Federal Home Loan Bank of Atlanta 10Q 2021 Q3 Quarterly report

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

For the quarterly period ended September 30, 2021

☐ 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
United States
(State or other jurisdiction of incorporation or organization)						(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)888-8000

_____________________________________

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

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. ☒ 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). ☒ 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

☑

Smaller reporting company

☐

Emerging growth company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the registrant’s Class B Stock, par value $100, as of October 31, 2021 was 23,667,183.

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 September 30, 2021		As of December 31, 2020
Assets
Cash and due from banks	$	2,079	$	2,905
Interest-bearing deposits (including deposits with other FHLBanks of $3 and $5 as of September 30, 2021 and December 31, 2020, respectively)	689		1,644
Securities purchased under agreements to resell	3,500		9,500
Federal funds sold	9,609		3,270
Investment securities:
Trading securities	—		1,562
Available-for-sale securities (amortized cost of $1,597 and $0 as of September 30, 2021 and December 31, 2020, respectively)	1,597		—
Held-to-maturity securities (fair value of $15,635 and $20,489 as of September 30, 2021 and December 31, 2020, respectively)	15,584		20,404
Total investment securities	17,181		21,966
Advances	43,779		52,168

Mortgage loans held for portfolio, net	162		218



Accrued interest receivable	65		88
Derivative assets	344		391

Other assets, net	100		145
Total assets	$	77,508	$	92,295
Liabilities
Interest-bearing deposits	$	2,308	$	1,998
Consolidated obligations, net:
Discount notes	22,796		25,385
Bonds	47,609		59,379
Total consolidated obligations, net	70,405		84,764

Accrued interest payable	59		45
Affordable Housing Program payable	68		82
Derivative liabilities	8		11
Other liabilities	90		135
Total liabilities	72,938		87,035
Commitments and contingencies (Note 13)	0		0
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 7 and 10 as of September 30, 2021 and December 31, 2020, respectively	734		943
Subclass B2 issued and outstanding shares: 16 and 21 as of September 30, 2021 and December 31, 2020, respectively	1,598		2,135
Total capital stock Class B putable	2,332		3,078
Retained earnings:
Restricted	613		588
Unrestricted	1,631		1,610
Total retained earnings	2,244		2,198
Accumulated other comprehensive loss	(6)		(16)
Total capital	4,570		5,260
Total liabilities and capital	$	77,508	$	92,295

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(Unaudited)

(In millions)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Interest income
Advances	$	73	$	135	$	256	$	786
Interest-bearing deposits	—		1		1		17
Securities purchased under agreements to resell	—		2		2		30
Federal funds sold	2		2		5		46
Trading securities	—		1		1		8
Available-for-sale securities	1		—		1		3
Held-to-maturity securities	28		44		93		243
Mortgage loans	3		3		8		10
Total interest income	107		188		367		1,143
Interest expense
Consolidated obligations:
Discount notes	2		40		9		344
Bonds	41		59		121		530
Interest-bearing deposits	—		—		—		5

Total interest expense	43		99		130		879
Net interest income	64		89		237		264


Noninterest income (loss)

Net (losses) gains on trading securities	—		—		(1)		5
Net realized gains from sale of available-for-sale securities	—		—		—		82
Net realized gains from sale of held-to-maturity securities	—		—		—		3
Net gains (losses) on derivatives	—		1		1		(6)
Standby letters of credit fees	2		4		9		16
Other	2		4		3		8
Total noninterest income	4		9		12		108
Noninterest expense
Compensation and benefits	19		21		58		81
Other operating expenses	10		8		27		26
Federal Housing Finance Agency	3		3		8		8
Office of Finance	1		1		5		5
Other	5		2		11		7
Total noninterest expense	38		35		109		127
Income before assessment	30		63		140		245
Affordable Housing Program assessment	3		7		14		25
Net income	$	27	$	56	$	126	$	220

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	27	$	56	$	126	$	220
Other comprehensive income (loss):

Reclassification of unrealized gains related to the sale of available-for-sale securities	—		—		—		(41)

Pension and postretirement benefits	6		1		10		2
Total other comprehensive income (loss)	6		1		10		(39)
Total comprehensive income	$	33	$	57	$	136	$	181

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CAPITAL

(Unaudited)

(In millions)



	Capital Stock Class B Putable			Retained Earnings						Accumulated Other Comprehensive Loss		Total Capital
	Shares	Par Value		Restricted		Unrestricted		Total
Balance, June 30, 2020	37	$	3,680	$	570	$	1,630	$	2,200	$	(18)	$	5,862
Issuance of capital stock	3	308		—		—		—		—		308
Repurchase/redemption of capital stock	(7)	(647)		—		—		—		—		(647)

Comprehensive income	—	—		11		45		56		1		57

Cash dividends on capital stock	—	—		—		(58)		(58)		—		(58)
Balance, September 30, 2020	33	$	3,341	$	581	$	1,617	$	2,198	$	(17)	$	5,522

Balance, June 30, 2021	24	$	2,448	$	608	$	1,632	$	2,240	$	(12)	$	4,676
Issuance of capital stock	2	239		—		—		—		—		239
Repurchase/redemption of capital stock	(3)	(355)		—		—		—		—		(355)

Comprehensive income	—	—		5		22		27		6		33

Cash dividends on capital stock	—	—		—		(23)		(23)		—		(23)
Balance, September 30, 2021	23	$	2,332	$	613	$	1,631	$	2,244	$	(6)	$	4,570


	Capital Stock Class B Putable			Retained Earnings						Accumulated Other Comprehensive Loss		Total Capital
	Shares	Par Value		Restricted		Unrestricted		Total
Balance, December 31, 2019	50	$	4,988	$	537	$	1,616	$	2,153	$	22	$	7,163
Issuance of capital stock	48	4,868		—		—		—		—		4,868
Repurchase/redemption of capital stock	(65)	(6,493)		—		—		—		—		(6,493)
Net shares reclassified to mandatorily redeemable capital stock	—	(22)		—		—		—		—		(22)
Comprehensive income (loss)	—	—		44		176		220		(39)		181
Partial recovery of prior capital distribution to Financing Corporation	—	—		—		29		29		—		29
Cash dividends on capital stock	—	—		—		(204)		(204)		—		(204)
Balance, September 30, 2020	33	$	3,341	$	581	$	1,617	$	2,198	$	(17)	$	5,522

Balance, December 31, 2020	31	$	3,078	$	588	$	1,610	$	2,198	$	(16)	$	5,260
Issuance of capital stock	8	887		—		—		—		—		887
Repurchase/redemption of capital stock	(16)	(1,632)		—		—		—		—		(1,632)
Net shares reclassified to mandatorily redeemable capital stock	—	(1)		—		—		—		—		(1)
Comprehensive income	—	—		25		101		126		10		136

Cash dividends on capital stock	—	—		—		(80)		(80)		—		(80)
Balance, September 30, 2021	23	$	2,332	$	613	$	1,631	$	2,244	$	(6)	$	4,570

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	For the Nine Months Ended September 30,
	2021		2020
Operating activities
Net income	$	126	$	220
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization (accretion)	5		(98)

Net change in derivative and hedging activities	495		(689)
Net change in fair value adjustment on trading securities	1		(5)

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	23		162
Other assets	43		84
Affordable Housing Program payable	(15)		(4)
Accrued interest payable	14		(151)
Other liabilities	(45)		(77)
Total adjustments	521		(863)
Net cash provided by (used in) operating activities	647		(643)
Investing activities
Net change in:
Interest-bearing deposits	1,185		1,971
Securities purchased under agreements to resell	6,000		(4,200)
Federal funds sold	(6,339)		1,261

Trading securities:
Proceeds from sales	61		—
Proceeds from principal collected	1,500		—

Available-for-sale securities:
Proceeds from sales	—		726

Purchases of long-term	(1,597)		—
Held-to-maturity securities:

Proceeds from sales	—		195
Proceeds from principal collected	4,812		7,710
Purchases of long-term	—		(5,730)
Advances:
Proceeds from principal collected	65,420		215,848
Made	(57,794)		(176,347)
Mortgage loans:
Proceeds from principal collected	57		53


Proceeds from sale of foreclosed assets	—		1
Purchases of premises, equipment, and software	(3)		(5)
Net cash provided by investing activities	13,302		41,483

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FEDERAL HOME LOAN BANK OF ATLANTA STATEMENTS OF CASH FLOWS—(Continued) (Unaudited) (In millions)
	For the Nine Months Ended September 30,
	2021		2020
Financing activities
Net change in interest-bearing deposits	312		450

Net payments on derivatives containing a financing element	(4)		(3)
Proceeds from issuance of consolidated obligations:
Discount notes	427,310		270,257
Bonds	34,315		59,849
Payments for debt issuance costs	(2)		(7)
Payments for maturing and retiring consolidated obligations:
Discount notes	(429,891)		(286,765)
Bonds	(45,989)		(79,524)
Proceeds from issuance of capital stock	887		4,868
Payments for repurchase/redemption of capital stock	(1,632)		(6,493)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(1)		(22)
Partial recovery of prior capital distribution to Financing Corporation	—		29
Cash dividends paid	(80)		(204)
Net cash used in financing activities	(14,775)		(37,565)
Net (decrease) increase in cash and due from banks	(826)		3,275
Cash and due from banks at beginning of the period	2,905		911
Cash and due from banks at end of the period	$	2,079	$	4,186
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	122	$	1,129
Affordable Housing Program assessment, net	$	28	$	28
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	1	$	22

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

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 1—Basis of Presentation

The accompanying unaudited interim financial statements of the Federal Home Loan Bank of Atlanta (Bank) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities 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 2021, 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, 2020, which are contained in the Bank’s 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 4, 2021 (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 11—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.

All investments in interest-bearing deposits and federal funds sold were repaid or expected to be repaid according to the contractual terms as of September 30, 2021 and December 31, 2020. No allowance for credit losses was recorded for these assets as of September 30, 2021 and December 31, 2020. The carrying values of these assets excludes accrued interest receivable that was not material as of September 30, 2021 and December 31, 2020.

Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of September 30, 2021 and December 31, 2020. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable that was not material as of September 30, 2021 and December 31, 2020.

Refer to Note 2—Summary of Significant Accounting Policies to the Bank’s 2020 audited financial statements for a description of all the Bank’s significant accounting policies. There have been no changes to these policies as of September 30, 2021.

Note 2—Recently Issued But Not Yet Adopted Accounting Standards

There are no recently issued but not yet adopted accounting standards which may have an impact on the Bank’s financial statements.

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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 September 30, 2021		As of December 31, 2020
U.S. Treasury obligations	$	—	$	1,500
Government-sponsored enterprises debt obligations	—		62

Total	$	—	$	1,562

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020 (1)		2021		2020
Net gains on trading securities held at period end	$	—	$	—	$	—	$	5
Net losses on trading securities that were sold or matured during the period	—		—		(1)		—
Net (losses) gains on trading securities	$	—	$	—	$	(1)	$	5

____________________

(1) Amounts are not material.

Note 4—Available-for-sale Securities

Major Security Type. The following table presents information on U.S. Treasury obligations that are classified as available-for-sale. The Bank did not have any securities classified as available-for-sale as of December 31, 2020.


	Amortized Cost (1)		Gross Unrealized Gains(2)		Gross Unrealized Losses(2)		Estimated Fair Value
As of September 30, 2021	$	1,597	$	—	$	—	$	1,597

____________________

(1) Amortized cost includes adjustments made to the cost basis for accretion, amortization, and excludes accrued interest receivable that was not material as of September 30, 2021.

(2) Amounts are not material.

The following table presents U.S. Treasury obligations 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
	Estimated Fair Value		Gross Unrealized Losses (1)
As of September 30, 2021	$	1,098	$	—

____________________

(1) Amounts are not material.

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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 available-for-sale securities by contractual maturity.


	As of September 30, 2021
	Amortized Cost (1)		Estimated Fair Value


Due after one year through five years	$	1,597	$	1,597

____________

(1)Amortized cost includes adjustments made to the cost basis for accretion, amortization, and excludes accrued interest receivable that was not material as of as of September 30, 2021.

The Bank has not established an allowance for credit losses on its available-for-sale securities as of September 30, 2021 because the securities carry an explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.

Note 5—Held-to-maturity Securities

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


	As of September 30, 2021								As of December 31, 2020
	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
Government-sponsored enterprises debt obligations	1,585		6		(1)		1,590		2,245		6		—		2,251
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	246		1		(2)		245		295		2		—		297
Government-sponsored enterprises residential	5,390		50		(6)		5,434		7,283		62		(6)		7,339
Government-sponsored enterprises commercial	8,362		23		(20)		8,365		10,580		31		(10)		10,601

Total	$	15,584	$	80	$	(29)	$	15,635	$	20,404	$	101	$	(16)	$	20,489

____________

(1) Excludes accrued interest receivable of $7 and $9 as of September 30, 2021 and December 31, 2020, respectively.

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


	As of September 30, 2021				As of December 31, 2020
	Amortized Cost (1)		Estimated Fair Value		Amortized Cost (1)		Estimated Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	520	$	520	$	245	$	245
Due after one year through five years	806		806		1,740		1,742
Due after five years through 10 years	200		203		201		204
Due after 10 years	60		62		60		61
Total non-mortgage-backed securities	1,586		1,591		2,246		2,252
Mortgage-backed securities	13,998		14,044		18,158		18,237
Total	$	15,584	$	15,635	$	20,404	$	20,489

____________

(1) Excludes accrued interest receivable of $7 and $9 as of September 30, 2021 and December 31, 2020, respectively.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank has not established an allowance for credit loss on any of its held-to-maturity securities as of September 30, 2021 and December 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.

Note 6—Advances

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


	As of September 30, 2021		As of December 31, 2020

Due in one year or less	$	20,034	$	23,326
Due after one year through two years	3,319		3,803
Due after two years through three years	2,131		3,347
Due after three years through four years	3,460		2,643
Due after four years through five years	3,314		3,657
Due after five years	10,790		13,867
Total par value	43,048		50,643
Deferred prepayment fees	(77)		(55)
Discount on AHP (1) advances	(2)		(3)
Discount on EDGE (2) advances	(1)		(1)
Hedging adjustments	811		1,584

Total (3)	$	43,779	$	52,168

___________

(1) The Affordable Housing Program

(2) The Economic Development and Growth Enhancement Program

(3) Carrying amounts exclude accrued interest receivable of $57 and $77 as of September 30, 2021 and December 31, 2020, respectively.

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


	As of September 30, 2021		As of December 31, 2020

Due or convertible in one year or less	$	24,379	$	28,258
Due or convertible after one year through two years	3,338		4,142
Due or convertible after two years through three years	2,110		3,321
Due or convertible after three years through four years	3,433		2,612
Due or convertible after four years through five years	3,259		3,620
Due or convertible after five years	6,529		8,690
Total par value	$	43,048	$	50,643

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


	As of September 30, 2021		As of December 31, 2020
Fixed-rate:
Due in one year or less	$	14,560	$	15,304
Due after one year	20,334		24,620
Total fixed-rate	34,894		39,924
Variable-rate:
Due in one year or less	5,474		8,022
Due after one year	2,680		2,697
Total variable-rate	8,154		10,719
Total par value	$	43,048	$	50,643

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Advances concentrations. The Bank’s advances are 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 $30,688 and $36,259 as of September 30, 2021 and December 31, 2020, respectively. This concentration represented 71.3 percent and 71.6 percent of total advances outstanding as of September 30, 2021 and December 31, 2020, respectively.

Based on the collateral pledged as security for advances, the Bank’s credit analysis of members’ financial condition, and prior repayment history, no allowance for credit losses on advances was deemed necessary by the Bank as of September 30, 2021 and December 31, 2020. No advance was past due, on nonaccrual status, or considered impaired as of September 30, 2021 and December 31, 2020. In addition, there were no troubled debt restructurings (TDRs) related to advances as of September 30, 2021 and December 31, 2020.

Note 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 September 30, 2021		As of December 31, 2020
Medium-term (15 years or less)	$	2	$	3
Long-term (greater than 15 years)	160		216

Total unpaid principal balance	162		219
Premiums	1		1
Discounts	—		(1)
Total mortgage loans held for portfolio (1)	163		219
Allowance for credit losses on mortgage loans	(1)		(1)
Mortgage loans held for portfolio, net	$	162	$	218

____________

(1) Exclude accrued interest receivable of $1 as of September 30, 2021 and December 31, 2020.

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


	As of September 30, 2021		As of December 31, 2020
Conventional mortgage loans	$	148	$	203
Government-guaranteed or insured mortgage loans	14		16
Total unpaid principal balance	$	162	$	219

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Balance, beginning of period	$	1	$	1	$	1	$	1
Provision for credit losses	—		—		—		—

Balance, end of period	$	1	$	1	$	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. Loans are grouped by loans originated in the most recent five years and those loans originated prior to the most recent five-year period.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of September 30, 2021
	Origination Year
	2017(2)		Prior to 2017		Total
Payment status, at amortized cost:(1)
Past due 30-59 days	$	—	$	2	$	2
Past due 60-89 days	—		1		1
Past due 90 days or more	—		8		8
Total past due mortgage loans	—		11		11
Current mortgage loans	—		137		137
Total conventional mortgage loans	$	—	$	148	$	148

____________

(1) Amortized cost excludes accrued interest receivable of $1 as of September 30, 2021.

(2) Mortgage loans originated in 2017 had a current payment status and the amounts are not material.


	As of December 31, 2020
	Origination Year
	2017 and 2016		Prior to 2016		Total
Payment status, at amortized cost:(1)
Past due 30-59 days	$	—	$	6	$	6
Past due 60-89 days	—		2		2
Past due 90 days or more	1		11		12
Total past due mortgage loans	1		19		20
Current mortgage loans	42		141		183
Total conventional mortgage loans	$	43	$	160	$	203

____________

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

The following tables present the other delinquency statistics for all mortgage loans.


	As of September 30, 2021
	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)	5.23		%	5.11		%	5.22		%
Past due 90 days or more and still accruing interest (3)	$	—		$	1		$	1
Mortgage loans on nonaccrual status (4)	$	8		$	—		$	8

____________

(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. As of September 30, 2021, none of these conventional mortgage loans on non-accrual status had an associated allowance for credit losses.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of December 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)	$	—		$	—		$	—
Seriously delinquent rate (2)	6.03		%	8.10		%	6.18		%
Past due 90 days or more and still accruing interest (3)	$	—		$	1		$	1
Mortgage loans on nonaccrual status (4)	$	12		$	—		$	12

____________

(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. As of December 31, 2020, none of these conventional mortgage loans on non-accrual status had an associated allowance for credit losses.

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides temporary relief from the accounting and reporting requirements for TDRs for certain loan modifications related to Coronavirus Disease 2019 (COVID-19). Specifically, the CARES Act provides that a qualifying financial institution may elect to suspend (1) the requirements under U.S. GAAP for certain loan modifications that would otherwise be categorized as a TDR, and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. Section 4013 of the CARES Act applies to any modification related to an economic hardship as a result of the COVID-19 pandemic, including an interest rate modification, a repayment plan, or any similar arrangement that defers or delays payment of principal or interest, that occurs during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020 or the date that is 60 days after the declaration of the national emergency related to the COVID-19 pandemic ends for a loan that was not more than 30 days past due as of December 31, 2019. On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law, extending the applicable period to the earlier of January 1, 2022, or 60 days following the termination of the national emergency declared on March 13, 2020. The Bank has elected to suspend TDR accounting for eligible modifications under Section 4013 of the CARES Act, such modifications were not material as of September 30, 2021.

The Bank’s servicers may grant a forbearance period to borrowers who have requested forbearance based on COVID-19 related difficulties regardless of the status of the loan at the time of the request. The Bank continues to apply its accounting policy for past due loans and charge-offs to loans during the forbearance period unless there is a legal modification made to update the terms of the mortgage loan contract. The accrual status for loans under forbearance will be driven by the past due status of the loan.

The following table presents payment status for conventional residential mortgage loans in a forbearance plan as a result of COVID-19.


	As of September 30, 2021		As of December 31, 2020
Past due 30-59 days	$	—	$	1
Past due 60-89 days	—		1
Past due 90 days or more(1)	3		9
Total past due mortgage loans	3		11
Current mortgage loans	—		6
Total unpaid principal balance(2)	$	3	$	17

____________

(1) Represents mortgage loans on nonaccrual payment status.

(2) Represents 1.60 percent and 7.60 percent of the Bank’s mortgage loans held for portfolio as of September 30, 2021 and December 31, 2020, respectively.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 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 September 30, 2021		As of December 31, 2020
Simple variable-rate	$	23,188	$	52,935
Fixed-rate	22,866		6,322
Step up/down	1,602		75


Total par value	$	47,656	$	59,332

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


	As of September 30, 2021			As of December 31, 2020
	Amount		Weighted- average Interest Rate (%)	Amount		Weighted- average Interest Rate (%)
Due in one year or less	$	20,082	0.21	$	43,788	0.24
Due after one year through two years	5,421		0.24	11,205		0.25
Due after two years through three years	6,183		0.88	340		2.05
Due after three years through four years	5,557		0.66	1,719		2.33
Due after four years through five years	6,029		0.86	1,090		0.50
Due after five years	4,384		1.76	1,190		3.76
Total par value	47,656		0.58	59,332		0.40
Premiums	10			11
Discounts	(17)			(20)
Hedging adjustments	(40)			56
Total	$	47,609		$	59,379

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


	As of September 30, 2021		As of December 31, 2020
Noncallable	$	29,495	$	59,247
Callable	18,161		85
Total par value	$	47,656	$	59,332

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 September 30, 2021		As of December 31, 2020
Due or callable in one year or less	$	38,098	$	43,873
Due or callable after one year through two years	5,541		11,205
Due or callable after two years through three years	1,493		315
Due or callable after three years through four years	1,332		1,659
Due or callable after four years through five years	3		1,090
Due or callable after five years	1,189		1,190
Total par value	$	47,656	$	59,332

Consolidated Obligation Discount Notes. Consolidated obligation discount notes are issued to raise short-term funds and have original contractual maturities of up to one year. These consolidated obligation discount notes are issued at less than their face amounts and redeemed at par value when they mature.

The following table presents the Bank’s participation in consolidated obligation discount notes.


	Book Value		Par Value		Weighted-average Interest Rate (%)
As of September 30, 2021	$	22,796	$	22,797	0.04
As of December 31, 2020	$	25,385	$	25,389	0.11

Note 9—Capital

Capital. The following table presents the Bank’s compliance with the Federal Housing Finance Agency’s (Finance Agency) regulatory capital rules and requirements.


	As of September 30, 2021						As of December 31, 2020
	Required			Actual			Required			Actual
Risk-based capital	$	701		$	4,576		$	1,496		$	5,276
Total regulatory capital ratio	4.00		%	5.90		%	4.00		%	5.72		%
Total regulatory capital (1)	$	3,100		$	4,576		$	3,692		$	5,276
Leverage capital ratio	5.00		%	8.86		%	5.00		%	8.58		%
Leverage capital	$	3,875		$	6,864		$	4,615		$	7,914

____________

(1) Total regulatory capital does not include accumulated other comprehensive loss, 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 2021 and 2020.


	2021			2020
	Amount		Annualized Rate (%)	Amount		Annualized Rate (%)
First quarter	$	30	3.72	$	76	5.93
Second quarter	27		3.69	70		5.53
Third quarter	23		3.67	58		4.35

Total	$	80	3.70	$	204	5.26

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 10—Accumulated Other Comprehensive Loss

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



	Net Unrealized Gains (Losses) on Available-for-sale Securities		Pension and Postretirement Benefits		Total Accumulated Other Comprehensive Loss
Balance, June 30, 2020	$	—	$	(18)	$	(18)



Reclassification from accumulated other comprehensive income to net income:
Amortization of pension and postretirement (1)	—		1		1
Net current period other comprehensive income	—		1		1
Balance, September 30, 2020	$	—	$	(17)	$	(17)

Balance, June 30, 2021	$	—	$	(12)	$	(12)



Reclassification from accumulated other comprehensive loss to net income:

Amortization of pension and postretirement (1)	—		6		6
Net current period other comprehensive income	—		6		6
Balance, September 30, 2021	$	—	$	(6)	$	(6)

____________

(1) Included in Noninterest expense - Other on the Statements of 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
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)
Amortization of pension and postretirement (1)	—		—		2		2
Net current period other comprehensive (loss) income	—		(41)		2		(39)
Balance, September 30, 2020	$	—	$	—	$	(17)	$	(17)

Balance, December 31, 2020	$	—	$	—	$	(16)	$	(16)






Reclassification from accumulated other comprehensive loss to net income:

Amortization of pension and postretirement (1)	—		—		10		10
Net current period other comprehensive income	—		—		10		10
Balance, September 30, 2021	$	—	$	—	$	(6)	$	(6)

____________

(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 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 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 15—Derivatives and Hedging Activities to the 2020 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 September 30, 2021						As of December 31, 2020
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives in hedging relationships:
Interest-rate swaps (1)	$	41,756	$	10	$	322	$	28,001	$	5	$	502
Derivatives not designated as hedging instruments:
Interest-rate swaps (1)	69		1		1		121		1		1

Interest-rate caps or floors	4,000		—		—		7,000		1		1

Total derivatives not designated as hedging instruments	4,069		1		1		7,121		2		2
Total derivatives before netting and collateral adjustments	$	45,825	11		323		$	35,122	7		504
Netting adjustments and cash collateral (2)			333		(315)				384		(493)
Derivative assets and derivative liabilities			$	344	$	8			$	391	$	11

___________

(1) Includes variation margin for daily settled contracts of $492 and $1,065 as of September 30, 2021 and December 31, 2020, 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, including accrued interest was $648 and $878 as of September 30, 2021 and December 31, 2020, respectively. Cash collateral received, including accrued interest, was $1 and $0 as of September 30, 2021 and December 31, 2020, respectively.

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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


	For the Three Months Ended September 30, 2021				For the Nine Months Ended September 30, 2021
	Interest Income (Expense)				Interest Income (Expense)
	Advances		Consolidated Obligation Bonds			Advances		Consolidated Obligation Bonds
Total interest income (expense) recorded in the Statements of Income	$	73	$	(41)		$	256	$	(121)
Changes in fair value:
Hedged items	$	(164)	$	25		$	(679)	$	96
Derivatives	191		(30)			787		(100)
Net changes in fair value	27		(5)			108		(4)
Net interest settlements on derivatives (1) (2)	(81)		34			(263)		71
Amortization/accretion of active hedging relationships	(18)		—			(83)		—
Other	(4)		—			(11)		—
Total net interest income effect from fair value hedging relationships	$	(76)	$	29		$	(249)	$	67

____________

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

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


	For the Three Months Ended September 30, 2020						For the Nine Months Ended September 30, 2020
	Interest Income (Expense)						Interest Income (Expense)
	Advances		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes		Advances		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes
Total interest income (expense) recorded in the Statements of Income	$	135	$	(59)	$	(40)	$	786	$	(530)	$	(344)
Changes in fair value:
Hedged items	$	(202)	$	17	$	1	$	1,173	$	(28)	$	—
Derivatives	219		(16)		(2)		(1,164)		30		—
Net changes in fair value	17		1		(1)		9		2		—
Net interest settlements on derivatives (1) (2)	(109)		15		—		(238)		34		38
Amortization/accretion of active hedging relationships	(15)		—		—		(39)		(2)		—



Other	(1)		—		—		(1)		—		—
Total net interest income effect from fair value hedging relationships	$	(108)	$	16	$	(1)	$	(269)	$	34	$	38

____________

(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 total basis adjustments on hedged items designated as fair value hedges and the related

amortized cost of the hedged items.


	As of September 30, 2021								As of December 31, 2020
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		Total 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		Total Amount of Fair Value Hedging Basis Adjustments
Advances	$	21,189	$	736	$	75	$	811	$	25,380	$	1,529	$	55	$	1,584
Consolidated obligations:
Bonds	19,382		(40)		—		(40)		1,555		56		—		56
Discount notes	—		—		—		—		1,122		—		—		—

___________

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

The following table presents net gains (losses) on derivatives recorded in noninterest income on the Statements of Income.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Derivatives not designated as hedging instruments:
Interest-rate swaps	$	—	$	1	$	1	$	(5)

Net interest settlements	—		—		—		(1)
Net gains (losses) on derivatives	$	—	$	1	$	1	$	(6)

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 (CFTC) 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), 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 September 30, 2021 was $6, for which the Bank was not required to post collateral as of September 30, 2021. 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 of collateral at fair value to its uncleared derivative counterparties as of September 30, 2021.

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 utilizes two Clearinghouses for all cleared derivative transactions, CME Clearing and LCH Ltd. 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 the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure

Table of Contents

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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.

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 September 30, 2021				As of December 31, 2020
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Gross recognized amount:
Uncleared derivatives	$	10	$	314	$	6	$	493
Cleared derivatives	1		9		1		11
Total gross recognized amount	11		323		7		504
Gross amounts of netting adjustments and cash collateral:
Uncleared derivatives	(6)		(306)		(2)		(482)
Cleared derivatives	339		(9)		386		(11)
Total gross amounts of netting adjustments and cash collateral	333		(315)		384		(493)
Net amounts after netting adjustments and cash collateral:
Uncleared derivatives	4		8		4		11
Cleared derivatives	340		—		387		—
Total net amounts after netting adjustments and cash collateral	344		8		391		11
Non-cash collateral received or pledged not offset-cannot be sold or repledged: (1)
Uncleared derivatives	1		—		1		—
Cleared derivatives	—		—		—		—
Total cannot be sold or repledged (1)	1		—		1		—
Net unsecured amounts: (1)
Uncleared derivatives	3		8		3		11
Cleared derivatives	340		—		387		—
Total net unsecured amount (1)	$	343	$	8	$	390	$	11

____________

(1) The Bank had net credit exposure of $2 and $3 as of September 30, 2021 and December 31, 2020, respectively, due to instances where the Bank’s pledged collateral to a counterparty exceeded the Bank’s net derivative liability position.

Note 12—Estimated Fair Values

The Bank records trading 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.

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 September 30, 2021 and December 31, 2020.

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 available-for-sale securities and derivatives at fair value hierarchy Level 2 as of September 30, 2021. The Bank carried trading securities and derivatives at fair value hierarchy Level 2 as of December 31, 2020.

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 did not carry any financial assets or liabilities, measured on a recurring basis, at fair value Level 3 as of September 30, 2021 and December 31, 2020.

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. 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 September 30, 2021
	Fair Value Measurements Using				Netting Adjustments and Cash Collateral (1)
	Level 1		Level 2					Total
Assets:






Available-for-sale securities - U.S. Treasury obligations	$	—	$	1,597		$	—	$	1,597

Derivative assets - Interest-rate related	—		11			333		344
Grantor trust (included in Other assets)	40		—			—		40
Total assets at fair value	$	40	$	1,608		$	333	$	1,981
Liabilities:

Derivative liabilities - Interest-rate related	$	—	$	323		$	(315)	$	8

____________

(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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of December 31, 2020
	Fair Value Measurements Using				Netting Adjustments and Cash Collateral (1)
	Level 1		Level 2					Total
Assets:
Trading securities:
U.S. Treasury obligations	$	—	$	1,500		$	—	$	1,500
Government-sponsored enterprises debt obligations	—		62			—		62

Total trading securities	—		1,562			—		1,562



Derivative assets - Interest-rate related	—		7			384		391
Grantor trust (included in Other assets)	74		—			—		74
Total assets at fair value	$	74	$	1,569		$	384	$	2,027
Liabilities:

Derivative liabilities - Interest-rate related	$	—	$	504		$	(493)	$	11

____________

(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.

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 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.

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 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.

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 September 30, 2021 and December 31, 2020. 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.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 significant assumptions used in this model are based on management’s best estimate of discount rates, market indices, and market volatility. The inputs for interest-rate related derivatives uses the Secured Overnight Financing Rate (SOFR) swap curve for the discounting of cleared derivatives and the Overnight Index Swap (OIS) curve for the discounting of 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 should 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 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 September 30, 2021 and December 31, 2020. 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.

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


	As of September 30, 2021
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks	$	2,079	$	2,079	$	2,079	$	—	$	—
Interest-bearing deposits	689		689		—		689		—
Securities purchased under agreements to resell	3,500		3,500		—		3,500		—
Federal funds sold	9,609		9,609		—		9,609		—

Available-for-sale securities	1,597		1,597		—		1,597		—
Held-to-maturity securities	15,584		15,635		—		15,635		—
Advances	43,779		44,113		—		44,113		—
Mortgage loans held for portfolio, net	162		175		—		175		—

Accrued interest receivable	65		65		—		65		—
Derivative assets	344		344		—		11		333
Grantor trust assets (included in Other assets)	40		40		40		—		—
Liabilities:
Interest-bearing deposits	2,308		2,308		—		2,308		—
Consolidated obligations, net:
Discount notes	22,796		22,796		—		22,796		—
Bonds	47,609		47,828		—		47,828		—

Accrued interest payable	59		59		—		59		—
Derivative liabilities	8		8		—		323		(315)

____________

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)


	As of December 31, 2020
			Estimated Fair Value
	Carrying Value		Total		Level 1		Level 2		Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks	$	2,905	$	2,905	$	2,905	$	—	$	—
Interest-bearing deposits	1,644		1,644		—		1,644		—
Securities purchased under agreements to resell	9,500		9,500		—		9,500		—
Federal funds sold	3,270		3,270		—		3,270		—
Trading securities	1,562		1,562		—		1,562		—

Held-to-maturity securities	20,404		20,489		—		20,489		—
Advances	52,168		52,610		—		52,610		—
Mortgage loans held for portfolio, net	218		234		—		234		—

Accrued interest receivable	88		88		—		88		—
Derivative assets	391		391		—		7		384
Grantor trust assets (included in Other assets)	74		74		74		—		—
Liabilities:
Interest-bearing deposits	1,998		1,998		—		1,998		—
Consolidated obligations, net:
Discount notes	25,385		25,387		—		25,387		—
Bonds	59,379		59,835		—		59,835		—

Accrued interest payable	45		45		—		45		—
Derivative liabilities	11		11		—		504		(493)

____________

(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 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 $570,985 and $662,051 as of September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020. Accordingly, the Bank has not recognized a liability for its joint and several obligation related to the other FHLBanks’ consolidated obligations as of September 30, 2021 and December 31, 2020.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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


	As of September 30, 2021						As of December 31, 2020
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit (1)	$	6,371	$	3,588	$	9,959	$	9,287	$	6,754	$	16,041
Commitments to fund additional advances	106		28		134		10		107		117
Unsettled consolidated obligation bonds, at par (2)	1,248		—		1,248		1		—		1

____________

(1)“Expire Within One Year” includes 18 standby letters of credit for a total of $15 and 15 standby letters of credit for a total of $19 as of September 30, 2021 and December 31, 2020, 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 $15 and $30 as of September 30, 2021 and December 31, 2020, 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 Statement of Condition for these commitments as of September 30, 2021 and December 31, 2020.

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 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.

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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 10 percent of total regulatory capital stock outstanding.


	As of September 30, 2021
	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	$	298	12.76	$	7,507	17.44	$	—	—
TIAA, FSB	256		10.98	6,396		14.86	1		0.05


	As of December 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
TIAA, FSB	$	337	10.94	$	7,571	14.95	$	1	0.07
Bank of America, National Association	334		10.85	7,507		14.82	—		0.01

Note 15—Subsequent Events

On October 28, 2021, the Bank's board of directors approved a cash dividend for the third quarter of 2021. The Bank paid the third quarter 2021 dividend on November 2, 2021 in the amount of $23.

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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 (Report) 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; demand for Bank advances and FHLBank consolidated obligations; gains and losses on derivatives; plans to pay dividends and repurchase excess capital stock; future classification of securities; the impact of changes in product offerings; the impact of housing reform and other legislative or 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 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 4, 2021, and from time to time in the Bank’s other filings with the SEC, and elsewhere in this 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 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 September 30, 2021 and December 31, 2020, and results of operations for the third quarter and first nine months of 2021 and 2020. 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, 2020.

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. The impacts of the COVID-19 pandemic continued to affect the financial markets throughout the third quarter of 2021. Historically low market interest rates have continued since the FOMC lowered the target range for federal funds in March 2020 in response to market conditions resulting from the COVID-19 pandemic. Additionally, the Federal Reserve continued its emergency actions, initiated in March 2020, to help facilitate liquidity and support stability in the capital markets. In particular, the Federal Reserve has continued to increase its provision of liquidity to the repurchase agreements and U.S. Treasury markets through open market operations. Additional fiscal stimulus through various relief measures has also led to increased liquidity and deposit levels at the Bank’s member institutions. As discussed below, these actions and market conditions reduced demand for the Bank’s advances during the third quarter of 2021.

Operating Status Update

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 July 1, 2021, the Bank began operating in Phase

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3 of its return to office plan, which provides that up to 66 percent of the Bank’s employees may work on-site. The Bank’s current protocols allow for fully vaccinated employees and contractors to work on-site. To date, the Bank has not experienced significant operational difficulties or disruptions, however the 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

The following table presents the Bank’s total assets, total liabilities, and total capital as of September 30, 2021 and December 31, 2020 (dollars in millions). These items are discussed in more detail below.


	As of September 30, 2021		As of December 31, 2020	Increase (Decrease)
	Amount			Amount		Amount		Percent






Total assets	$	77,508		$	92,295	$	(14,787)	(16.02)





Total liabilities	72,938			87,035		(14,097)		(16.20)



Total capital	4,570			5,260		(690)		(13.12)

•Total assets decreased primarily due to a $8.4 billion, or 16.1 percent, decrease in total advances, and a $5.4 billion, or 14.9 percent, decrease in total investments. Decreased demand for liquidity from the Bank’s members, caused by increased members’ deposits was the primary driver of the decrease in advance balances. The decrease in total investments reflects prepayments and maturities that occurred during the first nine months of 2021.

•Total liabilities decreased primarily due to a $14.4 billion, or 16.9 percent, decrease in consolidated obligations as a result of decreased funding and liquidity needs during the period.

•Total capital decreased primarily due to certain changes in member minimum capital stock requirements that the Bank implemented in March 2021, and a decrease in the Bank’s subclass B2 activity-based capital stock resulting from a decrease in the total outstanding advances during the period.

Results of Operations

The following table presents the Bank’s significant income items for the third quarter and first nine months of 2021 and 2020, 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 September 30,				Increase (Decrease)			For the Nine Months Ended September 30,				Increase (Decrease)
	2021		2020		Amount		Percent	2021		2020		Amount		Percent
Net interest income	$	64	$	89	$	(25)	(27.68)	$	237	$	264	$	(27)	(10.24)

Noninterest income	4		9		(5)		(41.65)	12		108		(96)		(88.59)
Noninterest expense	38		35		3		11.06	109		127		(18)		(14.03)
Affordable Housing Program assessment	3		7		(4)		(51.90)	14		25		(11)		(42.67)
Net income	$	27	$	56	$	(29)	(51.90)	$	126	$	220	$	(94)	(42.65)

Below are the primary factors that impacted net interest income and net income for the third quarters of 2021 and 2020:

•Net interest income and net income included $12 million and $42 million of advance prepayment fees for the third quarter of 2021 and 2020, respectively.

•Net interest income and net income were also impacted by lower advance and other interest-earning assets balances.

Below are the primary factors that impacted net interest income and net income for the first nine months of 2021 and 2020:

•Net interest income and net income included $59 million and $58 million of advance prepayment fees for the first nine months of 2021 and 2020, respectively.

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•Net interest income and net income for the first nine months of 2021 benefited from $9 million of derivative and hedging fair value adjustments, while net interest income and net income for the first nine months of 2020 were reduced by $35 million of derivative and hedging fair value adjustments.

•The remaining change in net interest income was due to a decrease in interest rates which impacted interest-bearing liabilities more than interest-earning assets, partially offset by reduced advance balances and other interest-earning assets.

•During the first nine months of 2020, the Bank recorded an $85 million gain from the sale of its private-label MBS investment portfolio and made an additional voluntary $20 million retirement plan contribution.

The following table presents the Bank’s significant income ratios for the third quarter and first nine months of 2021 and 2020, These items are discussed in more detail below.


	For the Three Months Ended September 30,				Increase (Decrease)		For the Nine Months Ended September 30,				Increase (Decrease)
	2021		2020		Change		2021		2020		Change
Return on average equity (ROE)	2.31	%	3.95	%	(1.64)	%	3.49	%	4.33	%	(0.84)	%
ROE spread to average daily SOFR	2.26		3.86		(1.60)		3.45		3.88		(0.43)
Interest-rate spread	0.31		0.31		—		0.37		0.22		0.15

•The decrease in ROE during the third quarter and first nine months of 2021, compared to the same periods in 2020, was primarily due to the decrease in net income partially offset by the decrease in equity. The decrease in equity was the result of the change in activity-based capital stock requirements, as well as lower advance balances.

•The ROE spread to average daily SOFR for the third quarter and first nine months of 2021 was impacted by the explanations provided above related to changes in ROE. Additionally, the average daily SOFR decreased from 45 basis points for the first nine months of 2020 to four basis points for the first nine months of 2021.

•The increase in the Bank’s interest rate spread for the first nine months of 2021, compared to the same period in 2020, was primarily due to decreases in interest rates that impacted the expense from interest-bearing liabilities more than the income from interest-earning assets.

Business Outlook

The factors impacting the Bank’s business outlook remain largely unchanged from the discussion in the Bank’s 2020 Form 10-K. External factors, including changes in interest rates, liquidity levels and loan demand at member institutions, the general state of the economy, and fiscal and monetary policies continue to impact the Bank’s overall business outlook and advance demand. The COVID-19 pandemic has and is expected to continue to influence these external factors and the financial markets. At its November 2021 meeting, the Federal Reserve maintained the Federal Funds target range at a range between 0% and 0.25%, stating it expects it will maintain this target range until its employment and price stability goals are met, while also announcing the start of tapering of its monetary stimulus actions. The Bank expects that decreased advance demand resulting from the COVID-19 monetary and fiscal stimulus actions discussed throughout this Report will continue into the foreseeable future, which, combined with the continued low interest rate environment, is expected to reduce the Bank’s net income for 2021. If the Bank experiences these lower levels of net income, the amount that the Bank pays as dividends could be impacted. The Bank relies on access to the capital markets to meet its funding needs, and the Bank expects continued sufficient access to capital markets. Given the evolving and unknowable effect of the COVID-19 pandemic on these external factors, the Bank cannot predict the extent to which, and the duration of, the impact to the Bank’s future business performance and profitability due to the COVID-19 pandemic.

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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
	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020
Statements of Condition (at period end)
Total assets	$	77,508	$	78,904	$	86,095	$	92,295	$	112,165
Advances	43,779		47,075		49,463		52,168		58,802
Investments (1)	30,979		30,078		32,880		36,380		48,255
Mortgage loans held for portfolio, net	162		178		199		218		242
Allowance for credit losses on mortgage loans	(1)		(1)		(1)		(1)		(1)

Interest-bearing deposits	2,308		2,623		2,713		1,998		1,967
Consolidated obligations, net:
Discount notes (2)	22,796		22,318		19,901		25,385		35,519
Bonds (2)	47,609		49,030		58,475		59,379		68,858
Total consolidated obligations, net (2)	70,405		71,348		78,376		84,764		104,377
Mandatorily redeemable capital stock	—		—		—		—		1
Affordable Housing Program payable	68		74		79		82		86
Capital stock - putable	2,332		2,448		2,543		3,078		3,341
Retained earnings	2,244		2,240		2,211		2,198		2,198
Accumulated other comprehensive loss	(6)		(12)		(13)		(16)		(17)
Total capital	4,570		4,676		4,741		5,260		5,522
Statements of Income (for the period ended)
Net interest income	64		94		79		69		89


Net losses on trading securities	—		—		(1)		(1)		—

Net gains on derivatives	—		—		1		—		1
Standby letters of credit fees	2		3		4		3		4
Other income	2		1		—		3		4
Noninterest expense	38		35		36		36		35
Income before assessment	30		63		47		38		63
Affordable Housing Program assessment	3		7		4		3		7
Net income	27		56		43		35		56
Performance Ratios (%)
Return on equity (3)	2.31		4.82		3.35		2.53		3.95
Return on assets (4)	0.13		0.28		0.19		0.14		0.20
Net interest margin (5)	0.32		0.46		0.36		0.28		0.33
Regulatory capital ratio (at period end) (6)	5.90		5.94		5.52		5.72		4.94
Equity to assets ratio (7)	5.80		5.71		5.66		5.43		5.17
Dividend payout ratio (8)	84.86		47.83		70.82		102.39		101.75

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____________

(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):


September 30, 2021	$	570,985
June 30, 2021	595,375
March 31, 2021	617,965
December 31, 2020	662,051
September 30, 2020	715,531

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

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

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

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

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

(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 September 30, 2021			As of December 31, 2020			Increase (Decrease)
	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent
Advances	$	43,779	56.48	$	52,168	56.52	$	(8,389)	(16.08)
Investment securities	17,181		22.17	21,966		23.80	(4,785)		(21.78)
Other investments	13,798		17.80	14,414		15.62	(616)		(4.28)
Mortgage loans, net	162		0.21	218		0.24	(56)		(25.97)

Other assets	2,588		3.34	3,529		3.82	(941)		(26.64)
Total assets	$	77,508	100.00	$	92,295	100.00	$	(14,787)	(16.02)
Consolidated obligations, net:
Discount notes	$	22,796	31.25	$	25,385	29.17	$	(2,589)	(10.20)
Bonds	47,609		65.27	59,379		68.22	(11,770)		(19.82)
Deposits	2,308		3.17	1,998		2.30	310		15.56
Other liabilities	225		0.31	273		0.31	(48)		(17.68)
Total liabilities	$	72,938	100.00	$	87,035	100.00	$	(14,097)	(16.20)
Capital stock	$	2,332	51.04	$	3,078	58.53	$	(746)	(24.23)
Retained earnings	2,244		49.11	2,198		41.79	46		2.10
Accumulated other comprehensive loss	(6)		(0.15)	(16)		(0.32)	10		(59.52)
Total capital	$	4,570	100.00	$	5,260	100.00	$	(690)	(13.12)

Advances

Total advances decreased by 16.1 percent as of September 30, 2021, compared to December 31, 2020. In response to the deteriorating market conditions in early 2020, the Federal Reserve implemented a number of asset purchase programs to provide additional liquidity to the financial markets. The additional market liquidity from monetary and fiscal stimulus actions resulted in increased deposits at the Bank’s members and lower demand for the Bank’s advances. The Bank expects that advance demand will continue at reduced levels. A significant percentage of advances made during the first nine months of 2021 were short-term advances.

As of September 30, 2021, 81.1 percent of the Bank’s advances were fixed-rate, compared to 78.8 percent as of December 31, 2020. However, the Bank often simultaneously entered into derivatives with the issuance of advances to convert the rates on them, in effect, into short-term variable interest rates, primarily based on London Interbank Offered Rate (LIBOR) and SOFR. As of September 30, 2021 and December 31, 2020, 60.3 percent and 63.2 percent, respectively, of the Bank’s fixed-rate advances were swapped. The majority of the Bank’s variable-rate advances were indexed to LIBOR, OIS, and SOFR. Beginning June 30, 2020, the Bank ceased issuing LIBOR-based advances and entering into LIBOR-based derivatives with

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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, or constant maturity swap rates.

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


	As of September 30, 2021			As of December 31, 2020
	Amount		Percent of Total	Amount		Percent of Total
Fixed rate (1)	$	29,942	69.56	$	33,816	66.77
Adjustable or variable-rate indexed	8,138		18.90	10,678		21.09

Convertible	4,395		10.21	5,316		10.50
Principal reducing credit	573		1.33	833		1.64
Total par value	$	43,048	100.00	$	50,643	100.00

____________

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

Refer to Note 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)
	As of September 30, 2021		As of December 31, 2020		Amount		Percent
Investment securities:
Government-sponsored enterprises debt obligations	$	1,585	$	2,307	$	(722)	(31.30)
U.S. Treasury obligations	1,597		1,500		97		6.45
State or local housing agency debt obligations	1		1		—		—
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	246		295		(49)		(16.76)
Government-sponsored enterprises residential	5,390		7,283		(1,893)		(25.99)
Government-sponsored enterprises commercial	8,362		10,580		(2,218)		(20.96)

Total mortgage-backed securities	13,998		18,158		(4,160)		(22.91)
Total investment securities	17,181		21,966		(4,785)		(21.78)
Other investments:
Interest-bearing deposits (1)	689		1,644		(955)		(58.13)
Securities purchased under agreements to resell	3,500		9,500		(6,000)		(63.16)
Federal funds sold (2)	9,609		3,270		6,339		193.85
Total other investments	13,798		14,414		(616)		(4.28)
Total investments	$	30,979	$	36,380	$	(5,401)	(14.85)

____________

(1)Interest-bearing deposits includes $431 million business money market account with Truist Bank one of the Bank’s 10 largest borrowers, as of December 31, 2020.

(2) Federal funds sold includes $199 million and $180 million with BankUnited, National Association, one of the Bank’s 10 largest borrowers as of September 30, 2021 and December 31, 2020.

The decrease in total investment securities was primarily due to the maturities and prepayments that occurred during the first nine months of 2021. The amount held in other investments 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 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. As of September 30, 2021 and December 31, 2020, these investments were 306 percent and 344 percent of the Bank’s regulatory capital, respectively. These investments exceeded the 300 percent level due to a decrease in regulatory capital that resulted from a decrease in advances as of September 30, 2021 and December 31, 2020. The Bank was in compliance with this regulatory requirement at the time of its MBS purchases and was not required to sell any previously purchased MBS. However, the Bank is precluded from purchasing additional MBS until its MBS to regulatory capital declines below 300 percent.

Mortgage Loans Held for Portfolio

The decrease in mortgage loans held for portfolio from December 31, 2020 to September 30, 2021 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 September 30, 2021 and December 31, 2020. 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 September 30, 2021	As of December 31, 2020
	Percent of Total	Percent of Total
Florida	23.09	22.98
South Carolina	22.90	21.74
Georgia	11.27	10.33
Virginia	10.40	10.68
North Carolina	8.45	8.33
All other	23.89	25.94
Total	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 in consolidated obligations from December 31, 2020 to September 30, 2021 was primarily a result of a decrease in advances outstanding and reduced liquidity needs during the period. Consolidated obligation issuances financed 90.8 percent of the $77.5 billion in total assets as of September 30, 2021, remaining relatively stable compared to the financing ratio of 91.8 percent as of December 31, 2020.

The Bank often simultaneously enters into derivatives with the issuance of fixed-rate consolidated obligation bonds to convert the interest rates, in effect, into short-term variable interest rates, primarily based on SOFR. As of September 30, 2021 and December 31, 2020, 78.9 percent and 23.1 percent, respectively, of the Bank’s fixed-rate consolidated obligation bonds were swapped. This increase was primarily the result of increased issuance of callable fixed-rate bonds that were swapped. None of the Bank’s variable-rate consolidated obligation bonds were swapped as of September 30, 2021 and December 31, 2020. None of the Bank’s fixed-rate consolidated obligation discount notes were swapped as of September 30, 2021 and 4.42 percent of the Bank’s fixed-rate consolidated obligation discount notes were swapped as of December 31, 2020. Beginning June 30, 2020, the Bank ceased issuing LIBOR-based consolidated obligation bonds and entering into LIBOR-based derivatives with maturities/termination dates beyond December 31, 2021.

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.

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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 9—Capital 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 September 28, 2021 the Bank received notification from the Director that, based on June 30, 2021 data, the Bank meets the definition of “adequately capitalized.”

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. As of September 30, 2021, the Bank was in compliance with this ratio.

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.

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Results of Operations

The following is a discussion and analysis of the Bank’s results of operations for the third quarter and first nine months of 2021 and 2020.

Net Income

The following table presents the Bank’s significant income items for the third quarter and first nine months of 2021 and 2020 (dollars in millions).


	For the Three Months Ended September 30,				Increase (Decrease)			For the Nine Months Ended September 30,				Increase (Decrease)
	2021		2020		Amount		Percent	2021		2020		Amount		Percent
Net interest income	$	64	$	89	$	(25)	(27.68)	$	237	$	264	$	(27)	(10.24)

Noninterest income	4		9		(5)		(41.65)	12		108		(96)		(88.59)
Noninterest expense	38		35		3		11.06	109		127		(18)		(14.03)
Affordable Housing Program assessment	3		7		(4)		(51.90)	14		25		(11)		(42.67)
Net income	$	27	$	56	$	(29)	(51.90)	$	126	$	220	$	(94)	(42.65)

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.

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. Fair value gains and losses of derivatives and hedged items designated in fair value hedging relationships are also recognized in interest income or interest expense. 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 $47 million and $93 million for the third quarter of 2021 and 2020, and decrease of $182 million and $197 million for the first nine months of September 30, 2021 and 2020, respectively.

Below are the primary factors that impacted net interest income for the third quarters of 2021 and 2020:

•Net interest income included $12 million and $42 million of advance prepayment fees for the third quarter of 2021 and 2020, respectively.

Below are the primary factors that impacted net interest income for the first nine months of 2021 and 2020:

•Net interest income included $59 million and $58 million of advance prepayment fees for the first nine months of 2021 and 2020, respectively.

•Net interest income for the first nine months of 2021 benefited from $9 million of derivative and hedging fair value adjustments, while net interest income and net income for the first nine months of 2020 were reduced by $35 million of derivative and hedging fair value adjustments.

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The following tables present spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the third quarter and first nine months of 2021 and 2020 (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” as “Net 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.

The Bank’s interest-rate spread was 31 basis points and 37 basis points for the third quarter and first nine months of 2021, respectively, compared to 31 basis points and 22 basis points for the same periods in 2020. The increase in the Bank’s interest rate spread for the first nine months of 2021, compared to the same period in 2020, was primarily due to decreases in interest rates that impacted the expense from interest-bearing liabilities more than the income from interest-earning assets.


	For the Three Months Ended September 30,
	2021					2020
	Average Balance		Interest		Yield/ Rate (%)	Average Balance		Interest		Yield/ Rate (%)
Assets
Interest-bearing deposits (1)	$	1,350	$	—	0.12	$	2,780	$	1	0.15
Securities purchased under agreements to resell	2,061		—		0.09	8,821		2		0.09
Federal funds sold	10,800		2		0.08	9,231		2		0.09
Investment securities (2)	18,088		29		0.64	24,742		45		0.73
Advances	46,443		73		0.62	62,822		135		0.85
Mortgage loans (3)	169		3		5.29	253		3		4.73
Loans to other FHLBanks	—		—		0.08	—		—		—
Total interest-earning assets	78,911		107		0.54	108,649		188		0.69
Allowance for credit losses on mortgage loans	(1)					(1)
Other assets	1,218					1,130
Total assets	$	80,128				$	109,778
Liabilities and Capital
Interest-bearing deposits (4)	$	2,578	—		0.01	$	2,179	—		0.01
Consolidated obligations, net:
Discount notes	23,518		2		0.04	38,639		40		0.41
Bonds	48,808		41		0.33	62,313		59		0.38
Other borrowings	—		—		2.74	1		—		0.39
Total interest-bearing liabilities	74,904		43		0.23	103,132		99		0.38
Other liabilities	577					974
Total capital	4,647					5,672
Total liabilities and capital	$	80,128				$	109,778
Net interest income and net yield on interest-earning assets			$	64	0.32			$	89	0.33
Interest-rate spread					0.31					0.31
Average interest-earning assets to interest-bearing liabilities					105.35					105.35

____________

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

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

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

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

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	For the Nine Months Ended September 30,
	2021					2020
	Average Balance		Interest		Yield/ Rate (%)	Average Balance		Interest		Yield/ Rate (%)
Assets
Interest-bearing deposits (1)	$	1,558	$	1	0.12	$	3,571	$	17	0.63
Securities purchased under agreements to resell	4,333		2		0.07	8,010		30		0.50
Federal funds sold	9,670		5		0.08	14,089		46		0.44
Investment securities (2)	18,905		95		0.67	25,228		254		1.34
Advances	48,732		256		0.70	89,441		786		1.17
Mortgage loans (3)	188		8		5.35	271		10		4.93
Loans to other FHLBanks	3		—		0.07	—		—		—
Total interest-earning assets	83,389		367		0.59	140,610		1,143		1.09
Allowance for credit losses on mortgage loans	(1)					(1)
Other assets	1,162					1,813
Total assets	$	84,550				$	142,422
Liabilities and Capital
Interest-bearing deposits (4)	$	2,503	—		—	$	1,951	5		0.32
Consolidated obligations, net:
Discount notes	23,048		9		0.05	60,145		344		0.76
Bonds	53,517		121		0.30	72,511		530		0.98
Other borrowings	—		—		2.08	2		—		4.52
Total interest-bearing liabilities	79,068		130		0.22	134,609		879		0.87
Other liabilities	645					1,009
Total capital	4,837					6,804
Total liabilities and capital	$	84,550				$	142,422
Net interest income and net yield on interest-earning assets			$	237	0.38			$	264	0.25
Interest-rate spread					0.37					0.22
Average interest-earning assets to interest-bearing liabilities					105.47					104.46

____________

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

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

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

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

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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 and as discussed above, the overall changes in net interest income during the third quarter and first nine months of 2021, compared to the same periods in 2020, were impacted by lower advance and interest-earning asset balances, along with related changes to debt funding balances. Additionally, during the first nine months of 2021, compared to the same period in 2020, there was a decrease in interest rates which impacted interest-bearing liabilities more than interest-earning assets.


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2021 vs. 2020						2021 vs. 2020
	Volume (1)		Rate (1)		Increase (Decrease)		Volume (1)		Rate (1)		Increase (Decrease)
Increase (decrease) in interest income:
Interest-bearing deposits	$	(1)	$	—	$	(1)	$	(7)	$	(9)	$	(16)
Securities purchased under agreements to resell	(2)		—		(2)		(10)		(18)		(28)
Federal funds sold	—		—		—		(11)		(30)		(41)
Investment securities	(11)		(5)		(16)		(53)		(106)		(159)
Advances	(30)		(32)		(62)		(281)		(249)		(530)
Mortgage loans	—		—		—		(3)		1		(2)

Total	(44)		(37)		(81)		(365)		(411)		(776)
Increase (decrease) in interest expense:
Interest-bearing deposits	—		—		—		1		(6)		(5)
Consolidated obligations, net:
Discount notes	(11)		(27)		(38)		(134)		(201)		(335)
Bonds	(12)		(6)		(18)		(112)		(297)		(409)

Total	(23)		(33)		(56)		(245)		(504)		(749)
(Decrease) increase in net interest income	$	(21)	$	(4)	$	(25)	$	(120)	$	93	$	(27)

___________

(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.

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 September 30, 2021
	Advances		Consolidated Obligation Bonds		Total
Effect on net interest income:
Amortization or accretion of active hedging relationships	$	(18)	$	—	$	(18)
Net changes in fair value hedges	27		(5)		22
Net interest settlements on derivatives (1)	(81)		34		(47)
Other (2)	(4)		—		(4)
Total effect on net interest income	$	(76)	$	29	$	(47)

____________

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

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

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	For the Three Months Ended September 30, 2020
	Advances		Investments		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes		Total
Effect on net interest income:
Amortization or accretion of active hedging relationships	$	(15)	$	—	$	—	$	—	$	(15)
Net changes in fair value hedges	17		—		1		(1)		17
Net interest settlements on derivatives (1)	(109)		—		15		—		(94)
Other (2)	(1)		—		—		—		(1)
Total effect on net interest income	$	(108)	$	—	$	16	$	(1)	$	(93)
Net losses on derivatives:
Effect on noninterest income:
Losses on derivatives not receiving hedge accounting including net interest settlements	$	—	$	1	$	—	$	—	$	1

Net gains on trading securities (3)	—		(1)		—		—		(1)
Total effect on noninterest income	$	—	$	—	$	—	$	—	$	—

____________

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

(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 Nine Months Ended September 30, 2021
	Advances		Investments		Consolidated Obligation Bonds		Total
Effect on net interest income:
Amortization or accretion of active hedging relationships	$	(83)	$	—	$	—	$	(83)
Net changes in fair value hedges	108		—		(4)		104
Net interest settlements on derivatives (1)	(263)		—		71		(192)
Other (2)	(11)		—		—		(11)
Total effect on net interest income	$	(249)	$	—	$	67	$	(182)
Net losses on derivatives:
Effect on noninterest income:
Gains on derivatives not receiving hedge accounting including net interest settlements	$	1	$	1	$	—	$	2

Net losses on trading securities (3)	—		(1)		—		(1)
Total effect on noninterest income	$	1	$	—	$	—	$	1

____________

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

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

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	For the Nine Months Ended September 30, 2020
	Advances		Investments		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes		Total
Effect on net interest income:
Amortization or accretion of active hedging relationships	$	(39)	$	—	$	(2)	$	—	$	(41)
Net changes in fair value hedges	9		—		2		—		11
Net interest settlements on derivatives (1)	(238)		—		34		38		(166)
Other (2)	(1)		—		—		—		(1)
Total effect on net interest income	$	(269)	$	—	$	34	$	38	$	(197)
Net losses on derivatives:
Effect on noninterest income:
Losses on derivatives not receiving hedge accounting including net interest settlements	$	(2)	$	(4)	$	—	$	—	$	(6)

Net gains on trading securities (3)	—		3		—		—		3
Total effect on noninterest income	$	(2)	$	(1)	$	—	$	—	$	(3)

____________

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

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

Noninterest Income (Loss)

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


	For the Three Months Ended September 30,				Increase (Decrease)			For the Nine Months Ended September 30,				Increase (Decrease)
	2021		2020		Amount		Percent	2021		2020		Amount		Percent

Net (losses) gains on trading securities	$	—	$	—	$	—	*	$	(1)	$	5	$	(6)	(117.18)
Net realized gains from sale of investment securities	—		—		—		—	—		85		(85)		(98.66)
Net gains (losses) on derivatives	—		1		(1)		(93.28)	1		(6)		7		100.00
Standby letters of credit fees	2		4		(2)		(32.13)	9		16		(7)		(42.34)
Other	2		4		(2)		(56.30)	3		8		(5)		(68.98)
Total noninterest income	$	4	$	9	$	(5)	(41.65)	$	12	$	108	$	(96)	(88.59)

___________

* 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.

The decrease in standby letters of credit fees income is due to the decreased balance in standby letters of credit.

Noninterest Expense and Affordable Housing Program (AHP) Assessment

The decrease in total noninterest expense for the first nine months of 2021, compared to the same period in 2020, was primarily due to the Bank making an additional $20 million retirement plan contribution during January of 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

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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 nine months of September 30, 2021.

Operational Liquidity. In order to ensure adequate operational liquidity (generally, the ready cash and borrowing capacity available to meet the Bank’s 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 nine months of September 30, 2021.

Additional Liquidity Guidance. The Finance Agency issued 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. The Finance Agency periodically issues supervisory letters that identify thresholds for measures of liquidity within the established ranges set forth in the Liquidity Guidance AB.

The Liquidity Guidance AB’s measurements of liquidity 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. 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, 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. The Liquidity Guidance AB permits an FHLBank to temporarily decrease its liquidity position, in a safe and sound manner, below the stated levels, as necessary for providing unanticipated extensions of advances to members or draws on letters of credit to beneficiaries.

The Bank has met this liquidity requirement as directed by the Finance Agency throughout the first nine months of 2021.

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.

As discussed elsewhere in this Report, the COVID-19 pandemic continued to impact the financial markets during the third quarter of 2021. The Bank maintained continual access to funding and adapted its debt issuance to meet the needs of its members throughout the third quarter of 2021. 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 is generally driven by member demand and is achieved through the issuance of consolidated discount notes and short-term consolidated bonds. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferences and risk aversion, including the effects of money market fund reform, have often sought the Bank’s short-term debt as an asset of choice.

The Bank is focused on maintaining an adequate liquidity balance and a funding balance between its 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

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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 September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020. As of September 30, 2021, the FHLBanks had $641.4 billion in aggregate par value of consolidated obligations issued and outstanding, $70.5 billion of which was attributable to the Bank. No FHLBank has ever defaulted on its principal 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 September 30, 2021.

Refer to Note 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 September 30, 2021, there have been no material 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.

Regulatory Interpretation on Eligibility of Mortgage Participations as Collateral for FHLBank Advances. On October 4, 2021, the Finance Agency published a Regulatory Interpretation on Eligibility of Mortgage Loan Participations as Collateral for Federal Home Loan Bank Advances. The Regulatory Interpretation addresses whether an FHLBank can accept as collateral to secure advances mortgage loan participations that cannot be readily liquidated in the form in which they are to be pledged. The Regulatory Interpretation concludes that mortgage loan participations must meet the requirements of Finance Agency regulation 12 CFR 1266.7(a)(4), including the requirement that the collateral can be “liquidated in due course” in order to be eligible to secure FHLBank advances. It further concludes that participations for which there would be a known impediment to liquidation do not meet such requirement and therefore are not eligible collateral for advances. Finally, the Regulatory Interpretation rescinds prior guidance from FHLBank System regulators that provide mortgage loan participations may be eligible as collateral under regulatory provisions other than 12 CFR 1266.7(a)(4). The Regulatory Interpretation becomes effective on December 13, 2021.

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Although the Bank does not currently expect the Regulatory Interpretation to have a material impact on its financial condition or results of operations, this restriction on collateral may negatively impact future borrowing by certain members.

FHLBank Membership. On September 9, 2021, the Finance Agency published a Supervisory Letter on FHLBank Membership Issues covering five issues, including (1) Requirements for De Novo Community Development Financial Institutions, (2) Automatic Transfer of Membership, (3) Large Non-Member Institution Merging with a Small Member, (4) Applicant’s Compliance with “Financial Condition” Requirement, and (5) Definition of Insurance Company. The Supervisory Letter is intended to provide uniform guidance to the FHLBanks in the event they encounter similar circumstances. The Bank continues to evaluate the Supervisory Letter and its effect on Bank membership.

Fair Housing and Fair Lending Enforcement. On July 9, 2021, the Finance Agency published a Policy Statement on Fair Lending to communicate its general position on monitoring and information gathering, supervisory examinations, and administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act. The Policy Statement became effective on the date of publication.

On August 12, 2021, the Finance Agency and the U.S. Department of Housing and Urban Development announced they had entered into a Memorandum of Understanding regarding fair housing and fair lending enforcement. Under the Memorandum of Understanding, the two agencies will focus on enhancing their enforcement of the Fair Housing Act, and their oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

The Bank continues to monitor these actions and guidance as they evolve and to evaluate their potential impact on the Bank.

COVID-19 Developments

Additional COVID-19 Presidential, Legislative and Regulatory Developments. In light of the COVID-19 pandemic, the President of the United States, through executive orders, governmental agencies, including the SEC, OCC, Federal Reserve, FDIC, National Credit Union Administration, CFTC and the Finance Agency, as well as state governments and agencies, have taken, and may continue to take, actions to provide various forms of relief from, and guidance regarding, the financial, operational, credit, market, and other effects of the pandemic, and the Congress has enacted and may continue to enact pandemic relief legislation, some of which may have a direct or indirect impact on the Bank or its members. Many of these actions are temporary in nature. The Bank continues to monitor these actions and guidance as they evolve and to evaluate their potential impact on the Bank.

Other Legislative Matters

As previously disclosed, Congress is considering legislation, currently in the budget reconciliation process, that would require that the FHLBanks set aside higher percentages of their earnings for their affordable housing and community investment programs than is currently required by law. The FHLBanks continue to actively monitor any such potential legislation and developments.

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.

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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

On March 5, 2021, the United Kingdom's Financial Conduct Authority (FCA) announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. Although the FCA does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date.

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 and June 30, 2023. The Bank is currently evaluating and planning for the eventual replacement of the LIBOR benchmark interest rate, including the probability of SOFR as the dominant replacement in the capital markets. On July 1, 2021, the Finance Agency issued a Supervisory Letter to the FHLBanks regarding its expectations regarding an FHLBank’s use of alternative rates other than SOFR. The Supervisory Letter provides guidance on considerations, such as volume of underlying transactions, credit sensitivity, modeling risk and others, that an FHLBank should take into account prior to employing an alternative reference rate.

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 part of the Bank’s risk LIBOR exposure evaluation and risk management, the Bank has developed an inventory of financial instruments impacted by the LIBOR transition and has worked to identify and update 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 credit and collateral policy to include fallback language addressing the discontinuation of LIBOR as a benchmark rate. Further, the Bank and each of its counterparties has adhered to the Supplement to the 2006 ISDA Definitions and the ISDA 2020 IBOR Fallbacks Protocol. This adherence by the Bank and its counterparties amended all of the Bank’s legacy bilateral LIBOR-based derivative transactions to apply the new ISDA-recommended IBOR fallbacks in the event of the relevant IBOR’s cessation.

The Bank has LIBOR exposure related to advances, investment securities, consolidated obligation bonds, and derivatives. The following tables present the Bank’s LIBOR-indexed variable-rate financial instruments and interest-rate swaps with LIBOR exposure as of September 30, 2021 and December 31, 2020, respectively, is set forth below (in millions).

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	As of September 30, 2021
	Due/Terminates in		Due/Terminates in		Due/Terminates through		Due/Terminates
	2021		2022		June 30, 2023		thereafter		Total
Assets with LIBOR exposure
Advance by redemption term (principal amount) (1)	$	2,854	$	907	$	5	$	830	$	4,596
Investment securities by contractual maturity (principal amount)
Non-mortgage-backed securities	50		435		—		465		950
Mortgage-backed securities	4		10		56		11,910		11,980
Total investment securities	54		445		56		12,375		12,930
LIBOR-indexed interest-rate swaps notional amount (receive leg)
Cleared	102		1,090		385		4,103		5,680
Uncleared	24		96		23		2,535		2,678
Total interest-rate swaps	126		1,186		408		6,638		8,358
Total principal/notional amount	$	3,034	$	2,538	$	469	$	19,843	$	25,884

Liabilities with LIBOR exposure

LIBOR-indexed interest-rate swaps notional amount (pay leg)
Cleared	164		142		71		50		427
Uncleared	53		28		—		—		81

Total notional amount interest-rate swaps	$	217	$	170	$	71	$	50	$	508
____________
(1) Includes all fixed-rate advances that have cap/floor optionality and excludes convertible advances.


	As of December 31, 2020
	Due/Terminates in		Due/Terminates in		Due/Terminates through		Due/Terminates
	2021		2022		June 30, 2023		thereafter		Total
Assets with LIBOR exposure
Advance by redemption term (principal amount) (1)	$	5,349	$	907	$	5	$	830	$	7,091
Investment securities by contractual maturity (principal amount)
Non-mortgage-backed securities	160		435		—		465		1,060
Mortgage-backed securities	19		15		448		15,148		15,630
Total investment securities	179		450		448		15,613		16,690
LIBOR-indexed interest-rate swaps notional amount (receive leg)
Cleared	1,647		2,110		945		5,198		9,900
Uncleared	99		135		28		3,767		4,029
Total interest-rate swaps	1,746		2,245		973		8,965		13,929
Total principal/notional amount	$	7,274	$	3,602	$	1,426	$	25,408	$	37,710

Liabilities with LIBOR exposure
Consolidated bonds by contractual maturity (principal amount)	$	10,575	$	—	$	—	$	—	$	10,575
LIBOR-indexed interest-rate swaps notional amount (pay leg)
Cleared	520		142		71		50		783
Uncleared	173		28		25		60		286
Total interest-rate swaps	693		170		96		110		1,069
Total principal/notional amount	$	11,268	$	170	$	96	$	110	$	11,644
____________
(1) Includes all fixed-rate advances that have cap/floor optionality and excludes convertible advances.

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In addition to LIBOR-indexed interest-rate swaps included in the above tables, the Bank has interest-rate caps and floors with LIBOR exposure as of September 30, 2021 and December 31, 2020. The following table presents the notional amount of caps and floors with LIBOR exposure as of September 30, 2021 and December 31, 2020 (in millions).


	As of September 30, 2021		As of December 31, 2020
Terminates in 2021	$	—	$	3,000
Terminates after June 30, 2023	4,000		4,000
Total (1)	$	4,000	$	7,000

____________

(1) The estimated net fair value of these interest-rate caps and floors was less than $1 million as of September 30, 2021 and December 31, 2020.

With respect to LIBOR-linked collateral that is pledged by members to secure their advances, the Bank has adopted a transition plan for such collateral. The elements of the plan include:

•Readiness to modify haircuts promptly for affected LIBOR collateral in response to changing market conditions;

•Implementation of a monitoring process for liquidity of LIBOR collateral; and

•Implementation of a communication process to inform shareholders of any changes to valuation or haircuts for LIBOR collateral.

The Bank monitors risks related to LIBOR-linked collateral, including any shareholders with concentrations in LIBOR-linked pledged collateral.

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 determines credit risk ratings for its members by evaluating each institution’s overall financial health, taking into account the quality of assets, earnings, and capital position. The Bank assigns each borrower that is an insured depository institution a credit risk rating from 101 to 104 by utilizing an internal model (101 being the least amount of credit risk and 104 the greatest amount of credit risk). The Bank assigns each borrower that is an insurance company a credit risk rating from 101 to 104 by utilizing an external model. 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 credit risk rating from 101 to 104 based on a risk matrix developed for each entity type.

In general, borrowers 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. Management and the board also monitor the Bank’s concentration in secured credit and standby letters of credit exposure to individual borrowers.

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).

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	As of September 30, 2021			As of December 31, 2020
Rating	Number of Borrowers	Par Value of Outstanding Advances		Number of Borrowers	Par Value of Outstanding Advances
101	255	$	41,823	298	$	37,713
102	14	968		32	12,849
103	2	5		3	35
104	4	252		3	46

Total	275	$	43,048	336	$	50,643

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 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 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, however, none of these borrowers exceeded the 30 percent credit limit as of September 30, 2021, and their total outstanding advance and standby letters of credit balance was $16.0 billion and $504 million, respectively, as of September 30, 2021.

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 September 30, 2021 and December 31, 2020. 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 September 30, 2021	$	43,048	$	314,607	63.41	11.22	25.37
As of December 31, 2020	50,643		326,602		62.96	11.01	26.03

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 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.

Consistent with the provisions of the CARES Act, the Bank continues to accept loan collateral under forbearance agreements through October 31, 2021. Loans that entered into forbearance agreements from March 1, 2020 until October 31, 2021, and continue to meet all eligibility and collateral relief program requirements, are expected to continue to be eligible collateral for the duration of the forbearance period of each loan. The Bank monitors risks related to collateral under forbearance agreements, including any shareholders with forbearance concentrations.

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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 September 30, 2021 and December 31, 2020.

Investments

The Bank is subject to credit risk on investments consisting of investment securities, interest-bearing deposits, securities purchased under agreements to resell, 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.

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.

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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 September 30, 2021
	Federal Funds Sold		Interest-bearing Deposits		Net Derivative Exposure (1)		Total
Australia	$	825	$	—	$	—	$	825

Canada	2,300		—		—		2,300
Finland	850		—		—		850
France	500		—		1		501
Germany	2,040		—		—		2,040

Netherlands	825		—		—		825
Norway	1,240		—		—		1,240
Sweden	830		—		—		830


United States of America	199		689		—		888
Total	$	9,609	$	689	$	1	$	10,299


	As of December 31, 2020
	Federal Funds Sold (1)		Interest-bearing Deposits (2)		Total
Australia	$	970	$	—	$	970

Canada	400		—		400
Finland	250		—		250
France	200		—		200
Germany	970		—		970



Sweden	300		—		300


United States of America	180		1,644		1,824
Total	$	3,270	$	1,644	$	4,914

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 to $10.3 billion as of September 30, 2021 from $4.9 billion as of December 31, 2020. The following two counterparties each represented greater than 10 percent and collectively represented 24.4 percent of the total unsecured credit exposure to non-U.S. government or non-U.S. government agencies counterparties: DnB Bank ASA and Royal Bank of Canada. As of September 30, 2021, 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 typically have the highest ratings issued by S&P or Moody’s at the time of purchase. 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.

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The following tables present information on the credit ratings of the Bank’s investments held as of September 30, 2021 and December 31, 2020 (in millions), based on their credit ratings as of September 30, 2021 and December 31, 2020, respectively. The credit ratings reflect the lowest long-term credit ratings as reported by an NRSRO.


	As of September 30, 2021
	Carrying Value
	Investment Grade
	AAA		AA		A		BBB		Total
Investment securities:
Government-sponsored enterprises debt obligations	$	—	$	1,585	$	—	$	—	$	1,585
U.S. Treasury obligations	—		1,597		—		—		1,597
State or local housing agency debt obligations	—		1		—		—		1
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	—		246		—		—		246
Government-sponsored enterprises residential	—		5,390		—		—		5,390
Government-sponsored enterprises commercial	548		7,814		—		—		8,362

Total mortgage-backed securities	548		13,450		—		—		13,998
Total investment securities	548		16,633		—		—		17,181
Other investments:
Interest-bearing deposits	—		3		638		48		689
Securities purchased under agreements to resell	—		1,500		2,000		—		3,500
Federal funds sold	—		3,365		6,045		199		9,609
Total other investments	—		4,868		8,683		247		13,798
Total investments	$	548	$	21,501	$	8,683	$	247	$	30,979


	As of December 31, 2020
	Carrying Value
	Investment Grade
	AAA		AA		A		BBB		Total
Investment securities:
Government-sponsored enterprises debt obligations	$	—	$	2,307	$	—	$	—	$	2,307
U.S. Treasury obligations	—		1,500		—		—		1,500
State or local housing agency debt obligations	—		1		—		—		1
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential	—		295		—		—		295
Government-sponsored enterprises residential	—		7,283		—		—		7,283
Government-sponsored enterprises commercial	551		10,029		—		—		10,580

Total mortgage-backed securities	551		17,607		—		—		18,158
Total investment securities	551		21,415		—		—		21,966
Other investments:
Interest-bearing deposits	—		5		1,591		48		1,644
Securities purchased under agreements to resell	—		1,000		4,500		4,000		9,500
Federal funds sold	—		650		2,440		180		3,270
Total other investments	—		1,655		8,531		4,228		14,414
Total investments	$	551	$	23,070	$	8,531	$	4,228	$	36,380

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.

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Available-for-sale Securities

Available-for-sale securities are evaluated at the individual security level for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, the Bank considers whether there would be a shortfall in receiving all cash flows contractually due. For securities that carry an implicit or explicit government guarantee, the Bank considers the risk of nonpayment to be zero. When a shortfall is considered possible, the Bank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded as net unrealized gains (losses) on available-for-sale securities within other comprehensive income.

Held-to-maturity Securities

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.

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 September 30, 2021 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.

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 September 30, 2021.

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 million of collateral at fair value to its uncleared derivative counterparties as of September 30, 2021.

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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 utilized two approved 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 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, Morgan Stanley & Co. LLC, and Goldman Sachs & Co. The Bank does not anticipate any credit losses on its cleared derivatives as of September 30, 2021.

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.

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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 September 30, 2021
	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:

Single-A	$	460	$	1	$	(1)	$	—	$	—




Liability positions with credit exposure:

Single-A	7,921		(25)		28		—		3

Cleared derivatives	16,683		(8)		348		—		340
Total derivative positions with non-member counterparties to which the Bank had credit exposure	25,064		(32)		375		—		343
Member institutions (1)	12		1		—		(1)		—
Total	$	25,076	$	(31)	$	375	$	(1)	$	343

____________

(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, 2020
	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:





Cleared derivatives	$	393	$	—	$	3	$	—	$	3
Liability positions with credit exposure:
Double-A	10		(1)		1		—		—
Single-A	4,061		(67)		70		—		3
Triple-B	2,643		(120)		120		—		—
Cleared derivatives	20,429		(11)		395		—		384
Total derivative positions with non-member counterparties to which the Bank had credit exposure	27,536		(199)		589		—		390
Member institutions (1)	12		1		—		(1)		—
Total	$	27,548	$	(198)	$	589	$	(1)	$	390

____________

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 September 30, 2021 and December 31, 2020.

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.

Recently Issued But Not Yet Adopted Accounting Guidance

See Note 2—Recently Issued But Not Yet Adopted Accounting Standards to the Bank’s interim financial statements for a discussion of recently issued but not yet adopted accounting standards.

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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.

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.

As of September 30, 2021

As of December 31, 2020

Hedged Item / Hedging Instrument

Hedging Objective

Hedge
Accounting
Designation

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

1,929

2,306

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

18,531

22,501

Non-qualifying
hedges

—

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

725

558

Pay variable with embedded features, receive variable interest-rate swap (non-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

Total

21,206

25,406

Investments

Pay fixed, receive variable interest-rate swap

Converts the investment’s fixed rate to a variable-rate index.

Non-qualifying
hedges

—

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

1,145

1,395

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

19,410

Total

20,555

1,480

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

—

1,115

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As of September 30, 2021

As of December 31, 2020

Hedged Item / Hedging Instrument

Hedging Objective

Hedge
Accounting
Designation

Notional Amount

Balance Sheet

Pay fixed, receive variable interest-rate swap

Converts the asset or liability fixed rate to a variable-rate index.

Non-qualifying
hedges

—

Pay variable, receive variable interest rate swap

Interest-rate swap not linked to specific assets, liabilities or forecasted transactions.

Non-qualifying hedges

—

Pay variable, receive fixed interest rate swap

Interest-rate swap not linked to specific assets, liabilities or forecasted transactions.

Non-qualifying hedges

—

Pay fixed, receive variable interest rate swap

Interest-rate swap not linked to specific assets, liabilities or forecasted transactions.

Non-qualifying hedges

—

Interest-rate cap or floor

Protects against changes in income of certain assets due to changes in interest rates.

Non-qualifying hedges

4,000

7,000

Total

4,040

7,040

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

Total notional amount

45,825

35,122

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 September 30, 2021			As of December 31, 2020
	Down 200 Basis Points (1)	Current	Up 200 Basis Points	Down 200 Basis Points (1)	Current	Up 200 Basis Points
Assets	0.62	0.48	0.47	0.67	0.52	0.48
Liabilities	0.31	0.39	0.29	0.34	0.30	0.27
Equity	5.00	1.80	3.38	5.32	4.10	3.99
Effective duration gap	0.31	0.09	0.18	0.33	0.22	0.21

___________

(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 “constrained shock” scenario may not represent current expectations.

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 pricing approach that is more fully described in Note 12—Estimated Fair Values to the Bank’s interim financial statements. The difference between the market value of total assets

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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 September 30, 2021						As of December 31, 2020
	Down 200 Basis Points (1)		Current		Up 200 Basis Points		Down 200 Basis Points (1)		Current		Up 200 Basis Points
Assets	$	77,464	$	76,783	$	76,093	$	91,612	$	90,868	$	90,046
Liabilities	72,321		72,107		71,637		85,617		85,482		84,996
Equity	5,143		4,676		4,456		5,995		5,386		5,050

____________

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Bank’s President and Chief Executive Officer and the Bank’s 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 September 30, 2021, 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 third quarter of 2021, 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.

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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.

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.

Item 5. Other Information.

None.

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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

3.1

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 October 31, 2019)

8-K

3.2

10/31/2019

4.1

Capital Plan of the Federal Home Loan Bank of Atlanta

8-K

4.1

10/8/2021

31.1

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

31.2

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 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. +

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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:	November 5, 2021	By /s/ Kirk R. Malmberg
		Name: Kirk R. Malmberg Title: President and Chief Executive Officer

Date:	November 5, 2021	By /s/ Haig H. Kazazian III
		Name: Haig H. Kazazian III Title: Senior Vice President and Chief Financial Officer

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Federal Home Loan Bank of Atlanta 10-Q2021 Q3 Quarterly report

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