligations.


	As of March 31, 2019						As of December 31, 2018						As of March 31, 2020						As of December 31, 2019
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit ⁽¹⁾	$	11,615	$	15,894	$	27,509	$	12,334	$	17,974	$	30,308	$	8,422	$	23,040	$	31,462	$	8,532	$	23,973	$	32,505
Commitments to fund additional advances	30		—		30		48		—		48		70		10		80		—		—		—
Unsettled consolidated obligation bonds, at par ⁽²⁾	1,015		—		1,015		640		—		640		500		—		500		—		—		—
Unsettled consolidated obligation discount notes, at par ⁽²⁾	—		—		—		750		—		750		—		—		—		2,000		—		2,000

____________


⁽¹⁾	“Expire Within One Year” includes 1413 standby letters of credit for a total of ~~$37~~$39 and 13 standby letters of credit for a total of $36 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, which have no stated maturity date and are subject to renewal on an annual basis.


⁽²⁾	Expiration is based on settlement period rather than underlying contractual maturity of consolidated obligations.

~~The~~ carrying value of the guarantees related to standby letters of credit is recorded in “Other liabilities” on the Statements of Condition and amounted to ~~$88~~$101 and ~~$102~~$117 as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. ~~Based on the Bank’s credit analyses and collateral requirements, the Bank does not deem it necessary to record any additional liability on the Statements of Condition for these commitments.~~

The Bank is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate, as of the date of the financial statements, that the ultimate liability, if any, arising out of these matters will have a material effect on the Bank’s financial condition or results of operations.

Note ~~16—~~14—Transactions with Shareholders

The Bank is a cooperative whose member institutions own substantially all of the capital stock of the Bank. Former members and certain non-members, which own the Bank’s capital stock as a result of a merger or acquisition of a member of the Bank, own the remaining capital stock to support business transactions still carried on the Bank’s Statements of Condition. All holders of the Bank’s capital stock receive dividends on their investments, to the extent declared by the Bank’s board of directors. All advances are issued to members and eligible housing associates under the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), and mortgage loans held for portfolio were purchased from members. The Bank also maintains demand deposit accounts primarily to facilitate settlement activities that are related directly to advances and mortgage loans purchased. Transactions with any member that has an officer or director who is also a director of the Bank are subject to the same Bank policies as transactions with other members.

Related Parties. In accordance with GAAP, financial statements are required to disclose material related-party transactions other than compensation arrangements, expense allowances, or other similar items that occur in the ordinary course of business. Under GAAP, related parties include owners of more than 10 percent of the voting interests of the Bank. Due to limits on member voting rights under the FHLBank Act and Finance Agency regulations, no member owned more than 10 percent of the total voting interests. Therefore, the Bank had no such related party transactions required to be disclosed for the periods presented.

3228

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Shareholder Concentrations. The Bank considers shareholder concentration as members or non-members with regulatory capital stock outstanding in excess of 10 percent of the Bank’s total regulatory capital stock. The following tables present transactions with shareholders whose holdings of regulatory capital stock ~~exceed~~exceeded 10 percent of total regulatory capital stock outstanding.


	As of March 31, 2019									As of March 31, 2020
	Regulatory Capital Stock Outstanding		Percent of Total Regulatory Capital Stock Outstanding	Par Value of Advances		Percent of Total Par Value of Advances	Interest-bearing Deposits		Percent of Total Interest-bearing Deposits	Regulatory Capital Stock Outstanding		Percent of Total Regulatory Capital Stock Outstanding	Par Value of Advances		Percent of Total Par Value of Advances	Interest-bearing Deposits		Percent of Total Interest-bearing Deposits
Truist Bank										$	1,412	21.22	$	32,867	24.38	$	—	—
Bank of America, National Association										823		12.37	19,009		14.10	—		0.01
Navy Federal Credit Union	$	527	11.08	$	12,040	13.29	$	99	8.47	744		11.19	17,159		12.73	—		0.01
Bank of America, National Association	515		10.83	11,759		12.98	—		0.01

As of December 31, 2018
Regulatory Capital Stock Outstanding Percent of Total Regulatory Capital Stock Outstanding Par Value of Advances Percent of Total Par Value of Advances Interest-bearing Deposits Percent of Total Interest-bearing Deposits
Bank of America, National Association $ 855
15.58 $ 19,759
18.23 $ —
0.01
Navy Federal Credit Union 570
10.39 13,058
12.04 —
0.04



	As of December 31, 2019
	Regulatory Capital Stock Outstanding		Percent of Total Regulatory Capital Stock Outstanding	Par Value of Advances		Percent of Total Par Value of Advances	Interest-bearing Deposits		Percent of Total Interest-bearing Deposits
Truist Bank	$	760	15.24	$	17,537	18.18	$	—	—

Note ~~17—~~15—Subsequent Events

On April ~~25, 2019,~~30, 2020, the Bank's board of directors approved a cash dividend for the first quarter of ~~2019.~~2020. The Bank paid the first quarter ~~2019~~2020 dividend on ~~April 29, 2019~~May 5, 2020 in the amount of ~~$81.~~$70.

3329

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Information

Some of the statements made in this quarterly report on Form 10-Q may be “forward-looking statements,” which include statements with respect to the plans, objectives, expectations, estimates, and future performance of the Bank and involve known and unknown risks, uncertainties, and other factors, many of which may be beyond the Bank’s control and may cause the Bank’s actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Bank’s use of words such as “may,” “will,” “anticipate,” “hope,” “project,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “could,” “intend,” “seek,” “target,” and other similar words and expressions of the future.

Forward-looking statements may include statements related to, among others, the impact of the COVID-19 pandemic on the Bank, its employees, members and counterparties, or on the capital markets and the U.S. economy, which impact is evolving and unknowable at this time; the interest-rate ~~environment,~~environment; demand for Bank advances and FHLBank consolidated ~~obligations,~~obligations; gains and losses on ~~derivatives,~~derivatives; plans to pay dividends and repurchase excess capital ~~stock, future other-than-temporary impairment charges,~~stock; future classification of ~~securities,~~securities; the impact of changes in product ~~offerings,~~offerings; the impact of housing reform and other regulatory changes. These statements may involve matters pertaining to, but not limited to: projections regarding revenue, income, earnings, capital expenditures, dividends, liquidity, the capital structure and other financial items; statements of plans or objectives for future operations; expectations for future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.

The forward-looking statements may not be realized due to a variety of factors, including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological and ~~marketing~~market factors, the impact of the COVID-19 pandemic, as well as those risk factors provided under Item 1A of the Bank’s most recent Form 10-K filed on March 5, 2020, and ~~Item 1A~~from time to time in ~~Part II of~~the Bank’s other filings with the SEC, and elsewhere in this ~~quarterly report on Form 10-Q.~~report.

All written or oral statements that are made by or are attributable to the Bank are expressly qualified in their entirety by this cautionary notice. The reader should not place undue reliance on forward-looking statements since the statements speak only as of the date that they are made. The Bank has no obligation and does not undertake publicly to update, revise, or correct any of the forward-looking statements after the date of this quarterly report, or after the respective dates on which these statements otherwise are made, whether as a result of new information, future events, or otherwise, except as otherwise may be required by law.

The discussion presented below provides an analysis of the Bank’s financial condition as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, and results of operations for the first quarter of ~~2019~~2020 and ~~2018.~~2019. Management’s discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in this report, as well as the Bank’s audited financial statements for the year ended December 31, ~~2018.~~2019.

Executive Summary

Recent Market Conditions

The Bank’s overall results of operations are influenced by the economy and the financial markets. In particular, market conditions impact members’ demand for advances and the Bank’s ability to maintain sufficient access to sources of funding at favorable costs. Conditions in the financial markets deteriorated during the first quarter of 2020, primarily due to the global pandemic associated with COVID-19. In response to these market conditions, the Federal Open Market Committee (FOMC) lowered the target range for federal funds from 1.50 percent to 1.75 percent to a target range of 0.00 percent to 0.25 percent. In the weeks before and after the Federal Reserve’s cut in the federal funds target rate, market interest rates declined significantly. Additionally, the Federal Reserve undertook a number of emergency actions in March 2020 to help facilitate liquidity and support stability in the capital markets. In particular, the Federal Reserve substantially increased its provision of liquidity to the repurchase agreements and U.S. Treasury markets through open market operations. The Bank continued to meet its funding needs in response to demand for advances through March 31, 2020.

Table of Contents

Operating Status Update

Both the State of Georgia and the City of Atlanta, where the Bank is located, implemented shelter-in-place orders during the COVID-19 pandemic, portions of which are still in place, and the Governor of Georgia declared a public health state of emergency which is currently scheduled to expire on May 13, 2020. As a financial institution, the Bank is part of the nation’s critical infrastructure, has continually operated its business, and has continued to serve as a reliable source of funding for our members. Beginning March 16, 2020, most of the Bank’s employees began working remotely, with operationally critical employees working on site at our offices. While the Bank cannot predict when its full employee base will return to work in our offices, the Bank expects to initiate a phased-in employee return to the Bank’s offices no earlier than June 1, 2020. At this time, the Bank cannot predict the potential impact of the COVID-19 pandemic to our members, counterparties, vendors and other third parties upon which we rely upon to conduct our business. To date, the Bank has not experienced significant operational difficulties or disruptions, however their possibility exists, which could impair the Bank’s ability to conduct and manage its business effectively. To date, no member of the Bank’s executive management team has been incapacitated or unable to perform duties. The Bank’s board of directors regularly reviews the Bank’s succession plan in the event of incapacitation of any executive team member.

Financial Condition

As of March 31, ~~2019,~~2020, total assets were ~~$138.9~~$189.4 billion, ~~a decrease~~an increase of ~~$15.5~~$39.5 billion, or ~~10.1~~26.4 percent, from December 31, ~~2018.~~2019. This ~~decrease~~increase was primarily due to a ~~$17.5~~$39.9 billion, or ~~16.2 percent, decrease in advances, partially offset by a $2.5 billion, or 5.58~~41.0 percent, increase in ~~total investments.~~advances. This increase in advances was the result of increased demand for liquidity from the Bank’s members, especially during the latter portion of the first quarter of 2020.

As of March 31, ~~2019,~~2020, total liabilities were ~~$132.0~~$180.6 billion, ~~a decrease~~an increase of ~~$14.8~~$37.9 billion, or ~~10.1~~26.6 percent, from December 31, ~~2018.~~2019. This ~~decrease~~increase was primarily due to a ~~$14.8~~$37.7 billion, or ~~10.2~~26.8 percent, ~~decrease~~increase in consolidated obligation. Consolidated obligations ~~as a result of lower advances balances as of March 31, 2019.~~are the principal funding source used by the Bank and the increase in funding was driven by the increase in advance demand.

As of March 31, ~~2019,~~2020, total capital was ~~$6.9~~$8.8 billion, ~~a decrease~~an increase of ~~$724 million,~~$1.7 billion, or ~~9.47~~23.1 percent, from December 31, ~~2018.~~2019. This ~~decrease~~increase was primarily due to ~~a decrease~~an increase in the Bank’s subclass B2 activity-based capital stock resulting from ~~a decrease~~an increase in the total outstanding advances during ~~this~~the period.

Results of Operations

The Bank recorded net interest income of ~~$144~~$85 million for the first quarter of ~~2019, an increase~~2020, a decrease of $9$59 million, or ~~6.23~~40.6 percent, from net interest income of ~~$135~~$144 million for the same period in ~~2018. This increase~~2019. The decrease in market interest rates impacted the Bank’s net interest income during the first

~~Table of Contents~~

quarter of ~~2019, compared to the same period~~2020 resulting in ~~2018, was primarily due to changes in interest rates which impacted~~narrower spreads on interest-earning assets ~~more than~~and increased losses from derivative and hedging activities. The impact of narrower spread on interest-earning assets impacted net interest income by $25 million. Derivative and hedging activities reduced net interest income by $38 million during the ~~corresponding impact to interest-bearing liabilities.~~ first quarter of 2020.

The Bank recorded net income of ~~$101~~$108 million for the first quarter of ~~2019, a decrease~~2020, an increase of ~~$13~~$7 million, or ~~11.6~~6.77 percent, from net income of ~~$114~~$101 million for the same period in ~~2018. This decrease~~2019. The increase in net income was primarily ~~related~~due to an $85 million gain from the ~~Bank recording $22 million~~sale of ~~net gains on derivatives and hedging activities~~the Bank’s private-label MBS investment portfolio during the first quarter of ~~2018, compared~~2020. Partially offsetting this increase in net income was a decrease in net interest income and an increase in noninterest expense due to ~~recording a $2~~an additional voluntary $20 million ~~net loss on derivatives and hedging activities~~retirement plan contribution during the first quarter of ~~2019. The net gains on derivatives and hedging activities were primarily the result of changes in interest rates during the period.~~ 2020.

One way in which the Bank currently analyzes its performance is by comparing its annualized return on average equity (ROE) to three-month average London Interbank Offered Rate (LIBOR). The Bank has chosen to measure ROE as a spread to average three-month LIBOR because the Bank has significant assets and liabilities priced to average three-month LIBOR. The Bank’s ROE was ~~5.72~~5.97 percent for the first quarter of ~~2019,~~2020, compared to ~~6.01~~5.72 percent for the same period in ~~2018.~~2019. The ~~decrease~~increase in ROE was primarily due to the ~~decrease~~increase in net income during the ~~period.~~first quarter of 2020, compared to the same period in 2019, partially offset by the increase in average equity. ROE spread to three-month average LIBOR was ~~303~~444 basis points for the first quarter of ~~2019,~~2020, compared to ~~408~~303 basis points for the same period in ~~2018.~~2019. The ~~decrease~~increase in the ROE spread to three-month average LIBOR was primarily due to ~~the increase~~a decrease in three-month average LIBOR during the first quarter of ~~2019,~~2020, compared to the same period in ~~2018.~~2019. The Bank is currently planning for the eventual replacement of the LIBOR benchmark interest rate, including the possibility of the Secured Overnight Financing Rate (SOFR) as the dominant replacement. For comparative purposes, the Bank’s ROE spread to average SOFR for the first quarter of 2020 was 474 basis points.

Table of Contents

The Bank’s interest-rate spread was 2823 basis points for the first quarter of ~~2019 and 2018.~~2020, compared to 40 basis points for the same period in 2019. This decrease in the Bank’s interest-rate spread was primarily due to decreases in market interest rates, as discussed above, which impacted interest income related to interest-earning assets more than the offsetting interest expense related to interest-bearing liabilities.

Business Outlook

The factors impacting the Bank’s business outlook ~~remains~~remain largely unchanged from the discussion in the Bank’s 2019 Form 10-K. External factors, including changes in interest rates, liquidity levels and loan demand at member institutions, ~~and~~ the general state of the economy, and fiscal and monetary policies continue to impact the Bank’s overall business outlook and ~~advances~~advance demand.

~~Management continues~~ The COVID-19 pandemic has and is expected to ~~be focused~~continue to influence these external factors and ~~engaged on developing and implementing an effective transition away from LIBOR. During~~the financial markets. Towards the end of the first quarter of ~~2019,~~2020, the Bank’s advance balances increased significantly due to demands from members for increased liquidity. This demand has decreased since the end of the first quarter and future advance demand is uncertain, which could impact the Bank’s asset/liability and capital management activities. The Bank relies on access to the capital markets to meet its funding needs, and the Bank ~~adopted~~expects continued sufficient access to capital markets. As discussed throughout this Report, the Federal Reserve has undertaken a ~~formal multi-year LIBOR phase-out transition plan,~~number of emergency actions, and there has been numerous Congressional and federal agency actions to attempt to ameliorate the negative effects of the COVID-19 pandemic. Given the evolving and unknowable effect of the COVID-19 pandemic on these external factors, the Bank cannot predict the extent to which, ~~includes governance, risk management, legal, operational, systems~~ and ~~operations,~~the duration of, the impact to the Bank’s future business performance and ~~other aspects~~profitability due to the COVID-19 pandemic. A more detailed discussion of ~~planning for~~ the ~~transition.~~

risks to the Bank associated with the COVID-19 pandemic is discussed in “Part II Other Information- Item 1A Risk Factors.”

3532

Table of Contents

Selected Financial Data

The following table presents a summary of certain financial information for the Bank for the periods presented (dollars in millions):


	As of and for the Three Months Ended															As of and for the Three Months Ended
	March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
Statements of Condition (at period end)
Total assets	$	138,940		$	154,476		$	155,591		$	154,171		$	140,460		$	189,392		$	149,857		$	150,880		$	149,692		$	138,940
Advances	90,929			108,462			109,746			104,537			91,733			137,037			97,167			102,466			101,776			90,929
Investments⁽¹⁾	46,781			44,309			44,680			47,629			47,483			46,429			50,617			47,130			46,645			46,781
Mortgage loans held for portfolio	347			361			377			395			417			282			297			314			329			347
Allowance for credit losses on mortgage loans	(1		)	(1		)	(1		)	(1		)	(1		)	(1		)	(1		)	(1		)	(1		)	(1		)
Interest-bearing deposits	1,163			1,176			965			1,069			1,213			1,766			1,492			1,541			1,400			1,163
Consolidated obligations, net:
Discount notes ⁽²⁾	61,166			66,025			62,632			65,353			54,659			96,490			52,134			55,049			64,833			61,166
Bonds ⁽²⁾	69,186			79,114			83,761			79,812			77,160			81,856			88,503			86,423			75,468			69,186
Total consolidated obligations, net ⁽²⁾	130,352			145,139			146,393			145,165			131,819			178,346			140,637			141,472			140,301			130,352
Mandatorily redeemable capital stock	1			1			2			2			3			1			1			1			1			1
Affordable Housing Program payable	89			85			85			80			80			95			89			84			88			89
Capital stock - putable	4,753			5,486			5,557			5,300			4,748			6,652			4,988			5,213			5,196			4,753
Retained earnings	2,126			2,110			2,104			2,079			2,052			2,185			2,153			2,132			2,138			2,126
Accumulated other comprehensive income	44			51			91			95			95
Accumulated other comprehensive (loss) income																(19		)	22			29			36			44
Total capital	6,923			7,647			7,752			7,474			6,895			8,818			7,163			7,374			7,370			6,923
Statements of Income (for the period ended)
Net interest income ⁽³⁾	144			152			143			131			135			85			141			118			132			144
Net impairment losses recognized in earnings	(1		)	(2		)	—			(1		)	—			—			(6		)	(4		)	(2		)	(1		)
Net gains (losses) on trading securities	1			1			—			(1		)	(1		)
Net (losses) gains on derivatives and hedging activities ⁽³⁾	(2		)	(20		)	13			14			22
Net gains on trading securities																5			—			1			1			1
Net realized gains from sale of investment securities																85			—			—			—			—
Net (losses) gains on derivatives and hedging activities																(6		)	1			(1		)	(2		)	(2		)
Standby letters of credit fees	7			6			6			7			6			7			6			5			6			7
Other income	2			(1		)	—			2			—			2			2			4			1			2
Noninterest expense	39			38			44			33			35			58			36			39			32			39
Income before assessment	112			98			118			119			127			120			108			84			104			112
Affordable Housing Program assessment	11			10			11			12			13			12			11			8			11			11
Net income	101			88			107			107			114			108			97			76			93			101
Performance Ratios (%)
Return on equity ⁽⁴⁾	5.72			4.73			5.68			5.73			6.01
Return on assets ⁽⁵⁾	0.28			0.24			0.28			0.28			0.29
Net interest margin ⁽⁶⁾	0.40			0.41			0.38			0.34			0.35
Regulatory capital ratio (at period end) ⁽⁷⁾	4.95			4.92			4.92			4.79			4.84
Equity to assets ratio ⁽⁸⁾	4.95			5.00			4.96			4.89			4.89
Dividend payout ratio ⁽⁹⁾	84.73			92.42			77.16			74.36			56.86
Return on equity ⁽³⁾																5.97			5.26			4.24			5.12			5.72
Return on assets ⁽⁴⁾																0.28			0.25			0.21			0.25			0.28
Net interest margin ⁽⁵⁾																0.23			0.37			0.32			0.36			0.40
Regulatory capital ratio (at period end) ⁽⁶⁾																4.67			4.77			4.87			4.90			4.95
Equity to assets ratio ⁽⁷⁾																4.76			4.72			4.84			4.90			4.95
Dividend payout ratio ⁽⁸⁾																70.70			78.30			107.18			86.91			84.73

3633

Table of Contents

____________

⁽¹⁾ Investments consist of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and securities classified as trading, available-for-sale, and held-to-maturity.

⁽²⁾The amounts presented are the Bank’s primary obligations on consolidated obligations outstanding. The par value of the other FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was as follows (in millions):

March 31, 2019 $ 880,223
December 31, 2018 886,081
September 30, 2018 872,256
June 30, 2018 914,286
March 31, 2018 887,057



March 31, 2020	$	996,251
December 31, 2019	885,114
September 30, 2019	868,664
June 30, 2019	907,877
March 31, 2019	880,223

⁽³⁾The Bank adopted new accounting guidance related to derivatives and hedging activities effective January 1, 2019. The impact of this guidance changed the presentation of net interest income as described in Note 13—Derivatives and Hedging Activities to the Bank’s interim financial statements.

⁽⁴⁾ Calculated as net income, divided by average total equity.

⁽⁵⁾⁽⁴⁾Calculated as net income, divided by average total assets.

⁽⁶⁾⁽⁵⁾Net interest margin is net interest income as a percentage of average earning assets.

⁽⁷⁾⁽⁶⁾ Regulatory capital ratio is regulatory capital, which does not include accumulated other comprehensive income, but does include mandatorily redeemable capital stock, as a percentage of total assets as of period end.

⁽⁸⁾⁽⁷⁾Calculated as average total equity, divided by average total assets.

⁽⁹⁾⁽⁸⁾ Calculated as dividends declared during the period divided by net income during the period.

Financial Condition

The following table presents the distribution of the Bank’s total assets, liabilities, and capital by major class as of the dates indicated (dollars in millions). These items are discussed in more detail below.


	As of March 31, 2019			As of December 31, 2018			Increase (Decrease)					As of March 31, 2020					As of December 31, 2019			Increase (Decrease)
	Amount		Percent of Total	Amount		Percent of Total	Amount			Percent		Amount			Percent of Total		Amount		Percent of Total	Amount			Percent
Advances	$	90,929	65.44	$	108,462	70.21	$	(17,533	)	(16.17	)	$	137,037		72.36		$	97,167	64.84	$	39,870		41.03
Investment securities	26,062		18.76	24,799		16.05	1,263			5.09		25,162			13.28		28,181		18.81	(3,019		)	(10.72	)
Other investments	20,719		14.91	19,510		12.63	1,209			6.20		21,267			11.23		22,436		14.97	(1,169		)	(5.21	)
Mortgage loans, net	346		0.25	360		0.23	(14		)	(3.88	)	281			0.15		296		0.20	(15		)	(5.30	)
Loan to another FHLBank	—		—	500		0.33	(500		)	(100.00	)
Other assets	884		0.64	845		0.55	39			4.78		5,645			2.98		1,777		1.18	3,868			217.75
Total assets	$	138,940	100.00	$	154,476	100.00	$	(15,536	)	(10.06	)	$	189,392		100.00		$	149,857	100.00	$	39,535		26.38
Consolidated obligations, net:
Discount notes	$	61,166	46.33	$	66,025	44.97	$	(4,859	)	(7.36	)	$	96,490		53.43		$	52,134	36.53	$	44,356		85.08
Bonds	69,186		52.41	79,114		53.88	(9,928		)	(12.55	)	81,856			45.33		88,503		62.02	(6,647		)	(7.51	)
Deposits	1,163		0.88	1,176		0.80	(13		)	(1.07	)	1,766			0.98		1,492		1.05	274			18.34
Other liabilities	502		0.38	514		0.35	(12		)	(2.17	)	462			0.26		565		0.40	(103		)	(18.33	)
Total liabilities	$	132,017	100.00	$	146,829	100.00	$	(14,812	)	(10.09	)	$	180,574		100.00		$	142,694	100.00	$	37,880		26.55
Capital stock	$	4,753	68.66	$	5,486	71.74	$	(733	)	(13.35	)	$	6,652		75.43		$	4,988	69.63	$	1,664		33.36
Retained earnings	2,126		30.71	2,110		27.59	16			0.73		2,185			24.78		2,153		30.06	32			1.47
Accumulated other comprehensive income	44		0.63	51		0.67	(7		)	(13.44	)
Accumulated other comprehensive (loss) income												(19		)	(0.21	)	22		0.31	(41		)	(184.81	)
Total capital	$	6,923	100.00	$	7,647	100.00	$	(724	)	(9.47	)	$	8,818		100.00		$	7,163	100.00	$	1,655		23.11

Advances

Total advances ~~decreased~~increased by ~~16.2~~41.0 percent as of March 31, ~~2019,~~2020, compared to December 31, ~~2018. This decrease was~~2019. As market conditions changed during the first quarter of 2020 as a result of the COVID-19 pandemic, member’s demand for liquidity increased. The increase in advances is primarily due to ~~maturities that occurred~~this increase demand for liquidity. Given the uncertainty in the market and the potential impact to the U.S. economy during the ~~period~~COVID-19 pandemic, it is uncertain whether this increased advance demand will continue, and ~~a decrease in members’ liquidity needs during the quarter.~~if so, for how long. A significant percentage of advances made during the ~~fourth quarter~~first three months of ~~2018 and the first quarter of 2019~~2020 were short-term advances.

As of March 31, ~~2019, 58.8~~2020, 65.6 percent of the Bank’s advances were fixed-rate, compared to ~~59.6~~64.6 percent as of December 31, ~~2018.~~2019. However, the Bank may simultaneously enter into derivatives with the issuance of advances to convert the rates on them, in effect, into short-term variable interest rates, ~~the majority of~~ which are primarily based on ~~LIBOR.~~LIBOR and SOFR. As of March 31, ~~2019~~2020 and December 31, ~~2018, 54.6~~2019, 60.3 percent and ~~45.3~~46.7 percent, respectively, of the Bank’s fixed-rate advances were swapped, and ~~0.15~~1.51 percent and ~~0.47~~2.03 percent, respectively, of the Bank’s variable-rate advances, which contained optionality, were swapped. The ~~majority of the Bank’s variable-~~

3734

Table of Contents

~~rate~~majority of the Bank’s variable-rate advances were indexed to ~~LIBOR.~~LIBOR and SOFR. Beginning June 30, 2020, the Bank will cease issuing LIBOR-based advances and entering into LIBOR-based derivatives with maturities/termination dates beyond December 31, 2021. The Bank also offers variable-rate advances that may be tied to other indices, such as the federal funds rate, prime rate, SOFR, or constant maturity swap rates.

The following table presents the par value of outstanding advances by product characteristics (dollars in millions).


	As of March 31, 2019			As of December 31, 2018			As of March 31, 2020			As of December 31, 2019
	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent of Total
Fixed rate ⁽¹⁾	$	51,184	56.49	$	62,458	57.61	$	81,770	60.64	$	57,711	59.83
Adjustable or variable-rate indexed	37,240		41.10	43,737		40.34	45,719		33.91	33,412		34.64
Convertible							6,277		4.66	4,261		4.42
Principal reducing credit	1,181		1.30	1,232		1.14	1,067		0.79	1,072		1.11
Convertible	1,007		1.11	987		0.91
Total par value	$	90,612	100.00	$	108,414	100.00	$	134,833	100.00	$	96,456	100.00

____________


⁽¹⁾	Includes convertible advances whose conversion options have expired.

Refer to Note 7—6—Advances to the Bank’s interim financial statements for the concentration of the Bank’s advances to its 10 largest borrowing institutions.

Investments

The following table presents more detailed information regarding investments held by the Bank (dollars in millions).


						Increase (Decrease)									Increase (Decrease)
	As of March 31, 2019		As of December 31, 2018			Amount			Percent		As of March 31, 2020		As of December 31, 2019		Amount			Percent
Investment securities:
Government-sponsored enterprises debt obligations	$	3,228	$	2,727		$	501		18.38		$	3,637	$	4,556	$	(919	)	(20.16	)
U.S. Treasury obligations	999		—			999			100.00		1,501		1,499		2			0.10
State or local housing agency debt obligations	1		1			—			—		1		1		—			—
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	112		118			(6		)	(5.63	)	83		89		(6		)	(6.53	)
Government-sponsored enterprises residential	8,991		9,304			(313		)	(3.35	)	8,574		8,642		(68		)	(0.80	)
Government-sponsored enterprises commercial	11,516		11,368			148			1.29		11,366		12,518		(1,152		)	(9.20	)
Private-label residential	1,215		1,281			(66		)	(5.18	)	—		876		(876		)	(100.00	)
Total mortgage-backed securities	21,834		22,071			(237		)	(1.08	)	20,023		22,125		(2,102		)	(9.50	)
Total investment securities	26,062		24,799		—	1,263			5.09		25,162		28,181		(3,019		)	(10.72	)
Other investments:
Interest-bearing deposits ⁽¹⁾	3,444		6,782			(3,338		)	(49.22	)	3,322		3,810		(488		)	(12.80	)
Securities purchased under agreements to resell	4,500		3,750			750			20.00		—		8,800		(8,800		)	(100.00	)
Federal funds sold(2)	12,775		8,978			3,797			42.29		17,945		9,826		8,119			82.63
Total other investments	20,719		19,510			1,209			6.20		21,267		22,436		(1,169		)	(5.21	)
Total investments	$	46,781	$	44,309		$	2,472		5.58		$	46,429	$	50,617	$	(4,188	)	(8.27	)

____________


⁽¹⁾	Interest-bearing deposits ~~include~~includes a ~~$196~~$510 million and ~~$409~~$508 million business money market account with ~~Branch Banking and Trust Company,~~Truist Bank one of the Bank’s 10 largest borrowers, as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

⁽²⁾ Federal funds sold includes $100 million with BankUnited, National Association, one of the Bank’s 10 largest borrowers as of December 31, 2019.

The ~~increase~~decrease in total investments was primarily due to anthe prepayments that occurred during the first quarter of 2020 and the sale of the Bank’s private-label residential mortgage backed securities portfolio. The decrease in securities purchased under agreements to resell and the corresponding increase in ~~total investment securities from December 31, 2018 to March 31, 2019, as the Bank positioned itself~~federal funds sold was for operational intra-day cash management purposes to meet ~~new Finance Agency liquidity requirements.~~member advance demand. Additionally, the amount held in other investments ~~increased and~~ will vary each day based on the Bank’s liquidity needs as a result of advances demand, the earnings rates, and the availability of high quality counterparties in the federal funds market. ~~The decrease in interest-~~

~~Table of Contents~~

~~bearing deposits and increase in federal funds sold was primarily due to a change in interpretation of regulatory guidance related to unsecured credit exposure.~~

The Finance Agency regulations prohibit an FHLBank from purchasing MBS and asset-backed securities if its investment in such securities would exceed 300 percent of the FHLBank’s previous month-end regulatory capital on the day it would purchase the securities. The Bank was in compliance with this regulatory requirement as of March 31, 2020, as these investments amounted to 227 percent of the Bank’s regulatory capital. As of ~~March~~December 31, 2019, these investments were ~~316~~309 percent of the Bank’s regulatory capital. These investments exceeded the 300 percent level due to a decrease in regulatory capital that resulted from a decrease in ~~advances.~~

advances at December 31, 2019. The Bank was in compliance with this regulatory requirement at the time of its MBS purchases and ~~will~~was not be required to sell any previously purchased MBS. However, the Bank was precluded from purchasing additional MBS until its MBS to regulatory capital ~~declines~~declined below 300 ~~percent. As of December 31, 2018, the Bank’s MBS to regulatory capital was 290~~ percent.

Mortgage Loans Held for Portfolio

The decrease in mortgage loans held for portfolio from December 31, ~~2018~~2019 to March 31, ~~2019~~2020 was primarily due to the maturity and prepayment of these assets during the period.

Members that sold mortgage loans to the Bank were located primarily in the southeastern United States; therefore, the Bank’s conventional mortgage loan portfolio was concentrated in that region as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. The following table presents the percentage of unpaid principal balance of conventional residential mortgage loans held for portfolio for the five largest state concentrations.


	As of March 31, 2019	As of December 31, 2018	As of March 31, 2020	As of December 31, 2019
	Percent of Total	Percent of Total	Percent of Total	Percent of Total
Florida	22.72	22.76	22.52	22.36
South Carolina	20.46	20.40	20.51	20.47
Virginia	11.21	11.23	11.78	11.61
Georgia	10.01	10.12	10.01	9.96
North Carolina	8.16	8.19	7.79	8.13
All other	27.44	27.30	27.39	27.47
Total	100.00	100.00	100.00	100.00

Consolidated Obligations

The Bank funds its assets primarily through the issuance of consolidated obligation bonds and consolidated obligation discount notes. The ~~decrease~~increase in consolidated obligations from December 31, ~~2018~~2019 to March 31, ~~2019~~2020 was primarily a result of ~~the decrease in advances outstanding~~increased funding and liquidity needs during the period. Consolidated obligation issuances financed ~~93.8~~94.2 percent of the ~~$138.9~~$189.4 billion in total assets as of March 31, ~~2019,~~2020, remaining relatively stable compared to the financing ratio of ~~94.0~~93.9 percent as of December 31, ~~2018.~~2019.

The Bank often simultaneously enters into derivatives with the issuance of consolidated obligation bonds to convert the interest rates, in effect, into short-term variable interest rates, ~~usually~~primarily based on ~~LIBOR.~~LIBOR and SOFR. As of March 31, ~~2019~~2020 and December 31, ~~2018, 77.9~~2019, 75.6 percent and ~~80.7~~83.3 percent, respectively, of the Bank’s fixed-rate consolidated obligation bonds were swapped. None of the Bank’s variable-rate consolidated obligation bonds orwere swapped as of March 31, 2020 and December 31, 2019. As of March 31, 2020 and December 31, 2019, 27.1 percent and 33.9 percent, respectively, of the Bank’s fixed-rate consolidated obligation discount notes were ~~swapped as of March 31, 2019 and~~swapped. Beginning June 30, 2020, the Bank will cease entering into LIBOR-based derivatives with termination dates beyond December 31, ~~2018.~~2021.

Table of Contents

Deposits

The Bank offers demand and overnight deposit programs to members and qualifying non-members primarily as a liquidity management service. In addition, a member that services mortgage loans may deposit funds in the Bank that are collected in connection with the mortgage loans, pending disbursement of those funds to the owners of the mortgage loans. For demand deposits, the Bank pays interest at the overnight rate. Most of these deposits represent member liquidity investments, which members may withdraw on demand. Therefore, the total account balance of the Bank’s deposits may fluctuate significantly. As a matter of prudence, the Bank typically invests deposit funds in liquid short-term assets. Member loan demand, deposit flows, and liquidity management strategies influence the amount and volatility of deposit balances carried with the Bank.

~~Table of Contents~~

Capital

The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank was in compliance with these regulatory capital rules and requirements as shown in Note 119—Capital and Mandatorily Redeemable Capital Stock to the Bank’s interim financial statements.

Finance Agency regulations establish criteria for four capital classifications, based on the amount and type of capital held by an FHLBank, as follows:

Adequately Capitalized - FHLBank meets or exceeds both risk-based and minimum capital requirements;

Undercapitalized - FHLBank does not meet one or both of its risk-based or minimum capital requirements;

Significantly Undercapitalized - FHLBank has less than 75 percent of one or both of its risk-based or minimum capital requirements; and

Critically Undercapitalized - FHLBank total capital is two percent or less of total assets.

Under the regulations, the Director of the Finance Agency (Director) will make a capital classification for each FHLBank at least quarterly and notify the FHLBank in writing of any proposed action and provide an opportunity for the FHLBank to submit information relevant to such action. The Director is permitted to make discretionary classifications. An FHLBank must provide written notice to the Finance Agency within 10 days of any event or development that has caused or is likely to cause its permanent or total capital to fall below the level required to maintain its most recent capital classification or reclassification. In the event that an FHLBank is not adequately capitalized, the regulations delineate the types of prompt corrective actions that the Director may order, including submission of a capital restoration plan by the FHLBank and restrictions on its dividends, stock redemptions, executive compensation, new business activities, or any other actions the Director determines will ensure safe and sound operations and capital compliance by the FHLBank. On March ~~26, 2019~~19, 2020 the Bank received notification from the Director that, based on December 31, ~~2018~~2019 data, the Bank meets the definition of “adequately capitalized.”

In August 2019, the Finance Agency issued an Advisory Bulletin providing for each FHLBank to maintain a ratio of at least two percent of capital stock to total assets, measured on a daily average basis at month end, which it began assessing in February 2020. As of March 31, 2020, the Bank’s capital stock ratio was 3.46 percent.

The Bank’s capital management plan is discussed in more detail in the Bank’s Form 10-K, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Capital.

Table of Contents

Results of Operations

The following is a discussion and analysis of the Bank’s results of operations for the first quarter of ~~2019~~2020 and ~~2018.~~

2019.

Net Income

The following table presents the Bank’s significant income items for the first quarter of ~~2019~~2020 and ~~2018,~~2019, and provides information regarding the changes during those periods (dollars in millions). These items are discussed in more detail below.


	For the Three Months Ended March 31,				Increase (Decrease)					For the Three Months Ended March 31,				Increase (Decrease)
	2019		2018		Amount			Percent		2020		2019		Amount			Percent
Net interest income	$	144	$	135	$	9		6.23		$	85	$	144	$	(59	)	(40.63	)
Noninterest income	7		27		(20		)	(72.52	)	93		7		86			*
Noninterest expense	39		35		4			9.51		58		39		19			50.43
Affordable Housing Program assessment	11		13		(2		)	(11.59	)	12		11		1			6.77
Net income	$	101	$	114	$	(13	)	(11.57	)	$	108	$	101	$	7		6.77

____________

^*Not meaningful

Net Interest Income

The primary source of the Bank’s earnings is net interest income. Net interest income equals interest earned on assets (including member advances, mortgage loans, MBS held in portfolio, and other investments), less the interest expense incurred on liabilities (including consolidated obligations, deposits, and other borrowings). Also included in net interest income are miscellaneous related items, such as prepayment fees, the amortization of debt issuance discounts, concession fees, and certain derivative instruments and hedging activities related adjustments. ~~The~~For the first quarter of 2019, the Bank ~~also recognizes~~recognized significant improvements in expected cash flows related to other-than-temporary impairment securities through net interest income.

As discussed above, net interest income includes components of hedging activity. When hedging relationships qualify for hedge accounting, the interest components of the hedging derivatives will be reflected in interest income or expense. ~~Beginning on January 1, 2019, the fair~~Fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized in interest income or interest expense. ~~Prior to January 1, 2019, the portion of fair value gains and losses of derivatives and hedged items representing hedge ineffectiveness were recorded in noninterest income.~~ When a hedging relationship is discontinued, the cumulative fair value adjustment on the hedged item will be amortized into interest income or expense over the remaining life of the asset or liability. The impact of hedging on net interest income was a decrease of $4$38 million and ~~$41~~$4 million for the first quarter of ~~2019~~2020 and ~~2018,~~2019, respectively.

The decrease in net interest income for the first quarter of 2020, compared to the same period in 2019, was primarily due to decreases in interest rates. As noted previously, in response to the global pandemic associated with COVID-19, the FOMC lowered the target range for federal funds in the first quarter of 2020 by 150 basis points. The decrease in market interest rates during the first quarter of 2020 resulted in increased losses related to derivative and hedging activities and in narrower spreads on interest-earning assets as these changes in interest rates impacted earnings from interest-earning assets more than the offsetting consolidated obligation interest expense.

The following ~~table presents~~tables present spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the first quarter of2020 and 2019 ~~and 2018~~ (dollars in millions). The interest-rate spread is affected by the inclusion or exclusion of net interest income or expense associated with the Bank’s derivatives. For example, as discussed above, when derivatives qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is included in net interest income and in the calculation of interest-rate spread. When derivatives do not qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is excluded from net interest income and from the calculation of interest-rate spread and is recorded in “Noninterest income (loss)” as “Net ~~(losses) gains~~losses on derivatives and hedging activities.” Amortization associated with hedging-related basis adjustments is also reflected in net interest income, which affects interest-rate spread.

4137

Table of Contents

The Bank’s interest-rate spread was 16 basis points for the first quarter of 2020, compared to 28 basis points for ~~both~~ the ~~first quarter of 2019 and~~same period in 2019. The decrease in interest-rate spread was primarily due to decreases in interest rates during the ~~first quarter of 2018.~~periods, which impacted earnings from interest-earning assets more than the expense from interest-bearing liabilities.


	For the Three Months Ended March 31,												For the Three Months Ended March 31,
	2019⁽¹⁾						2018⁽¹⁾						2020						2019
	Average Balance			Interest		Yield/ Rate (%)	Average Balance			Interest		Yield/ Rate (%)	Average Balance			Interest		Yield/ Rate (%)	Average Balance			Interest		Yield/ Rate (%)
Assets
Interest-bearing deposits⁽²⁾⁽¹⁾	$	4,474		$	28	2.51	$	3,111		$	14	1.87	$	4,409		$	15	1.38	$	4,474		$	28	2.51
Securities purchased under agreements to resell	4,344			26		2.45	1,685			6		1.47	7,135			27		1.53	4,344			26		2.45
Federal funds sold	12,753			78		2.47	13,132			49		1.51	13,039			40		1.23	12,753			78		2.47
Investment securities ⁽³⁾⁽²⁾	24,571			196		3.24	26,023			153		2.39	26,235			138		2.12	24,571			196		3.24
Advances	97,492			656		2.73	112,253			455		1.64	100,375			419		1.68	97,492			656		2.73
Mortgage loans ⁽⁴⁾⁽³⁾	353			4		5.15	426			6		5.45	289			4		5.07	353			4		5.15
Loans to other FHLBanks	11			—		3.71	8			—		2.73	—			—		—	11			—		3.71
Total interest-earning assets	143,998			988		2.78	156,638			683		1.77	151,482			643		1.71	143,998			988		2.78
Allowance for credit losses on mortgage loans	(1		)				(1		)				(1		)				(1		)
Other assets	1,041						1,243						1,363						1,041
Total assets	$	145,038					$	157,880					$	152,844					$	145,038
Liabilities and Capital
Interest-bearing deposits ⁽⁵⁾⁽⁴⁾	$	1,077		6		2.33	$	1,085		4		1.33	$	1,691		5		1.08	$	1,077		6		2.33
Consolidated obligations, net:
Discount notes	61,603			372		2.45	64,115			224		1.42	57,422			211		1.48	61,603			372		2.45
Bonds	74,414			466		2.54	84,230			320		1.54	85,527			342		1.61	74,414			466		2.54
Other borrowings	8			—		3.26	4			—		5.21	2			—		5.58	8			—		3.26
Total interest-bearing liabilities	137,102			844		2.50	149,434			548		1.49	144,642			558		1.55	137,102			844		2.50
Other liabilities	762						733						923						762
Total capital	7,174						7,713						7,279						7,174
Total liabilities and capital	$	145,038					$	157,880					$	152,844					$	145,038
Net interest income and net yield on interest-earning assets				$	144	0.40				$	135	0.35				$	85	0.23				$	144	0.40
Interest-rate spread						0.28						0.28						0.16						0.28
Average interest-earning assets to interest-bearing liabilities						105.03						104.82						104.73						105.03

____________


⁽¹⁾	For 2019, interest amounts reported for advances and consolidated obligation bonds include realized and unrealized gains (losses) on hedged items and derivatives in qualifying hedge relationships. Prior period interest amounts do not conform to new hedge accounting guidance adopted January 1, 2019.


⁽²⁾	Includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.


⁽³⁾⁽²⁾	Includes trading securities at fair value and available-for-sale securities at amortized cost.


⁽⁴⁾⁽³⁾	Nonperforming mortgage loans are included in average balances used to determine average rate.


⁽⁵⁾⁽⁴⁾	Includes amounts recognized for the right to return cash collateral received under master netting agreements with derivative counterparties.

4238

Table of Contents

Net interest income for the periods presented was affected by changes in average balances (volume changes) and changes in average rates (rate changes) of interest-earning assets and interest-bearing liabilities. The following table presents the extent to which volume changes and rate changes affected the Bank’s interest income and interest expense (in millions). As presented in the table below, the overall change in net interest income during the first quarter of ~~2019,~~2020, compared to the same period in ~~2018,~~2019, was primarily rate related.


	For the Three Months Ended March 31,									For the Three Months Ended March 31,
	2019 vs. 2018									2020 vs. 2019
	Volume ⁽¹⁾			Rate ⁽¹⁾			Increase (Decrease)			Volume ⁽¹⁾			Rate ⁽¹⁾			Increase (Decrease)
Increase (decrease) in interest income:
Interest-bearing deposits	$	8		$	6		$	14		$	(1	)	$	(12	)	$	(13	)
Securities purchased under agreements to resell	14			6			20			13			(12		)	1
Federal funds sold	(1		)	30			29			2			(40		)	(38		)
Investment securities	(9		)	52			43			13			(71		)	(58		)
Advances	(67		)	268			201			18			(255		)	(237		)
Mortgage loans	(1		)	(1		)	(2		)
Total	(56		)	361			305			45			(390		)	(345		)
Increase (decrease) in interest expense:
Interest-bearing deposits	—			2			2			3			(4		)	(1		)
Consolidated obligations, net:
Discount notes	(9		)	157			148			(24		)	(137		)	(161		)
Bonds	(41		)	187			146			62			(186		)	(124		)
Total	(50		)	346			296			41			(327		)	(286		)
(Decrease) increase in net interest income	$	(6	)	$	15		$	9
Increase (decrease) in net interest income										$	4		$	(63	)	$	(59	)

____________


⁽¹⁾	Volume change is calculated as the change in volume multiplied by the previous rate, while rate change is calculated as the change in rate multiplied by the previous volume. The rate/volume change, calculated as the change in rate multiplied by the change in volume, is allocated between volume change and rate change at the ratio each component bears to the absolute value of its total.

~~Noninterest Income (Loss)~~

~~The following table presents the components of noninterest income (dollars in millions).~~

For the Three Months Ended March 31, Increase (Decrease)

2019⁽¹⁾

2018⁽¹⁾
Amount Percent
Net impairment losses recognized in earnings $ (1 ) $ —
$ (1 ) (50.26 )
Net gains (losses) on trading securities 1
(1 ) 2
235.32
Net (losses) gains on derivatives and hedging activities (2 ) 22
(24 ) (107.61 )
Standby letters of credit fees 7
6
1
2.97
Other 2
—
2
534.51
Total noninterest income $ 7
$ 27
$ (20 ) (72.52 )

~~____________~~

⁽¹⁾ For 2019, amounts reported exclude realized and unrealized gains (losses) on hedged items and derivatives in qualifying hedge relationships. Prior period amounts do not conform to new hedge accounting guidance adopted January 1, 2019.

Beginning on January 1, 2019, changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item. Prior to January 1, 2019, for fair value hedges, any hedge ineffectiveness (which represented the amount by which the change in the fair value of the derivative differed from the change in the fair value of the hedge item) was recorded in noninterest income as net gains (losses) on derivatives and hedging activities.

4339

Table of Contents

Derivatives and Hedging Activity

The following tables present the net effect of derivatives and hedging activity on the Bank’s results of operations (in millions).


	For the Three Months Ended March 31, 2019 ⁽¹⁾															For the Three Months Ended March 31, 2020
	Advances			Investments			Consolidated Obligation Bonds			Balance Sheet			Total			Advances			Investments			Consolidated Obligation Bonds		Consolidated Obligation Discount Notes			Total
Net interest income:
Gains (losses) on designated fair value hedges	$	5		$	—		$	(4	)	$	—		$	1
Amortization or accretion of hedging activities in net interest income ⁽²⁾	(7		)	—			—			—			(7		)
Net interest settlements included in net interest income ⁽³⁾	20			—			(18		)	—			2
Amortization or accretion of active hedging relationships																$	(11	)	$	—		$	—	$	—		$	(11	)
Net changes in fair value hedges																(9		)	—			7		(16		)	(18		)
Net interest settlements on derivatives ⁽¹⁾																(30		)	—			7		12			(11		)
Other ⁽²⁾																2			—			—		—			2
Total effect on net interest income	$	18		$	—		$	(22	)	$	—		$	(4	)	$	(48	)	$	—		$	14	$	(4	)	$	(38	)
Net losses on derivatives:
Losses on derivatives not receiving hedge accounting including net interest settlements	$	—		$	(1	)	$	—		$	(1	)	$	(2	)	$	(2	)	$	(4	)	$	—	$	—		$	(6	)
Total net losses on derivatives	—			(1		)	—			(1		)	(2		)	(2		)	(4		)	—		—			(6		)
Net gains on trading securities ⁽⁴⁾	—			1			—			—			1
Net gains on trading securities ⁽³⁾																—			3			—		—			3
Total effect on noninterest income	$	—		$	—		$	—		$	(1	)	$	(1	)	$	(2	)	$	(1	)	$	—	$	—		$	(3	)

____________


⁽¹⁾	~~For 2019, amounts reported include realized and unrealized gains (losses) on hedged items and derivatives in qualifying hedge relationships as part of net interest income.~~


⁽²⁾	~~Represents the amortization or accretion of hedging fair value adjustments for both open and closed hedge positions.~~


⁽³⁾	Represents interest income or expense on derivatives included in net interest income.


⁽⁴⁾⁽²⁾	Amount in “Other” includes the price alignment amount on derivatives for which variation margin is characterized as daily settled contract.


⁽³⁾	Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative “assigned;” therefore, this line item may not agree to the income statement.

For the Three Months Ended March 31, 2018⁽¹⁾
Advances Investments Consolidated
Obligation
Bonds Consolidated Obligation Discount Notes Balance Sheet Total
Net interest income:
Amortization or accretion of hedging activities in net interest income⁽²⁾
$ (11 ) $ —
$ —
$ —
$ —
$ (11 )
Net interest settlements included in net interest income ⁽³⁾
(33 ) —
4
(1 ) —
(30 )
Total effect on net interest income $ (44 ) $ —
$ 4
$ (1 ) $ —
$ (41 )
Net gains on derivatives and hedging activities:
Gains on fair value hedges $ 14
$ —
$ 5
$ —
$ —
$ 19
Gains on derivatives not receiving hedge accounting including net interest settlements —
1
—
—
2
3
Total net gains on derivatives and hedging activities 14
1
5
—
2
22
Net losses on trading securities ⁽⁴⁾
—
(1 ) —
—
—
(1 )
Total effect on noninterest income $ 14
$ —
$ 5
$ —
$ 2
$ 21



	For the Three Months Ended March 31, 2019
	Advances			Investments			Consolidated Obligation Bonds			Balance Sheet			Total
Net interest income:
Amortization or accretion of active hedging relationships	$	(6	)	$	—		$	—		$	—		$	(6	)
Net changes in fair value hedges	4			—			(4		)	—			—
Net interest settlements on derivatives ⁽¹⁾	21			—			(18		)	—			3
Other ⁽²⁾	(1		)	—			—			—			(1		)
Total effect on net interest income	$	18		$	—		$	(22	)	$	—		$	(4	)
Net losses on derivatives:
Losses on derivatives not receiving hedge accounting including net interest settlements	$	—		$	(1	)	$	—		$	(1	)	$	(2	)
Total net losses on derivatives	—			(1		)	—			(1		)	(2		)
Net gains on trading securities ⁽³⁾	—			1			—			—			1
Total effect on noninterest income	$	—		$	—		$	—		$	(1	)	$	(1	)

~~____________~~ ____________


⁽¹⁾	For 2019, amounts reported include realized and unrealized gains (losses) on hedged items and derivatives in qualifying hedge relationships as part of net interest income. Prior period amounts do not conform to new hedge accounting guidance adopted January 1, 2019.


⁽²⁾	~~Represents the amortization or accretion of hedging fair value adjustments for both open and closed hedge positions.~~


⁽³⁾	Represents interest income or expense on derivatives included in net interest income.


⁽⁴⁾⁽²⁾	Amount in “Other” includes the price alignment amount on derivatives for which variation margin is characterized as daily settled contract.


⁽³⁾	Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative “assigned;” therefore, this line item may not agree to the income statement.

Table of Contents

Noninterest Income (Loss)

The following table presents the components of noninterest income (dollars in millions).



	For the Three Months Ended March 31,						Increase (Decrease)
	2020			2019			Amount			Percent
Net impairment losses recognized in earnings	$	—		$	(1	)	$	1		100.00
Net gains on trading securities	5			1			4			217.82
Net realized gains from sale of investment securities	85			—			85			100.00
Net losses on derivatives and hedging activities	(6		)	(2		)	(4		)	(281.65	)
Standby letters of credit fees	7			7			—			12.60
Other	2			2			—			39.08
Total noninterest income	$	93		$	7		$	86		*

____________

^*Not meaningful

During the first quarter of 2020, the Bank sold its entire private-label MBS portfolio. Proceeds from the sale totaled $921 million and resulted in a realized gain of $85 million.

Noninterest Expense and Affordable Housing Program (AHP) Assessment

~~Total~~The increase in total noninterest expense ~~remained relatively stable for~~during the first quarter of ~~2019,~~2020, compared to the same period in ~~2018.~~

~~Table~~2019, was primarily due to the Bank making an additional $20 million retirement plan contribution during the first quarter of ~~Contents~~

2020, which was recorded in compensation and benefits expense.

The Bank records AHP assessment expense at a rate of 10 percent of income before assessment, excluding interest expense on mandatorily redeemable capital stock.

Liquidity and Capital Resources

Liquidity is necessary to satisfy members’ borrowing needs on a timely basis, repay maturing and called consolidated obligations, and meet other obligations and operating requirements. Many members rely on the Bank as a source of standby liquidity, so the Bank attempts to be in a position to meet member funding needs on a timely basis. The Bank is required to maintain liquidity in accordance with the FHLBank Act, Finance Agency regulations, and policies established by the Bank’s management and board of directors. In addition, the Finance Agency, at times, has issued guidance and expectations to the FHLBanks related to liquidity.

Liquidity Reserves for Deposits. Finance Agency regulations require the Bank to hold a total amount of cash, obligations of the U.S., and advances with maturities of less than five years, in an amount not less than the amount of total member deposits. The Bank has complied with this requirement during the first ~~quarter~~three months of ~~2019.~~2020.

Operational Liquidity. In order to ensure adequate operational liquidity (generally, the ready cash and borrowing capacity available to meet the Bank’s ~~intraday~~intra-day needs) each day, Bank policy establishes a daily liquidity target based upon member deposit levels and current day liability maturities and asset settlements. The Bank met this liquidity requirement throughout the first ~~quarter~~three months of ~~2019.~~

~~Contingent Liquidity.~~ Finance Agency regulations require the Bank to maintain contingent liquidity in an amount sufficient to meet its liquidity needs for five business days if it is unable to access the capital markets. The Bank met these regulatory liquidity requirements during the first quarter of 2019.2020.

Additional Liquidity Guidance. ~~On August 23,~~In 2018, the Finance Agency issued ~~a final~~an Advisory Bulletin on FHLBank liquidity (Liquidity Guidance AB) that communicates the Finance Agency’s expectations with respect to the maintenance of sufficient liquidity to enable the Bank to provide advances and standby letters of credit for members during a sustained capital market disruption, assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days. Contemporaneously with the issuance of the Liquidity Guidance AB, the Finance Agency issued a supervisory letter that identifies initial thresholds for measures of liquidity within the established ranges set forth in the Liquidity Guidance AB.

The Liquidity Guidance ~~AB sets forth the Finance Agency’s expectations for how the Bank may best measure and maintain sufficient~~AB’s measurements of liquidity ~~including specific metrics that are commensurate with the Bank’s funds management strategies. These metrics~~ include a cash flow scenario, on a daily basis, that projects forward the number of days for which the Bank should maintain positive cash balances assuming the renewal of all maturing advances and the maintenance of a liquidity reserve for outstanding letters of credit. ~~These metrics~~The measurements of liquidity also include a funding gap measurement of the difference between assets and liabilities that are scheduled to mature during a specified period,

Table of Contents

expressed as a percentage of the Bank’s total assets to reduce the liquidity risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding, which may increase debt rollover risk.

Portions of the Liquidity Guidance AB were implemented on December 31, 2018 and March 31, 2019, with full implementation ~~to take place~~ on December 31, 2019. ~~The~~This Bank has increased the amount of liquid assets it holds to meet this ~~guidance, and anticipates a further increase to meet~~guidance. The Bank has met this liquidity requirement as directed by the ~~full implementation expectations at December 31, 2019.~~Finance Agency throughout the first three months of 2020.

Sources of Liquidity. The Bank’s principal source of liquidity is consolidated obligation debt instruments. To provide additional liquidity, the Bank also may use other short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase, and loans from other FHLBanks. The Bank’s consolidated obligations are not obligations of the United States and are not guaranteed by either the United States or any government agency, but have historically received the same credit rating as the government bond credit rating of the United States. As a result, the Bank generally has comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates. The Bank’s income and liquidity would be adversely affected if it were not able to access the capital markets at competitive rates for an extended period.

The Bank maintained continual access to funding and adapted its debt issuance to meet the needs of its members throughout the first three months of ~~2019.~~ 2020. As discussed elsewhere in this Report, during the first quarter of 2020, the Bank’s business was impacted by the COVID-19 pandemic on the financial markets. The Bank’s advance balances increased due to demands from members for increased liquidity. It is uncertain how long the increased advance demand will continue. The Bank relies on access to the capital markets to meet its funding needs, and the Bank expects continued sufficient access to capital markets.

The Bank’s short-term funding was generally driven by member demand and was achieved through the issuance of consolidated discount notes and short-term consolidated bonds during the first three months of ~~2019.~~2020. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferences and risk aversion,

~~Table of Contents~~

including the effects of money market fund reform, have sought the Bank’s short-term debt as an asset of choice, which has led to ~~advantageous funding opportunities and~~ increased utilization of debt maturing in one year or less.

The Bank is focused on maintaining an adequate liquidity balance and a funding balance between its financial assets and financial liabilities and the FHLBanks work collectively to manage the system-wide liquidity and funding needs. Management and the FHLBanks jointly monitor the combined refinancing risk primarily by tracking the maturities of financial assets and financial liabilities. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices. In managing and monitoring the amounts of assets that require refunding, the Bank considers contractual maturities of its financial assets, as well as certain assumptions regarding expected cash flows (i.e. estimated prepayments and scheduled amortizations). External factors including Bank member borrowing needs, supply and demand in the debt markets, and other factors may also affect the liquidity balances and the funding balance between financial assets and financial liabilities. See the notes to the Bank’s interim financial statements for more information regarding contractual maturities of certain of the Bank’s financial assets and liabilities.

Contingency plans are in place that prioritize the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance. Under the FHLBank Act, the Secretary of Treasury has the authority, at his discretion, to purchase consolidated obligations up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.

Off-balance Sheet Commitments

The Bank’s primary off-balance sheet commitments are as follows:

the Bank’s joint and several liability for all FHLBank consolidated obligations; and

the Bank’s outstanding commitments arising from standby letters of credit.

Should an FHLBank be unable to satisfy its payment obligation under a consolidated obligation for which it is the primary obligor, any of the other FHLBanks, including the Bank, could be called upon to repay all or any part of such payment obligation, as determined or approved by the Finance Agency. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, none of the other FHLBanks defaulted on their consolidated obligations; the Finance Agency was not required to allocate any obligation among the FHLBanks; and no amount of the joint and several obligation was fixed. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. As of March 31, ~~2019,~~2020, the FHLBanks had ~~$1.0~~$1.2 trillion in aggregate par value of consolidated obligations issued and outstanding, ~~$130.7~~$178.4 billion of which was attributable to the Bank. No FHLBank has ever defaulted on its principal

Table of Contents

or interest payments under any consolidated obligation, and the Bank has never been required to make payments under any consolidated obligation as a result of the failure of another FHLBank to meet its obligations.

The Bank generally requires standby letters of credit to contain language permitting the Bank, upon annual renewal dates and prior notice to the beneficiary, to choose not to renew the standby letter of credit, which effectively terminates the standby letter of credit prior to its scheduled final expiration date. Based on the creditworthiness of the member applicant and appropriate additional fees, the Bank may issue standby letters of credit that have terms of longer than one year without annual renewals or that have no stated maturity and are subject to renewal on an annual basis.

Commitments to extend credit, including standby letters of credit, are agreements to lend. The Bank issues a standby letter of credit on behalf of a member in exchange for a fee. A member may use these standby letters of credit to facilitate a financing arrangement. Management regularly reviews its standby letter of credit pricing in light of several factors, including the Bank’s potential liquidity needs related to draws on its standby letters of credit. Based on management’s credit analyses and collateral requirements, the Bank does not deem it necessary to have an allowance for credit losses for these unfunded standby letters of credit as of March 31, ~~2019.~~2020.

Refer to Note ~~15—~~13—Commitments and Contingencies to the Bank’s interim financial statements for more information about the Bank’s outstanding standby letters of credit.

Contractual Obligations

As of March 31, ~~2019,~~2020, there ~~has~~have been no material ~~change~~changes outside the ordinary course of business in the Bank’s contractual obligations as reported in the Bank’s Form 10-K.

Legislative and Regulatory Developments

Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.

~~Interim Final Rule on~~ Margin and Capital Requirements for Covered Swap Entities. On April 9, 2020, the Commodities Futures Trading Commission (CFTC) issued a final rule, effective May 11, 2020, to amend its rules requiring minimum margin and capital requirements for uncleared swaps for covered swap entities for which there is no prudential regulator by extending the phase-in compliance date for initial margin requirements from September 1, 2020 to September 1, 2021 for counterparties with an average daily aggregate notional amount of non-cleared swaps between $8 billion and $50 billion. The Bank does not expect this final rule to materially affect its financial condition or results of operations.

Finance Agency Final Rule on Stress Testing. On March ~~19,~~24, 2020, the Finance Agency issued a final rule, effective upon issuance, to amend its stress testing rule, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (EGRRCPA). The final rule (i) raises the minimum threshold for entities regulated by the Finance Agency to conduct periodic stress tests from $10 billion to $250 billion or more in total consolidated assets; (ii) removes the requirements for FHLBanks to conduct stress testing; and (iii) removes the adverse scenario from the list of required scenarios. FHLBanks are currently excluded from this regulation because no FHLBank has total consolidated assets over $250 billion, but the Finance Agency reserved its discretion to require an FHLBank with total consolidated assets below the $250 billion threshold to conduct stress testing. These amendments align the Finance Agency’s stress testing rule with rules adopted by other financial institution regulators that implement the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) stress testing requirements, as amended by EGRRCPA.

The results of the Bank’s most recent annual severely adverse economic conditions stress test were published to our public website, www.fhlbatl.com, on November 15, 2019. This rule will eliminate these stress testing requirements for the Bank, unless the Finance Agency exercises its discretion to require stress testing in the future.

The Bank does not expect this rule to have a material effect on its condition or results of operations.

Finance Agency Supervisory Letter - Planning for LIBOR Phase-Out. On September 27, 2019, the ~~Office~~Finance Agency issued a Supervisory Letter (Supervisory Letter) to the FHLBanks that the Finance Agency stated is designed to ensure the FHLBanks will be able to identify and prudently manage the risks associated with the termination of LIBOR in a safe and sound manner. The Supervisory Letter provided that the ~~Comptroller of~~FHLBanks should, by March 31, 2020, cease entering into new LIBOR referenced financial assets, liabilities, and derivatives with maturities beyond December 31, 2021 for all product types except investments. With respect to investments, the ~~Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Farm Credit~~FHLBanks were required, by December 31, 2019, to stop purchasing investments that

4643

Table of Contents

~~Administration~~reference LIBOR and mature after December 31, 2021. These phase-out dates do not apply to collateral accepted by the ~~Finance Agency (collectively,~~FHLBanks. The Supervisory Letter also directed the ~~Agencies) jointly adopted interim final rules (the Interim Rule) amending the Agencies’ regulations that established minimum margin and capital~~FHLBanks to update their pledged collateral certification reporting requirements (the Margin Rules) for registered swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (Covered Swap Entities) under the jurisdiction of one of the Agencies. The Interim Rule was adoptedby March 31, 2020 in an effort to ~~assist Covered Swap Entities and their counterparties upon the expected withdrawal, currently delayed until October~~encourage members to distinguish LIBOR-linked collateral maturing after December 31, 2019, of the United Kingdom (UK) from the European Union (EU), commonly referred to as “Brexit.” If the UK withdraws from the EU without a negotiated agreement between the UK and the EU, Covered Swap Entities located within the UK may not be authorized to continue providing certain financial services to swap counterparties that are located in the EU. The Interim Rule would permit Covered Swap Entities located within the UK to transfer their non-cleared swap portfolios to affiliates or other related entities located within the EU or the United States without subjecting legacy swaps (those swaps entered into before the compliance date of the Margin Rules) to the margin requirements of the Margin Rules, provided that the transfer is made within a year of a non-negotiated Brexit and there are no other amendments to the transactions.2021.

The Bank has ~~UK-based non-cleared swap counterparties~~ceased purchasing investments that ~~may choose~~reference LIBOR and mature after December 31, 2021. As a result of the recent market volatility triggered in part by the COVID-19 pandemic, the FHLBanks’ authority to ~~transfer their non-cleared swap portfolios, including any such swaps with~~enter into LIBOR-based instruments that mature after December 31, 2021 has been extended from March 31, 2020 to June 30, 2020, except for investments and option embedded products. In addition, the requirement to update pledged collateral certification reporting requirements was extended from March 31, 2020 to September 30, 2020.

The Bank continues to evaluate the potential impact of the Supervisory Letter and the related subsequent guidance on its financial condition and results of operations, but the Bank has begun to ~~a related entity~~change its investment strategy, may experience lower overall demand or increased costs for its advances, and it may be necessary to change the Bank’s hedging strategy, all of which in turn may negatively impact the ~~EU or the United States. If any~~future composition of the Bank’s ~~legacy non-cleared swaps are transferred in accordance with the Interim Rule, those swaps would retain legacy status under the Margin Rules.~~balance sheet, capital stock levels, core mission asset ratio, net income and dividend.

Legislative and Regulatory Developments Related to COVID-19 Pandemic.

Finance Agency Supervisory Letter - Paycheck Protection Program (PPP) Loans as Collateral for FHLBank Advances.On April ~~1, 2019,~~23, 2020, the ~~Commodity Futures Trading Commission (CFTC) adopted its own version~~Finance Agency issued a Supervisory Letter (PPP Supervisory Letter) permitting the FHLBanks to accept PPP loans as collateral for advances as “Agency Securities”, given the Small Business Administration’s (SBA) 100 percent guarantee of the ~~Interim Rule,~~unpaid principal balance. On April 20, 2020, the SBA published its third interim final rule related to PPP loans, which ~~is substantially similar~~explicitly waived certain regulatory requirements that must be satisfied before a member could pledge PPP loans to the ~~Agencies’ Interim Rule, but~~FHLBanks as collateral. The PPP Supervisory Letter establishes a series of conditions under which ~~applies to Covered Swap Entities that are not subject to~~ the ~~jurisdiction~~FHLBanks may accept PPP loans as collateral, which conditions focus on the financial condition of ~~one~~members, collateral discounts, and specified pledge dollar limits.

The Bank is evaluating the potential impact of the ~~Agencies. Comments~~PPP Supervisory Letter, including the determination whether to accept PPP loans as collateral and the terms on which the ~~Interim Rule were due April 18, 2019 and are due on the CFTC’s version of the Interim Rule on May 31, 2019. The~~ Bank would accept such collateral, but does not expect ~~this rule (or~~ the ~~CFTC’s version of the Interim Rule)~~PPP Supervisory Letter to materially ~~affect~~effect its financial condition or results of operations.

Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act was passed by the Senate on March 25, 2020 and by the House on March 27, 2020, and the President signed it into law the same day. The $2.2 trillion package is the largest stimulus bill in U.S. history. The CARES Act is in addition to previous relief legislation passed by Congress in March 2020. The legislation provides the following:

Assistance to businesses, states, and municipalities.

Creates a loan program for small businesses, non-profits and physician practices that can be forgiven through employee retention incentives.

Provides the Treasury Secretary authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens some regulations imposed through the Dodd-Frank Act.

Direct payments to eligible taxpayers and their families.

Expands eligibility for unemployment insurance and payment amounts.

Includes mortgage forbearance provisions and a foreclosure moratorium.

Funding for the PPP, which was created by the CARES Act, was increased on April 24, 2020 with the enactment of the Paycheck Protection Program and Healthcare Enhancement Act. Additional phases of the CARES Act or other COVID-19 relief legislation may be enacted by Congress. The Bank is evaluating the potential impact of the CARES Act on its business, including its impact to the U.S. economy, which is unknown; the possible acceptance of PPP loans as a new collateral source for the Bank’s advances; and impacts to mortgages held or serviced by the Bank’s members and that the Bank accepts as collateral.

Additional COVID-19 Legislative and Regulatory Developments. In light of the COVID-19 pandemic, governmental agencies, including the Securities and Exchange Commission, Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Association, CFTC and the Finance Agency, as well as state governments and agencies, have taken actions to provide various forms of relief from and guidance regarding the financial, operational, credit, market and other effects of the pandemic, some of which may have a direct or indirect impact on the Bank and/or its members. Many of these actions are temporary in nature. The Bank is monitoring these actions and guidance and evaluating their potential impact on the Bank.

Table of Contents

Risk Management

The Bank’s lending, investment and funding activities, and use of derivative hedge instruments expose the Bank to a number of risks. A robust risk management framework aligns risk-taking activities with the Bank’s strategies and risk appetite. A risk management framework also balances risks and rewards. The Bank’s risk management framework consists of risk governance, risk appetite, and risk management policies.

The Bank’s board of directors and management recognize that risks are inherent to the Bank’s business model and that the process of establishing a risk appetite does not imply that the Bank seeks to mitigate or eliminate all risk. By defining and managing to a specific risk appetite, the board of directors and management ensure that there is a common understanding of the Bank’s desired risk profile, which enhances strategic and tactical decisions. Additionally, the Bank aspires to (1) sustain a corporate culture of transparency, integrity, and adherence to legal and ethical obligations; and (2) achieve and exceed best practices in governance, ethics, and compliance.

The Bank’s board of directors and management have established a risk appetite statement and risk metrics for controlling and escalating actions based on the continuing objectives that represent the foundation of the Bank’s strategic and tactical planning, as described in the Bank’s Form 10-K.

Discussion of the Bank’s management of its LIBOR transition risk, credit risk and market risk is provided below. Further discussion of these risks, as well as the Bank’s management of its liquidity, operational, and business risks, is contained in the Bank’s Form 10-K.

Transition of LIBOR to an Alternative Reference Rate

In July 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that after 2021 it will no longer persuade or compel banks to submit rates for the calculation of LIBOR. In response, the Federal Reserve Board and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee to identify a set of alternative reference interest rates for possible use as market benchmarks. This committee has proposed SOFR as its recommended alternative to U.S. dollar LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in the second quarter of 2018. SOFR is based on a broad segment of the overnight Treasury repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Certain of the Bank’s assets and liabilities, and certain collateral pledged to the Bank, are indexed to LIBOR, with exposure extending past December 31, 2021. The Bank is currently evaluating and planning for the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement. In general, the transition away from LIBOR may result in increased market risk, credit risk, operational risk and business risk for the Bank. The Bank has adopted a LIBOR transition plan, which outlines the Bank’s transition activities, including LIBOR exposure evaluation, risk management, legal, operational, systems and operations, shareholder and external communication and education, and other aspects of planning. The Bank has a LIBOR Steering Committee, which oversees the Bank’s transition away from LIBOR in accordance with the strategies and requirements put forth by senior management and regulatory guidance, providing periodic reports to the Bank’s executive management committee and board of directors.

As of December 31, 2019, the Bank ceased purchasing assets tied to LIBOR with a contractual maturity beyond December 31, 2021. In light of this change, the Bank is evaluating its investment and related hedging strategy, including the availability of alternate permissible investments. In addition, beginning June 30, 2020, the Bank will cease entering into new LIBOR-based transactions involving advances, debt, derivatives, or other products with maturities beyond December 31, 2021. In preparation for this change and to help manage balance sheet exposure to LIBOR-indexed assets and liabilities with maturities beyond 2021, the Bank has begun updating its systems, participating in the issuance of SOFR-indexed consolidated bonds, issuing SOFR-linked advances, and swapping certain financial instruments to Overnight Index Swap (OIS) and SOFR as an alternative interest rate hedging strategy for certain financial instruments. The pace of transition, however, is dependent on external factors, including market developments and demand. The Bank closely monitors and participates in industry activity related to LIBOR transition, including those of the Alternate Reference Rate Committee and the International Swaps and Derivatives Association. The Bank will update its pledged collateral certification reporting requirements as of September 30, 2020 so that members may distinguish LIBOR-linked collateral maturing past December 31, 2021. The Bank intends to utilize this information in connection with its LIBOR exposure evaluation and risk management.

As part of the Bank’s risk LIBOR exposure evaluation and risk management, the Bank is developing an inventory of financial instruments impacted by the LIBOR transition and working to identify contracts that may require adding or adjusting the fallback language. The Bank has added or adjusted fallback language in advance confirmations, consolidated obligations and its

Table of Contents

credit and collateral policy to include fallback language addressing the discontinuation of LIBOR as a benchmark rate. The Bank continues to monitor the market-wide efforts to address fallback language related to derivatives and cash products.

The Bank’s exposure to advances, investment securities, and consolidated obligation bonds with interest rates indexed to LIBOR as of March 31, 2020 is set forth below (in millions).



	As of March 31, 2020
	Par Value
	Advances⁽¹⁾		Investments Securities		Consolidated Obligation Bonds
Variable-rate financial instruments outstanding:
LIBOR	$	29,107	$	20,506	$	44,350
SOFR	12,800		50		18,217
Other	5,348		1,592		—
Total variable-rate financial instruments outstanding	$	47,255	$	22,148	$	62,567

LIBOR-indexed financial instruments by contractual maturity:
Due before or on December 31, 2021	$	26,715	$	960	$	44,350
Due after December 31, 2021	2,392		19,546		—
Total LIBOR-indexed financial instruments by contractual maturity	$	29,107	$	20,506	$	44,350


⁽¹⁾	Includes all fixed-rate advances that have cap/floor optionality and excludes convertible advances.

The Bank’s notional amount of derivatives by type as of March 31, 2020 is set forth below (in millions).



	As of March 31, 2020
	Pay Leg		Receive Leg
Interest-rate swaps:
Fixed	$	53,722	$	40,764
LIBOR	14,910		23,076
SOFR	14,313		15,604
OIS	12,242		15,743
Total notional amount of interest-rate swaps	95,187		$	95,187

Other derivatives with LIBOR exposure:
Interest-rate caps or floors	7,083
Total notional amount of derivatives	$	102,270

The Bank’s exposure to derivatives with interest rates indexed to LIBOR as of March 31, 2020 is set forth below (in millions).



	As of March 31, 2020
	Notional Amount
	Pay Leg				Receive Leg				Interest-rate caps and floors
	Cleared		Uncleared		Cleared		Uncleared		Interest-rate caps and floors
Terminates before or on December 31, 2021	$	11,951	$	1,213	$	7,562	$	215	$	3,083
Terminates after December 31, 2021	263		1,483		10,585		4,714		4,000
Total LIBOR-indexed derivatives by termination date	$	12,214	$	2,696	$	18,147	$	4,929	$	7,083

Discussion of the Bank’s management of its credit risk and market risk is provided below. Further discussion of these risks, as well as the Bank’s management of its liquidity, operational, and business risks, is contained in the Bank’s Form 10-K.

Table of Contents

Credit Risk

The Bank faces credit risk primarily with respect to its advances, investments, derivatives, and mortgage loan assets. The Bank continues to monitor the potential financial impact of COVID-19 on Bank members, counterparties, collateral values, and critical vendors.

Advances

Secured advances to member financial institutions account for the largest category of Bank assets; thus, advances are a major source of the Bank’s credit risk exposure. The Bank uses a risk-focused approach to credit and collateral underwriting. The Bank attempts to reduce credit risk on advances by monitoring the financial condition of borrowers and the quality and value of the assets that borrowers pledge as eligible collateral.

The Bank ~~utilizes a~~determines credit risk ~~rating system~~ratings or risk level ratings for its members ~~which focuses primarily on an~~by evaluating each institution’s overall financial health, ~~and takes~~taking into account the quality of assets, earnings, and capital position. The Bank assigns each borrower that is an insured depository institution ~~or an insurance company~~ a credit risk rating from one to 10 according to the relative amount of credit risk that such borrower poses to the Bank (one being the least amount of credit risk and 10 the greatest amount of credit risk). The Bank assigns each borrower that is an insurance company a risk level rating from 101 to 104 by utilizing an external model. Each risk level rating generally corresponds to the one to 10 credit risk rating for insured depository institutions, 101 being the least amount of credit risk and 104 the greatest amount of credit risk. The Bank assigns each borrower that is not an insured depository institution or an insurance company (including housing associates, community development financial institutions, and corporate credit unions), a risk level rating based on a risk matrix developed for each entity type.

In general, borrowers ~~in category 10~~with the greatest amount of credit risk may have more restrictions on the types of collateral they may use to secure advances, may be required to maintain higher collateral maintenance levels and deliver loan collateral, may be restricted from obtaining further advances, and may face more stringent collateral reporting requirements. At times, based upon the Bank’s assessment of a borrower and its collateral, the Bank may place more restrictive requirements on a borrower than those generally applicable to borrowers with the same rating. The Bank assigns each borrower that is not an insured depository institution or insurance company, such as housing associates, community development financial institutions, and corporate credit unions, a risk level rating based on a risk matrix developed for each entity type. Each matrix has risk levels that generally correspond to the one to 10 credit risk rating for insured depository institutions and insurance companies. Development of these risk matrices for borrowers that are not insured depository institutions or insurance companies enables the Bank to monitor and analyze the financial condition of these borrowers in a more consistent and complete manner. The par value of advances to these institutions totaled $615 million as of March 31, 2019. Management and the board also monitor the Bank’s concentration in secured credit and standby letters of credit exposure to individual borrowers.

~~Table of Contents~~

The following table presents the number of borrowers and the par value of advances outstanding to borrowers with the specified ratings as of the specified dates (dollars in millions).


	As of March 31, 2019			As of December 31, 2018			As of March 31, 2020			As of December 31, 2019
Rating	Number of Borrowers	Par Value of Outstanding Advances		Number of Borrowers	Par Value of Outstanding Advances		Number of Borrowers	Par Value of Outstanding Advances		Number of Borrowers	Par Value of Outstanding Advances
1	88	$	2,336	97	$	2,176	94	$	3,203	96	$	2,387
2	55	16,637		50	18,472		70	21,911		62	14,958
3	61	7,681		75	22,207		47	10,422		48	10,287
4	103	51,873		104	60,897		99	58,656		91	61,269
5	44	10,688		57	3,083		34	37,132		40	4,695
6	16	307		13	361		7	67		7	79
7	6	60		9	140		4	47		4	31
8	2	223		3	262		1	16		1	16
9	7	124		6	190		1	11		2	12
10	5	68		5	85		3	30		3	31
Subtotal (rating from 1 to 10)								131,495			93,765
101							15	2,981		11	2,359
102							3	276		3	298
103							1	19		1	19
104							3	52		1	15
Subtotal (rating from 101 to 104)								3,328			2,691
Unrated							1	10		—	—
Total par value								$	134,833		$	96,456

The Bank establishes a credit limit for each borrower. The credit limit is not a committed line of credit, but rather an indication of the borrower’s general borrowing capacity with the Bank. The Bank determines the credit limit in its sole and absolute discretion by evaluating a wide variety of factors that indicate the borrower’s overall creditworthiness. The credit limit is generally expressed as a percentage equal to the ratio of the borrower’s total liabilities to the Bank (including the face amount

Table of Contents

of outstanding standby letters of credit, the par value of outstanding advances, and the total exposure of the Bank to the borrower under any derivative contract) to the borrower’s total assets. Generally, borrowers are held to a credit limit of no more than 30 percent. However, the Bank’s board of directors ~~or a relevant committee thereof,~~ may approve a higher limit at its discretion, and such borrowers may be subject to certain additional collateral, reporting, and maintenance requirements. Five borrowers have been approved for a credit limit higher than 30 percent, and their total outstanding advance and standby letters of credit balance was ~~$24.3~~$30.0 billion and ~~$1.6 billion,~~$564 million, respectively, as of March 31, ~~2019.~~2020.

The Bank obtains collateral on advances to protect against losses, but Finance Agency regulations permit the Bank to accept only certain types of collateral. Each borrower must maintain an amount of qualifying collateral that, when discounted to the lendable collateral value (LCV), is equal to at least 100 percent of the borrower’s outstanding par value of all advances and other liabilities from the Bank. The LCV is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support. For each type of qualifying collateral, the Bank discounts the market value of the qualifying collateral to calculate the LCV. The Bank regularly reevaluates the appropriate level of discounting. The Bank had rights to collateral on a borrower-by-borrower basis with an estimated value equal to or greater than its outstanding extension of credit as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. The following table presents information about the types of collateral held for the Bank’s advances (dollars in millions).

Total Par
Value of
Outstanding Advances

LCV of
Collateral
Pledged by Members

First Mortgage
Collateral (%)

Securities
Collateral (%)
Other Real Estate Related Collateral (%)
As of March 31, 2019 $ 90,612
$ 337,935
64.28 9.62 26.10
As of December 31, 2018 108,414
338,362
64.96 8.85 26.19



	Total Par Value of Outstanding Advances		LCV of Collateral Pledged by Members		First Mortgage Collateral (%)	Securities Collateral (%)	Other Real Estate Related Collateral (%)
As of March 31, 2020	$	134,833	$	381,294	66.73	9.15	24.12
As of December 31, 2019	96,456		348,964		66.00	8.32	25.68

For purposes of determining each member’s LCV, the Bank estimates the current market value of all residential first mortgage loans, commercial real estate loans, home equity loans, and lines of credit pledged as collateral based on information provided by the member on its loan portfolio or on individual loans through the regular collateral reporting process. The estimated market value is discounted to account for the (1) price volatility of loans, (2) model data uncertainty, and (3) estimated liquidation and servicing costs in the event of the member’s default. Market values, and thus LCVs, change monthly. The use of this market-based valuation methodology allows the Bank to establish its collateral discounts with greater precision and to provide greater transparency with respect to the valuation of collateral pledged for advances and other credit products offered by the Bank.

The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor) other than the claims and rights of a party that (1) would be entitled to priority under otherwise

~~Table of Contents~~

applicable law; and (2) is an actual bona fide purchaser for value or is an actual secured party whose security interest is perfected in accordance with applicable state law.

In its history, the Bank has never experienced a credit loss on an advance. In consideration of this and the Bank’s policies and practices detailed above, the Bank has not established an allowance for credit losses on advances as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Investments

The Bank is subject to credit risk on unsecured investments, such as interest-bearing deposits and federal funds sold. These investments are generally transacted with government agencies and large financial institutions that are considered to be of investment quality. The Finance Agency defines investment quality as a security with adequate financial backing, so that full and timely payment of principal and interest on such security is expected, and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security.

In addition to Finance Agency regulations, the Bank has established guidelines approved by its board of directors regarding unsecured extensions of credit, with respect to term limits and eligible counterparties.

Table of Contents

Finance Agency regulations prohibit the Bank from investing in any of the following securities:

instruments, such as common stock, that represent an ownership interest in an entity, other than stock in small business investment companies, or certain investments targeted to low-income people or communities;

instruments issued by non-United States entities, other than those issued by United States branches and agency offices of foreign commercial banks;

debt instruments that are not of investment quality, other than certain investments targeted to low-income people or communities and instruments that the Bank determined became less than investment quality because of developments or events that occurred after purchase by the Bank;

whole mortgages or other whole loans, other than the following: (1) those acquired under the Bank’s mortgage purchase programs; (2) certain investments targeted to low-income people or communities; (3) certain marketable direct obligations of state, local, or tribal government units or agencies that are of investment quality; (4) MBS or asset-backed securities that are backed by manufactured housing loans or home equity loans; and (5) certain foreign housing loans that are authorized under section 12(b) of the FHLBank Act;

interest-only or principal-only stripped MBS, collateralized mortgage obligations (CMOs), collateralized debt obligations, and real estate mortgage investment conduits (REMICs);

residual-interest or interest-accrual classes of CMOs and REMICs;

fixed-rate or variable-rate MBS, CMOs, and REMICs that are at rates equal to their contractual cap on the trade date and that have average lives that vary by more than six years under an assumed instantaneous interest-rate change of 300 basis points; and

non-U.S. dollar denominated securities.

Finance Agency regulations do not permit the Bank to rely exclusively on NRSRO ratings with respect to its investments. The Bank is required to make a determination of whether a security is of investment quality based on its own documented analysis, which includes the NRSRO rating as one of the factors that is assessed to determine investment quality. The Bank monitors the financial condition of investment counterparties to ensure that they are in compliance with the Bank’s Risk Management Policy (RMP) and Finance Agency regulations. Unsecured credit exposure to any counterparty is limited by the credit quality and capital of the counterparty and by the capital of the Bank. On a regular basis, management produces financial monitoring reports detailing the financial condition of the Bank’s counterparties. These reports are reviewed by the Bank’s board of directors. In addition to the Bank’s RMP and regulatory requirements, the Bank may limit or suspend overnight and term trading. Limiting or suspending counterparties limits the pool of available counterparties, shifts the geographical distribution of counterparty exposure, and may reduce the Bank’s overall investment opportunities.

Table of Contents

The Bank only enters into investments with U.S. counterparties or U.S. branch offices of foreign banks that have been approved by the Bank through its internal approval process, but the Bank may still have exposure to foreign entities if a counterparty’s parent entity is located in another country. The following tables present the Bank’s gross exposure, by instrument type, according to the location of the parent company of the counterparty (in millions).


	As of March 31, 2019								As of March 31, 2020
	Federal Funds Sold		Interest-bearing Deposits		Net Derivative Exposure ⁽¹⁾		Total		Federal Funds Sold		Interest-bearing Deposits ⁽¹⁾		Net Derivative Exposure ⁽²⁾		Total
Australia	$	750	$	—	$	—	$	750	$	1,500	$	—	$	—	$	1,500
Austria	1,205		—		—		1,205		450		—		—		450
Canada	200		—		—		200		3,230		—		2		3,232
Finland	605		—		—		605		1,700		—		—		1,700
France	1,100		—		5		1,105		2,020		—		—		2,020
Germany	2,510		—		—		2,510		1,450		—		—		1,450
Netherlands	500		—		—		500		1,260		—		—		1,260
Norway	1,300		—		—		1,300		1,495		—		—		1,495
Sweden	250		—		—		250		175		—		—		175
Switzerland	—		—		9		9		—		—		2		2
United States of America	4,355		3,444		41		7,840		4,665		3,322		39		8,026
Total	$	12,775	$	3,444	$	55	$	16,274	$	17,945	$	3,322	$	43	$	21,310

~~____________~~ _________


⁽¹⁾	Interest-bearing deposits includes a $510 million with Truist Bank one of the Bank’s 10 largest borrowers, as of March 31, 2020.

⁽²⁾Amounts do not reflect collateral; see the table under Risk Management–Credit Risk–Derivatives below for a breakdown of the credit ratings of and the Bank’s credit exposure to derivative counterparties, including net exposure after collateral.


	As of December 31, 2018								As of December 31, 2019
	Federal Funds Sold		Interest-bearing Deposits		Net Derivative Exposure ⁽¹⁾		Total		Federal Funds Sold ⁽¹⁾		Interest-bearing Deposits ⁽²⁾		Net Derivative Exposure ⁽³⁾		Total
Australia	$	1,965	$	—	$	—	$	1,965	$	975	$	—	$	—	$	975
Austria	400		—		—		400		500		—		—		500
Canada	1,935		—		—		1,935		2,275		—		6		2,281
Finland	500		—		—		500		1,150		—		—		1,150
France	—		—		3		3
Germany	1,640		—		—		1,640		1,250		—		—		1,250
Japan									—		—		1		1
Netherlands	588		—		—		588		450		—		—		450
Norway	375		—		—		375		1,495		—		—		1,495
Switzerland	—		—		3		3		—		—		1		1
United States of America	1,575		6,782		2		8,359		1,731		3,810		16		5,557
Total	$	8,978	$	6,782	$	8	$	15,768	$	9,826	$	3,810	$	24	$	13,660

____________


⁽¹⁾	Federal funds sold includes $100 million with BankUnited, National Association, one of the Bank’s 10 largest borrowers as of December 31, 2019.

⁽¹⁾⁽²⁾Interest-bearing deposits include a $508 million business money market account with Truist Bank, one of the Bank’s 10 largest borrowers as of December 31, 2019.

⁽³⁾Amounts do not reflect collateral; see the table under Risk Management–Credit Risk–Derivatives below for a breakdown of the credit ratings of and the Bank’s credit exposure to derivative counterparties, including net exposure after collateral.

The Bank experienced an increase in unsecured credit exposure in its investment portfolio related to non-U.S. government and non-U.S. government agency counterparties ~~from $15.7~~to $21.3 billion as of ~~December~~March 31, ~~2018 to $16.2~~2020 from $13.6 billion as of ~~March~~December 31, 2019. As of March 31, ~~2019,~~2020, there were no counterparties that had greater than 10 percent of the total unsecured credit exposure to non-U.S. government or non-U.S. government agencies counterparties. As of March 31, ~~2019, this~~2020, total unsecured credit portfolio consisted primarily of federal funds sold with overnight maturities.

The Bank’s RMP permits the Bank to invest in U.S. agency (i.e., Fannie Mae, Freddie Mac and Ginnie Mae) obligations including the following: (1) CMOs and REMICS that are backed by such securities; and (2) other MBS, CMOs, and REMICS that are of sufficient investment quality, which are typically have the highest ratings issued by S&P or Moody’s at the time of purchase. The private-label MBS purchased by the Bank originally attained their triple-A ratings through credit enhancements, which primarily consisted of the subordination of the claims of the other tranches of these securities. In addition to NRSRO ratings, the Bank considers a variety of credit quality factors when analyzing potential investments, such as collateral performance, marketability, asset class considerations, local and regional economic conditions, and the financial health of the underlying issuer.

Table of Contents

The following tables present information on the credit ratings of the Bank’s investments held as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 (in millions), based on their credit ratings as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The credit ratings reflect the lowest long-term credit ratings as reported by an NRSRO.


			As of March 31, 2019																				As of March 31, 2020
			Carrying Value ⁽¹⁾																				Carrying Value ⁽¹⁾
			Investment Grade						Below Investment Grade														Investment Grade
	AAA		AA		A		BBB		BB		B		CCC		CC		D		Unrated		Total		AAA		AA		A		BBB		Total
Investment securities:
Government-sponsored enterprises debt obligations	$	—	$	3,228	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	3,228	$	—	$	3,637	$	—	$	—	$	3,637
U.S. Treasury obligations	—		999		—		—		—		—		—		—		—		—		999		—		1,501		—		—		1,501
State or local housing agency debt obligations	—		1		—		—		—		—		—		—		—		—		1		—		1		—		—		1
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	—		112		—		—		—		—		—		—		—		—		112		—		83		—		—		83
Government-sponsored enterprises residential	—		8,991		—		—		—		—		—		—		—		—		8,991		—		8,574		—		—		8,574
Government-sponsored enterprises commercial	444		11,072		—		—		—		—		—		—		—		—		11,516		115		11,251		—		—		11,366
Private-label residential	—		76		94		102		113		39		234		42		62		453		1,215
Total mortgage-backed securities	444		20,251		94		102		113		39		234		42		62		453		21,834		115		19,908		—		—		20,023
Total investment securities	444		24,479		94		102		113		39		234		42		62		453		26,062		115		25,047		—		—		25,162
Other investments:
Interest-bearing deposits	—		924		2,473		47		—		—		—		—		—		—		3,444		—		942		2,332		48		3,322
Securities purchased under agreements to resell	—		1,500		2,000		1,000		—		—		—		—		—		—		4,500
Federal funds sold	—		3,305		8,445		1,025		—		—		—		—		—		—		12,775		—		6,350		11,160		435		17,945
Total other investments	—		5,729		12,918		2,072		—		—		—		—		—		—		20,719		—		7,292		13,492		483		21,267
Total investments	$	444	$	30,208	$	13,012	$	2,174	$	113	$	39	$	234	$	42	$	62	$	453	$	46,781	$	115	$	32,339	$	13,492	$	483	$	46,429

____________

⁽¹⁾Investment amounts noted in the above table represent the carrying value and ~~do not include related~~excludes accrued interest receivable of ~~$45~~$31 million as of March 31, ~~2019.~~2020.

~~Table of Contents~~


	As of December 31, 2018																						As of December 31, 2019
	Carrying Value ⁽¹⁾																						Carrying Value ⁽¹⁾
	Investment Grade								Below Investment Grade														Investment Grade								Below Investment Grade
	AAA		AA		A		BBB		BB		B		CCC		CC		D		Unrated		Total		AAA		AA		A		BBB		BB		B		CCC		CC		D		Unrated		Total
Investment securities:
Government-sponsored enterprises debt obligations																							$	—	$	4,556	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	4,556
U.S. Treasury obligations																							—		1,499		—		—		—		—		—		—		—		—		1,499
State or local housing agency debt obligations	$	—	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1	—		1		—		—		—		—		—		—		—		—		1
Government-sponsored enterprises debt obligations	—		2,727		—		—		—		—		—		—		—		—		2,727
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	—		118		—		—		—		—		—		—		—		—		118		—		89		—		—		—		—		—		—		—		—		89
Government-sponsored enterprises residential	—		9,304		—		—		—		—		—		—		—		—		9,304		—		8,642		—		—		—		—		—		—		—		—		8,642
Government-sponsored enterprises commercial	522		10,846		—		—		—		—		—		—		—		—		11,368		167		12,351		—		—		—		—		—		—		—		—		12,518
Private-label residential	—		77		92		112		119		50		246		44		68		473		1,281		—		38		44		47		54		18		210		34		48		383		876
Total mortgage-backed securities	522		20,345		92		112		119		50		246		44		68		473		22,071		167		21,120		44		47		54		18		210		34		48		383		22,125
Total investment securities	522		23,073		92		112		119		50		246		44		68		473		24,799		167		27,176		44		47		54		18		210		34		48		383		28,181
Other investments:
Interest-bearing deposits	—		2,032		4,703		47		—		—		—		—		—		—		6,782		—		939		2,222		649		—		—		—		—		—		—		3,810
Securities purchased under agreements to resell	—		750		2,000		1,000		—		—		—		—		—		—		3,750		—		1,800		4,250		2,750		—		—		—		—		—		—		8,800
Federal funds sold	—		2,865		4,668		1,445		—		—		—		—		—		—		8,978		—		4,120		5,176		530		—		—		—		—		—		—		9,826
Total other investments	—		5,647		11,371		2,492		—		—		—		—		—		—		19,510		—		6,859		11,648		3,929		—		—		—		—		—		—		22,436
Total investments	$	522	$	28,720	$	11,463	$	2,604	$	119	$	50	$	246	$	44	$	68	$	473	$	44,309	$	167	$	34,035	$	11,692	$	3,976	$	54	$	18	$	210	$	34	$	48	$	383	$	50,617

____________

⁽¹⁾ Investment amounts noted in the above table represent the carrying value and ~~do not include related~~excludes accrued interest receivable of ~~$42~~$44 million as of December 31, ~~2018.~~2019.

Table of Contents

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term loans transacted with counterparties that the Bank considers to be of investment quality. The terms of these loans are structured such that if the fair value of the underlying securities decreases below the fair value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is recognized in earnings. ~~Based upon the collateral held as security,~~As of March 31, 2020, the Bank ~~determined that no allowance for credit losses was needed for the~~did not have any securities purchased under agreements to ~~resell~~resell.

Held-to-maturity Securities

~~Non-MBS Held-to-maturity Securities~~

~~The unrealized losses related~~2020 because the securities: (1) were all highly-rated and/or had short remaining terms to ~~non-MBS held-to-maturity securities are caused by interest-rate changes. These losses are considered temporary as~~maturity, (2) had not experienced, nor did the Bank ~~expects to recover~~expect, any payment default on the ~~entire amortized cost basis on its non-MBS held-to-maturity securities~~instruments, and (3) in ~~unrealized loss positions and neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery~~the case of ~~each security's remaining amortized cost basis. As a result, Bank does not consider these non-MBS held-to-maturity securities to be other-than-temporarily impaired as of March 31, 2019.~~

~~Non-Private-label MBS~~

~~The unrealized losses related to government-sponsored enterprise MBS are caused by interest-rate changes. Because these securities are guaranteed by~~U.S., government-sponsored enterprises, it is expected that these securities would not be settled at a price less than the amortized cost basis. The Bank does not consider these investments to be other-than-temporarily impaired as of March 31, 2019 because the decline in fair value is attributable to changes in interest rates and not credit quality; the Bank does not intend to sell the investments; and it is not more likely than notor other agency obligations, carry an implicit or explicit government guarantee such that the Bank ~~will~~considers the risk of nonpayment to be ~~required to sell the investments before recovery of their amortized cost basis, which may be at maturity.~~

~~Table of Contents~~

~~Private-label MBS~~

For disclosure purposes, the Bank classifies private-label MBS as either prime or Alt-A based upon the overall credit quality of the underlying loans as determined by the originator at the time of origination, unless otherwise noted. Although there is no universally accepted definition of Alt-A, generally, loans with credit characteristics that range between prime and subprime are classified as Alt-A. Participants in the mortgage market have used the Alt-A classification principally to describe loans for which the underwriting process has been streamlined in order to reduce the documentation requirements of the borrower or allow for alternative documentation.

~~The following table presents information, based on investment ratings, on the Bank’s private-label MBS as of March 31, 2019 (dollars in millions).~~

Prime Alt-A Total
Investment Ratings:
AA $ 76
$ —
$ 76
A 94
—
94
BBB 97
5
102
BB 105
9
114
B 13
26
39
CCC 145
127
272
CC 27
22
49
D 65
—
65
Unrated 498
1
499
Total unpaid principal balance $ 1,120
$ 190
$ 1,310
Amortized cost $ 997
$ 153
$ 1,150
Gross unrealized losses $ (1 ) $ —
$ (1 )
Fair value $ 1,057
$ 161
$ 1,218
Other-than-temporary impairment (Year-to-date):
Total other-than-temporary impairment losses $ —
$ —
$ —
Net amount of impairment losses reclassified from accumulated other
comprehensive income

(1 ) —
(1 )
Net impairment losses recognized in earnings $ (1 ) $ —
$ (1 )
Weighted average percentage of fair value to unpaid principal balance 94.43 % 84.76 % 93.03 %
Original weighted average credit support 9.57 % 24.89 % 11.78 %
Weighted average credit support 5.94 % 9.25 % 6.42 %
Weighted average collateral delinquency 10.50 % 14.85 % 11.13 %

~~The following table presents a summary of the significant inputs used to evaluate each of the Bank’s private-label MBS for other-than-temporary impairment as of March 31, 2019.~~

Significant Inputs - Weighted Average (%)
Classification of Securities ⁽¹⁾
Prepayment Rate Default Rates Loss Severities Current Credit Enhancement (%)
Prime 16.29 7.54 25.10 9.07
Alt-A 14.36 18.04 37.00 3.85
Total 15.31 12.89 31.16 6.42

~~____________~~

⁽¹⁾ The classification of securities is based on current characteristics and performance, which may be different from the securities’ classification as determined by the originator at the time of origination.

In addition to the cash flow analysis of the Bank’s private-label MBS under a base case (best estimate) housing price scenario, a cash flow analysis was also performed based on a housing price scenario that is more adverse than the base case (adverse case housing price scenario). This more stressful scenario was primarily based on a short-term housing forecast, which was five percentage points lower than the base case, followed by a recovery path with annual rates of housing price growth that included rates which were 33 percent lower than the base case. The results of the adverse case housing price scenario was the same as the base case housing price scenario.

~~Table of Contents~~

The adverse case housing price scenario and associated results do not represent the Bank’s current expectations and therefore, should not be construed as a prediction of the Bank’s future results, market conditions, or the actual performance of these securities. Rather, the results from this hypothetical adverse case housing price scenario provide a measure of the credit losses that the Bank might incur if home price declines (and subsequent recoveries) are more adverse than those projected in the Bank’s base case assessment.

The Bank continues to actively monitor the credit quality of its private-label MBS investments. It is not possible to predict the magnitude of additional other-than-temporary impairment losses in future periods because that prediction depends on the actual performance of the underlying loan collateral, as well as the Bank’s future modeling assumptions. Many factors could influence the Bank’s future modeling assumptions, including economic, financial market, and housing market conditions. If performance of the underlying loan collateral deteriorates and/or the Bank’s modeling assumptions become more pessimistic, the Bank could experience further losses on its investment portfolio.zero.

Derivatives

The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures, collateral requirements, and other credit enhancements are used and are effective in mitigating the risk. The Bank manages credit risk through credit analysis, collateral management, and other credit enhancements. The Bank is also required to follow the requirements set forth by applicable regulations.

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 clearing agent with a Clearinghouse. Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated, and the executing counterparty is replaced with the Clearinghouse as the counterparty.

For uncleared derivatives, the Bank is subject to nonperformance by counterparties. The Bank generally requires collateral on uncleared derivative transactions. A counterparty must deliver collateral to the Bank if the total market value of the Bank’s exposure to that counterparty rises above a specific trigger point. As a result, the Bank does not anticipate any credit losses on its uncleared derivatives as of March 31, ~~2019.~~2020.

Certain of the Bank’s uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is a deterioration in the Bank’s credit rating. If the Bank’s credit rating had been lowered from its current rating to the next lower rating, the Bank would have been required to deliver $1$5 million of collateral at fair value to its uncleared derivative counterparties as of March 31, ~~2019.~~2020.

For cleared derivatives, the Bank is subject to credit risk due to nonperformance by the Clearinghouse and clearing agent. The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties, and collateral is posted daily for changes in the value of cleared derivatives through a clearing agent. This does introduce, however, a risk of concentration among the limited number of Clearinghouses and clearing agents. The Bank actively monitors Clearinghouses and clearing agents. An annual review of the Bank’s Clearinghouses is performed, and the Bank also monitors its exposure to Clearinghouses on a monthly basis. The Bank currently ~~has the following~~utilized two approved ~~Clearinghouses:~~Clearinghouses, CME Clearing and LCH Ltd. The Bank also monitors the clearing agents through its unsecured credit system, and the Bank subjects these clearing agents to the same limits as other bilateral derivative counterparties. The parent companies of the clearing agents are

Table of Contents

monitored through annual reviews, as well as through the Bank’s daily monitoring tools, which include reviewing equity triggers, debt triggers, and credit default swap spread triggers. In addition, exposures to the clearing agents are monitored daily on a swap counterparty report. The Bank currently has the following three approved clearing agents: Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, and Goldman Sachs & Co. The Bank does not anticipate any credit losses on its cleared derivatives as of March 31, ~~2019.~~2020.

The contractual or notional amount of derivative transactions reflects the involvement of the Bank in the various classes of financial instruments; however, the Bank’s maximum credit risk with respect to derivative transactions, is the estimated cost of replacing the derivative transactions if there is default, less the value of any related collateral, including initial and variation margin. In determining maximum credit risk, the Bank considers accrued interest receivables and payables, as well as the netting requirements to net assets and liabilities.

~~Table of Contents~~

The following tables present information on the credit ratings of, and the Bank’s credit exposure to, its derivative counterparties (in millions). The credit ratings reflect the lowest long-term credit rating by an NRSRO.

As of March 31, 2019
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged To (From) Counterparty Other Collateral Pledged To (From) Counterparty Net Credit Exposure to Counterparties
Non-member counterparties:
  Asset positions with credit exposure:
    Double-A $ 2,703
$ —
$ —
$ —
$ —
    Single-A 7,228
19
(19 ) —
—
    Triple-B 4,727
2
(2 ) —
—
Cleared derivatives 25,679
34
322
—
356
  Liability positions with credit exposure:
    Single-A 6,586
(20 ) 22
—
2
    Cleared derivatives 5,863
—
22
—
22
Total derivative positions with non-member counterparties to which the Bank had credit exposure 52,786
35
345
—
380
Member institutions ⁽¹⁾
148
1
—
(1 ) —
Total $ 52,934
$ 36
$ 345
$ (1 ) $ 380

~~____________~~

⁽¹⁾Collateral held with respect to derivatives with member institutions where the Bank is acting as an intermediary represents the amount of eligible collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.


	As of December 31, 2018										As of March 31, 2020
	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparty			Net Credit Exposure to Counterparties		Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparty			Other Collateral Pledged To (From) Counterparty			Net Credit Exposure to Counterparties
Non-member counterparties:
Asset positions with credit exposure:
Double-A	$	698	$	—		$	—		$	—	$	175	$	2		$	(2	)	$	—		$	—
Single-A	5,425		6			(6		)	—		55		—			—			—			—
Triple-B	4,471		2			(2		)	—
Cleared derivatives	969		—			3			3		45,324		41			858			—			899
Liability positions with credit exposure:
Double-A	615		(1		)	1			—
Single-A	4,816		(28		)	29			1		9,797		(390		)	398			—			8
Triple-B	4,608		(41		)	41			—		6,759		(177		)	189			—			12
Cleared derivatives	32,523		(33		)	343			310		39,731		(16		)	75			—			59
Total derivative positions with non-member counterparties to which the Bank had credit exposure	54,125		(95		)	409			314		101,841		(540		)	1,518			—			978
Member institutions ⁽¹⁾	3		—			—			—		153		11			—			(11		)	—
Total	$	54,128	$	(95	)	$	409		$	314	$	101,994	$	(529	)	$	1,518		$	(11	)	$	978

____________

5553

Table of Contents



	As of December 31, 2019
	Notional Amount		Net Derivatives Fair Value Before Collateral			Cash Collateral Pledged To (From) Counterparty			Other Collateral Pledged To (From) Counterparty			Net Credit Exposure to Counterparties
Non-member counterparties:
Asset positions with credit exposure:
Double-A	$	705	$	6		$	(6	)	$	—		$	—
Single-A	6,798		3			(1		)	$	—		2
Cleared derivatives	23,766		15			336			—			351
Liability positions with credit exposure:
Single-A	5,189		(165		)	169			—			4
Triple-B	6,233		(18		)	20			—			2
Cleared derivatives	31,425		(1		)	18			—			17
Total derivative positions with non-member counterparties to which the Bank had credit exposure	74,116		(160		)	536			—			376
Member institutions ⁽¹⁾	141		4			—			(4		)	—
Total	$	74,257	$	(156	)	$	536		$	(4	)	$	376

____________

Mortgage Loan Programs

The Bank seeks to manage the credit risk associated with the Mortgage Purchase Program (MPP) and the Mortgage Partnership Finance^® Program (MPF^® Program or MPF) by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institutions.

The allowance for credit losses on MPF loans was $1 million as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

Critical Accounting Policies and Estimates

A detailed description of the Bank’s critical accounting policies and estimates is contained in the Bank’s Form 10-K. There have been no material changes to these policies and estimates during the periods presented, except for policy updates related to new accounting guidance pertaining to the measurement of credit losses on financial instruments that requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments as well as available-for-sale securities to be recorded through the allowance for ~~derivatives and hedging activities, which is described in~~credit losses. Refer to Note 13—~~Derivatives and Hedging Activities~~1—Basis of Presentation to the Bank’s interim financial ~~statements.~~statements for more details on key changes. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. Refer to Note 2

—Summary of Significant Accounting Policies to the Bank’s 2019 audited financial statements for information on the prior accounting treatment.

Recently Issued and Adopted Accounting Guidance

See Note 2—Recently Issued and Adopted Accounting Guidance to the Bank’s interim financial statements for a discussion of recently issued and adopted accounting guidance.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The following quantitative and qualitative disclosures about market risk should be read in conjunction with the quantitative and qualitative disclosures about market risk that are included in the Bank’s Form 10-K. The information provided herein is intended to update the disclosures made in the Bank’s Form 10-K.

Changes in interest rates and spreads can have a direct effect on the value of the Bank’s assets and liabilities. As a result of the volume of the Bank’s interest-earning assets and interest-bearing liabilities, the component of market risk having the greatest effect on the Bank’s financial condition and results of operations is interest-rate risk. A description of the Bank’s management of interest-rate risk is contained in the Bank’s Form 10-K.

The Bank uses derivative financial instruments to reduce the interest-rate risk exposure inherent in otherwise unhedged assets and funding positions. These derivatives are used to adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives.

~~Table of Contents~~

The following table presents the notional amounts of derivative financial instruments (in millions). The category “Fair value hedges” represents hedge strategies for which hedge accounting is achieved. The category “Non-qualifying hedges” represents hedge strategies for which the derivatives are not in designated hedging relationships that formally meet the hedge accounting requirements under GAAP.

Table of Contents


				As of March 31, 2019		As of December 31, 2018					As of March 31, 2020		As of December 31, 2019
Hedged Item / Hedging Instrument		Hedging Objective	Hedge Accounting Designation	Notional Amount		Notional Amount			Hedging Objective	Hedge Accounting Designation	Notional Amount		Notional Amount
Advances
Pay fixed, receive variable interest-rate swap (without options)		Converts the advance’s fixed rate to a variable-rate index.	Fair value hedges	$	3,814	$	3,716		Converts the advance’s fixed rate to a variable-rate index.	Fair value hedges	$	2,388	$	2,382
Pay fixed, receive variable interest-rate swap (with options)		Converts the advance’s fixed rate to a variable-rate index and offsets option risk in the advance.	Fair value hedges	25,347		25,590			Converts the advance’s fixed rate to a variable-rate index and offsets option risk in the advance.	Fair value hedges	50,371		26,442
Pay fixed, receive variable interest-rate swap (with options)										Non-qualifying hedges	150		—
		Reduces interest rate sensitivity and repricing gaps by converting the advance’s variable rate to a different variable-rate index and/or offsets embedded option risk in the advance.	Fair value hedges	56		206			Reduces interest-rate sensitivity and repricing gaps by converting the advance’s variable rate to a different variable-rate index and/or offsets embedded option risk in the advance.	Fair value hedges	51		43
Pay-fixed with embedded features, receive-variable interest-rate swap (non-callable)									Reduces interest-rate sensitivity and repricing gaps by converting the advance’s fixed rate to a variable-rate index and/or offsets embedded option risk in the advance.	Fair value hedges	505		260
Pay variable with embedded features, receive variable interest-rate swap (callable)									Reduces interest-rate sensitivity and repricing gaps by converting the advance’s variable rate to a different variable-rate index and/or offsets embedded option risk in the advance.	Fair value hedges	650		650
			Total	29,217		29,512				Total	54,115		29,777
Investments
Pay fixed, receive variable interest-rate swap		Converts the investment’s fixed rate to a variable-rate index.	Non-qualifying hedges	56		56			Converts the investment’s fixed rate to a variable-rate index.	Non-qualifying hedges	56		56
Consolidated Obligation Bonds
Receive fixed, pay variable interest-rate swap (without options)		Converts the bond’s fixed rate to a variable-rate index.	Fair value hedges	5,205		6,791			Converts the bond’s fixed rate to a variable-rate index.	Fair value hedges	13,056		14,033
Receive fixed, pay variable interest-rate swap (with options)		Converts the bond’s fixed rate to a variable-rate index and offsets option risk in the bond.	Fair value hedges	16,368		14,124			Converts the bond’s fixed rate to a variable-rate index and offsets option risk in the bond.	Fair value hedges	1,465		12,240
			Total	21,573		20,915				Total	14,521		26,273
Consolidated Obligation Discount Notes
Receive fixed, pay variable interest-rate swap									Converts the discount note’s fixed rate to a variable-rate index.	Fair value hedges	26,090		17,587
Balance Sheet
Pay fixed, receive variable interest-rate swap		Converts the asset or liability fixed rate to a variable-rate index.	Non-qualifying hedges	100		100			Converts the asset or liability fixed rate to a variable-rate index.	Non-qualifying hedges	100		100
Interest-rate cap or floor		Protects against changes in income of certain assets due to changes in interest rates.	Non-qualifying hedges	8,000		8,000			Protects against changes in income of certain assets due to changes in interest rates.	Non-qualifying hedges	7,000		7,000
			Total	8,100		8,100				Total	7,100		7,100
Intermediary Positions and Other	Intermediary Positions and Other							Intermediary Positions and Other
Pay fixed, receive variable interest-rate swap, and receive fixed, pay variable interest-rate swap		To offset interest-rate swaps executed with members by executing interest-rate swaps with derivatives counterparties.	Non-qualifying hedges	501		852			To offset interest-rate swaps executed with members by executing interest-rate swaps with derivatives counterparties.	Non-qualifying hedges	305		323
Interest-rate cap or floor		To offset interest-rate caps or floors executed with members by executing interest-rate caps or floors with derivatives counterparties.	Non-qualifying hedges	83		83			To offset interest-rate caps or floors executed with members by executing interest-rate caps or floors with derivatives counterparties.	Non-qualifying hedges	83		83
			Total	584		935				Total	388		406
Total notional amount				$	59,530	$	59,518				$	102,270	$	81,199

5756

Table of Contents

Interest-rate Risk Exposure Measurement

The Bank measures interest-rate risk exposure by various methods. The primary methods used are (1) calculating the effective duration of assets, liabilities, and equity under various scenarios; and (2) calculating the theoretical market value of equity. Effective duration, normally expressed in years or months, measures the price sensitivity of the Bank’s interest-bearing assets and liabilities to changes in interest rates. As effective duration lengthens, market-value changes become more sensitive to interest-rate changes. The Bank employs sophisticated modeling systems to measure effective duration.

Bank policy requires the Bank to maintain its effective duration of equity within a range of plus five years to minus five years, assuming current interest rates, and within a range of plus seven years to minus seven years, assuming an instantaneous parallel increase or decrease in market interest rates of 200 basis points.

The following table presents the Bank’s effective duration exposure measurements as calculated in accordance with Bank policy (in years).


	As of March 31, 2019					As of December 31, 2018					As of March 31, 2020				As of December 31, 2019
	Down 200 Basis Points		Current		Up 200 Basis Points	Down 200 Basis Points		Current		Up 200 Basis Points	Down 200 Basis Points ⁽¹⁾	Current		Up 200 Basis Points	Down 200 Basis Points ⁽¹⁾	Current	Up 200 Basis Points
Assets	0.25		0.25		0.31	0.14		0.20		0.25	0.33	0.12		0.22	0.23	0.21	0.28
Liabilities	0.31		0.31		0.27	0.25		0.25		0.21	0.22	0.24		0.21	0.21	0.20	0.18
Equity	(0.94	)	(0.91	)	1.10	(1.95	)	(0.80	)	0.99	2.31	(2.46	)	0.38	0.53	0.37	2.38
Effective duration gap	(0.06	)	(0.06	)	0.04	(0.11	)	(0.05	)	0.04	0.11	(0.12	)	0.01	0.02	0.01	0.10

___________


⁽¹⁾	The “down 200 basis points” scenarios shown above are considered to be “constrained shocks,” intended to prevent the possibility of negative interest rates when a designated low rate environment exists.

The Bank also analyzes its interest-rate risk and market exposure by evaluating the theoretical market value of equity. The market value of equity represents the net result of the present value of future cash flows discounted to arrive at the theoretical market value of each balance sheet item. By using the discounted present value of future cash flows, the Bank is able to factor in the various maturities of assets and liabilities, similar to the effective duration analysis discussed above. The Bank determines the theoretical market value of assets and liabilities utilizing a Level 3 pricing approach as more fully described in Note ~~14—~~12—Estimated Fair Values to the Bank’s interim financial statements. The difference between the market value of total assets and the market value of total liabilities is the market value of equity. A more volatile market value of equity under different shock scenarios tends to result in a higher effective duration of equity, indicating increased sensitivity to interest-rate changes.

The following table presents the Bank’s market value of equity measurements as calculated in accordance with Bank policy (in millions).


	As of March 31, 2019						As of December 31, 2018						As of March 31, 2020						As of December 31, 2019
	Down 200 Basis Points		Current		Up 200 Basis Points		Down 200 Basis Points		Current		Up 200 Basis Points		Down 200 Basis Points ⁽¹⁾		Current		Up 200 Basis Points		Down 200 Basis Points ⁽¹⁾		Current		Up 200 Basis Points
Assets	$	138,866	$	138,246	$	137,472	$	154,492	$	153,977	$	153,290	$	187,754	$	186,110	$	185,432	$	149,996	$	148,896	$	148,146
Liabilities	132,207		131,391		130,638		147,120		146,378		145,710		178,193		177,891		177,119		142,301		141,858		141,313
Equity	6,659		6,855		6,834		7,372		7,599		7,580		9,561		8,219		8,313		7,695		7,038		6,833

____________


⁽¹⁾	The “down 200 basis points” scenarios shown above are considered to be “constrained shocks,” intended to prevent the possibility of negative interest rates when a designated low rate environment exists.

5857

Table of Contents

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Bank’s President and Chief Executive Officer and the Bank’s ~~Executive~~Senior Vice President and Chief Financial Officer (Certifying Officers) are responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

As of March 31, ~~2019,~~2020, the Bank’s management, with the participation of the Certifying Officers, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based on that evaluation, the Certifying Officers have concluded that the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(a) and 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed by the Bank in the reports that it files or submits under the Exchange Act (1) is accumulated and communicated to the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure; and (2) is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s Certifying Officers recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control Over Financial Reporting

During the first quarter of ~~2019,~~2020, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

5958

Table of Contents

PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

The Bank is subject to various legal proceedings and actions in the ordinary course of its business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of those matters presently known to the Bank will have a material adverse effect on the Bank’s financial condition or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, the factors discussed in Part I, “Item 1A. Risk Factors” in the Bank’s Form 10-K, should be carefully considered as they could materially affect the Bank’s business, financial condition, and/or operating results. The risks described in the Bank’s Form 10-K are not the only risks facing the Bank. Additional risks and uncertainties not currently known to the Bank or that the Bank currently deems to be immaterial also may materially adversely affect the Bank’s business, financial condition, and/or operating results.

An economic downturn or natural disaster in the Bank’s region, or a pandemic, could adversely affect the Bank’s profitability and financial condition.

Economic recession over a prolonged period or other unfavorable economic conditions in the Bank’s region (including on a state or local level) could have an adverse effect on the Bank’s business, including the demand for Bank products and services, and the value of the Bank’s collateral securing advances, investments, and mortgage loans held in portfolio. Portions of the Bank’s region also are subject to risks from hurricanes, tornadoes, floods, or other natural disasters, and all are subject to pandemic risk. These natural disasters, including those resulting from significant climate changes, could damage or dislocate the facilities of the Bank’s members, may damage or destroy collateral that members have pledged to secure advances or the mortgages the Bank holds for portfolio, or the livelihood of borrowers of the Bank’s members, or otherwise could cause significant economic dislocation in the affected areas of the Bank’s region.

Additionally, the impact of widespread health emergencies may adversely impact the Bank’s results of operations, such as the impact from the COVID-19 pandemic. As of the date of the filing of this report, the full effects of the COVID-19 pandemic are evolving and unknowable. The COVID-19 pandemic has to date caused significant economic and financial turmoil both in the U.S. and around the world, and has fueled concerns that it will lead to a global recession. These conditions are expected to continue in the near term. Many businesses in the Bank’s district and across the U.S. have been forced to suspend operations for an indefinite period of time in an attempt to slow the spread of the virus, and unemployment claims have increased dramatically as more employers layoff workers. Ultimately, the significant slowdown in economic activity caused by the COVID-19 pandemic could reduce demand at our member institutions, which could impact members’ demand for our products and services. It could also lead to a devaluation of our assets and/or the collateral pledged by the Bank’s members to secure advances and other extensions of credit, all of which could have an adverse impact on the Bank’s financial condition and results of operations, including as a result of reduced business volumes, reduced income or credit losses.

The Bank’s ability to obtain funds through the issuance of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in financial markets, which are beyond the Bank’s control. Volatility in the capital markets caused by the COVID-19 pandemic can impact demand for the Bank’s debt and the cost of the debt the Bank issues, which could impact the Bank’s liquidity and profitability. The Bank’s business and results of operations are affected by the fiscal and monetary policies of the U.S. government, foreign governments and their agencies. The Federal Reserve Board’s policies directly and indirectly influence the yield on the Bank’s interest-earning assets and the cost of its interest-bearing liabilities. In response to COVID-19, the FOMC lowered the target range for federal funds from 1.50 percent to 1.75 percent to a target range of 0.00 percent to 0.25 percent. The outlook for the remainder of 2020 is uncertain, and there is a possibility that the FOMC may keep interest rates low or even use negative interest rates if economic conditions warrant, each of which could affect the success of Bank’s asset and liability management activities and negatively affect the Bank’s financial condition and results of operations.

Beginning March 16, 2020, most of the Bank’s employees began working remotely, with only operationally critical employees working on site at our offices. At this time, the Bank cannot predict when its full employee base will be permitted to return to work in our offices. With most of the Bank’s employees working remotely, the Bank could face operational difficulties or disruptions that could impair its ability to conduct and manage its business effectively. In addition, some, most or all of the Bank’s employees, executive management team, or board of directors could become infected with the COVID-19 virus which, depending upon the number and the severity of their cases, could similarly affect the Bank’s ability to conduct and manage its business effectively. Counterparties, vendors and other third parties upon which the Bank relies to conduct its business could be

Table of Contents

adversely impacted by the COVID-19 pandemic which could, in turn, lead to operational challenges for the Bank. These potential difficulties, disruptions and challenges could increase the likelihood that the Bank’s financial condition and results of operations could be impacted.

Significant borrower defaults on loans made by the Bank’s members could occur as a result of reduced economic activity and these defaults could cause members to fail. The Bank could be adversely impacted by the reduction in business volume that would arise from the failure of one or more of the Bank’s members. Further, counterparty default, whether as a result of the operational or financial impacts of the COVID-19 pandemic, could adversely impact the Bank’s financial condition and results of operations.

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pension Plan), a tax qualified defined benefit pension plan. A prolonged negative impact on the value of stocks and other asset classes in the Pension Plan due to the COVID-19 pandemic may result in a significant reduction to pension plan asset values and increased pension liability, requiring the Bank to increase its contribution amount, which could negatively impact the Bank’s profitability.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

Not applicable.

~~Table of Contents~~

Item 5. Other Information.

PricewaterhouseCoopers LLP (PwC) serves as the independent registered public accounting firm for the Bank. Rule 201(c)(1)(ii)(A) of Regulation S-X (the Loan Rule) prohibits an accounting firm, such as PwC, from having certain financial relationships with its audit clients and affiliated entities. Specifically, the Loan Rule provides, in relevant part, that an accounting firm generally would not be independent if it or a covered person in the firm receives a loan from a lender that is a “record or beneficial owner of more than 10 percent of the audit client’s equity securities.” A covered person in the firm includes personnel on the audit engagement team, personnel in the chain of command, partners and managers who provide 10 or more hours of non-audit services to the audit client, and partners in the office where the lead engagement partner practices in connection with the client.

PwC has advised the Bank that for the quarter ended March 31, 2019, certain covered persons had borrowing relationships with one Bank member (referred below as the “Lender”) who owns more than 10 percent of the Bank’s capital stock, which could call into question PwC’s independence with respect to the Bank. The Bank is providing this disclosure to explain the facts and circumstances, as well as PwC’s and the Audit Committee’s conclusions, concerning PwC’s objectivity and impartiality with respect to the audit of the Bank.

PwC advised the Audit Committee of the Bank that it believes that, in light of the facts of this borrowing relationship, its ability to exercise objective and impartial judgment on all matters encompassed within PwC’s audit engagement has not been impaired and that a reasonable investor with knowledge of all relevant facts and circumstances would reach the same conclusion. PwC has advised the Audit Committee that this conclusion is based in part on the following considerations:

~~the PwC professionals are required to disclose any relationships that may raise issues about objectivity, confidentiality, independence conflicts, or favoritism; and~~

~~the Lender has not made any attempt to influence the conduct of the Bank’s audit or the objectivity and impartiality of any member of PwC’s audit engagement team.~~

Additionally, the Audit Committee of the Bank assessed PwC’s ability to perform an objective and impartial audit, including consideration of the ownership structure of the Bank, the limited voting rights of the Bank’s members and the composition of the board of directors. In addition to the above listed considerations, the Audit Committee considered the following:

~~although the Lender owned more than 10 percent of the Bank’s capital stock, the Lender’s voting rights are less than 10 percent;~~

~~as of March 31, 2019 and December 31, 2018, no officer or director of the Lender served on the board of directors of the Bank; and~~

~~the Lender is subject to the same terms and conditions for conducting business with the Bank as any other member.~~

Based on the Audit Committee’s evaluation, the Audit Committee has concluded that PwC’s ability to exercise objective and impartial judgment on all issues encompassed within PwC’s audit engagement has not been impaired.

None.

6160

Table of Contents

Item 6. Exhibits. The exhibits listed below are being filed with or incorporated by reference as a part of this Report:

Exhibit No.

Description

Form

Exhibit

Dated Filed

Description

Form

Exhibit

Dated Filed

3.1

Amended and Restated Organization Certificate of the Federal Home Loan Bank of Atlanta

8-K

3.1

10/26/2012

Amended and Restated Organization Certificate of the Federal Home Loan Bank of Atlanta

8-K

3.1

10/26/2012

3.2

Bylaws of the Federal Home Loan Bank of Atlanta (Revised and Restated through March 29, 2018)

8-K

3.2

4/4/2018

Bylaws of the Federal Home Loan Bank of Atlanta (Revised and Restated through October 31, 2019)

8-K

3.2

10/31/2019

4.1

Capital Plan of the Federal Home Loan Bank of Atlanta

8-K

99.2

8/5/2011

Capital Plan of the Federal Home Loan Bank of Atlanta

8-K

99.2

8/5/2011

31.1

Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. +

Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. +

Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +

Certification of the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +

101.INS

XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. +

XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document. +

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document. +

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document. +

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document. +

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document. +

XBRL Taxonomy Extension Presentation Linkbase Document.

104

The cover page of this Quarterly Report 10-Q, formatted in inline XBRL.

+ Furnished herewith

6261

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		Federal Home Loan Bank of Atlanta

Date:	May ~~9, 2019~~8, 2020	By /s/ W. Wesley McMullan
		Name: W. Wesley McMullan Title: President and Chief Executive Officer

Date:	May ~~9, 2019~~8, 2020	By /s/ ~~Kirk R. Malmberg~~Haig H. Kazazian III
		Name: ~~Kirk R. Malmberg~~Haig H. Kazazian III Title: ~~Executive~~Senior Vice President and Chief Financial Officer

6362



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	3430
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5655
Item 4.	Controls and Procedures	5958
PART II. OTHER INFORMATION		6059
Item 1.	Legal Proceedings	6059
Item 1A.	Risk Factors	6059
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	6160
Item 6.	Exhibits	6261
SIGNATURES		6362



	As of March 31, 2019		As of December 31, 2018
Allowance for credit losses:
Collectively evaluated for impairment	$	1	$	1
Recorded investment:
Individually evaluated for impairment	$	9	$	9
Collectively evaluated for impairment	316		330
Total recorded investment	$	325	$	339



	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, 2017	$	(24	)	$	134		$	110
Other comprehensive income before reclassifications:
Net change in fair value	—			(16		)	(16		)
Reclassification from accumulated other comprehensive income to net income:
Amortization of pension and postretirement ⁽¹⁾	1			—			1
Net current period other comprehensive income (loss)	1			(16		)	(15		)
Balance, March 31, 2018	$	(23	)	$	118		$	95

Balance, December 31, 2018	$	(21	)	$	72		$	51
Other comprehensive income before reclassifications:
Net change in fair value	—			(9		)	(9		)
Reclassification from accumulated other comprehensive income to net income:
Noncredit other-than-temporary impairment losses	—			1			1
Amortization of pension and postretirement ⁽¹⁾	1			—			1
Net current period other comprehensive income (loss)	1			(8		)	(7		)
Balance, March 31, 2019	$	(20	)	$	64		$	44



March 31, 2019	$	880,223
December 31, 2018	886,081
September 30, 2018	872,256
June 30, 2018	914,286
March 31, 2018	887,057



	Prime			Alt-A			Total
Investment Ratings:
AA	$	76		$	—		$	76
A	94			—			94
BBB	97			5			102
BB	105			9			114
B	13			26			39
CCC	145			127			272
CC	27			22			49
D	65			—			65
Unrated	498			1			499
Total unpaid principal balance	$	1,120		$	190		$	1,310
Amortized cost	$	997		$	153		$	1,150
Gross unrealized losses	$	(1	)	$	—		$	(1	)
Fair value	$	1,057		$	161		$	1,218
Other-than-temporary impairment (Year-to-date):
Total other-than-temporary impairment losses	$	—		$	—		$	—
Net amount of impairment losses reclassified from accumulated other comprehensive income	(1		)	—			(1		)
Net impairment losses recognized in earnings	$	(1	)	$	—		$	(1	)
Weighted average percentage of fair value to unpaid principal balance	94.43		%	84.76		%	93.03		%
Original weighted average credit support	9.57		%	24.89		%	11.78		%
Weighted average credit support	5.94		%	9.25		%	6.42		%
Weighted average collateral delinquency	10.50		%	14.85		%	11.13		%



	Significant Inputs - Weighted Average (%)
Classification of Securities ⁽¹⁾	Prepayment Rate	Default Rates	Loss Severities	Current Credit Enhancement (%)
Prime	16.29	7.54	25.10	9.07
Alt-A	14.36	18.04	37.00	3.85
Total	15.31	12.89	31.16	6.42