10-Q 1 fhlb-atlq32014.htm 10-Q FHLB-ATL Q3 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________ 
FORM 10-Q
_____________________________________
  
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-51845
 _____________________________________ 
FEDERAL HOME LOAN BANK OF ATLANTA
(Exact name of registrant as specified in its charter)
_____________________________________  

Federally chartered corporation
 
56-6000442
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
1475 Peachtree Street, NE, Atlanta, Ga.
 
30309
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (404) 888-8000
_____________________________________  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days.    ý  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
x  (Do not check if a smaller reporting company)
Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
The number of shares outstanding of the registrant’s Class B Stock, par value $100, as of October 31, 2014 was 46,847,312.



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, 2014
 
As of December 31, 2013
Assets
 
 
 
Cash and due from banks
$
4,386

 
$
4,374

Interest-bearing deposits (including deposits with another FHLBank of $2 and $1 as of September 30, 2014 and December 31, 2013, respectively)
1,010

 
1,007

Securities purchased under agreements to resell
455

 

Federal funds sold
4,095

 
1,795

Investment securities:
 
 
 
    Trading securities (includes another FHLBank’s bond of $61 and $65 as of September 30, 2014 and December 31, 2013, respectively)
1,428

 
1,667

    Available-for-sale securities
2,073

 
2,299

    Held-to-maturity securities (fair value of $21,141 and $20,146 as of September 30, 2014 and December 31, 2013, respectively)
21,082

 
20,176

Total investment securities
24,583

 
24,142

Advances
88,627

 
89,588

Mortgage loans held for portfolio, net:
 
 
 
Mortgage loans held for portfolio
792

 
929

Allowance for credit losses on mortgage loans
(4
)
 
(11
)
Total mortgage loans held for portfolio, net
788

 
918

Accrued interest receivable
184

 
199

Derivative assets
118

 
53

Premises and equipment, net
26

 
29

Other assets
165

 
211

Total assets
$
124,437

 
$
122,316

Liabilities
 
 
 
Interest-bearing deposits
$
1,271

 
$
1,752

Consolidated obligations, net:
 
 
 
Discount notes
26,055

 
32,202

Bonds
89,670

 
80,728

Total consolidated obligations, net
115,725

 
112,930

Mandatorily redeemable capital stock
19

 
24

Accrued interest payable
202

 
183

Affordable Housing Program payable
69

 
74

Derivative liabilities
180

 
187

Other liabilities
451

 
514

Total liabilities
117,917

 
115,664

Commitments and contingencies (Note 15)

 

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, 2014 and December 31, 2013, respectively
727

 
946

Subclass B2 issued and outstanding shares: 39 as of September 30, 2014 and December 31, 2013
3,927

 
3,937

Total capital stock Class B putable
4,654

 
4,883

Retained earnings:
 
 
 
Restricted
184

 
141

Unrestricted
1,555

 
1,516

Total retained earnings
1,739

 
1,657

Accumulated other comprehensive income
127

 
112

Total capital
6,520

 
6,652

Total liabilities and capital
$
124,437

 
$
122,316


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

3


FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF INCOME
(Unaudited)
(In millions)
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Interest income
 
 
 
 
 
 
 
Advances
$
11

 
$
54

 
$
119

 
$
178

Prepayment fees on advances, net

 
1

 
1

 
2

Interest-bearing deposits
1

 
1

 
3

 
4

Securities purchased under agreements to resell
1

 
1

 
1

 
1

Federal funds sold
2

 
1

 
6

 
7

Trading securities
19

 
26

 
57

 
79

Available-for-sale securities
30

 
33

 
93

 
98

Held-to-maturity securities
58

 
65

 
180

 
188

Mortgage loans
12

 
14

 
38

 
47

Total interest income
134

 
196

 
498

 
604

Interest expense
 
 
 
 
 
 
 
Consolidated obligations:
 
 
 
 
 
 
 
 Discount notes
8

 
5

 
22

 
19

 Bonds
80

 
104

 
247

 
325

Mandatorily redeemable capital stock

 
1

 
1

 
1

Total interest expense
88

 
110

 
270

 
345

Net interest income
46

 
86

 
228

 
259

(Reversal) provision for credit losses
(2
)
 
1

 
(4
)
 
4

Net interest income after (reversal) provision for credit losses
48

 
85

 
232

 
255

Noninterest income (loss)
 
 
 
 
 
 
 
Total other-than-temporary impairment losses

 

 

 
(1
)
Net amount of impairment losses (reclassified from) recorded in accumulated other comprehensive income
(2
)
 

 
(3
)
 
1

Net impairment losses recognized in earnings
(2
)
 

 
(3
)
 

Net losses on trading securities
(19
)
 
(15
)
 
(46
)
 
(79
)
Net gains on derivatives and hedging activities
77

 
34

 
108

 
151

Gain on early extinguishment of debt

 
2

 
15

 
2

Letters of credit fees
7

 
4

 
20

 
14

Gain on litigation settlements, net
4

 

 
4

 

Other

 

 
2

 
2

Total noninterest income
67

 
25

 
100

 
90

Noninterest expense
 
 
 
 
 
 
 
Compensation and benefits
19

 
16

 
53

 
49

Other operating expenses
10

 
11

 
29

 
32

Finance Agency
2

 
2

 
7

 
6

Office of Finance
1

 
2

 
4

 
5

Other

 

 
2

 

Total noninterest expense
32

 
31

 
95

 
92

Income before assessments
83

 
79

 
237

 
253

Affordable Housing Program assessments
9

 
8

 
24

 
25

Net income
$
74

 
$
71

 
$
213

 
$
228


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

4


FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
74

 
$
71

 
$
213

 
$
228

Other comprehensive income:
 
 
 
 
 
 
 
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
 
 
 
 
 
 
 
Noncredit losses transferred from held-to-maturity securities

 

 

 
(1
)
Net change in fair value on other-than-temporarily impaired available-for-sale securities
(5
)
 
16

 
11

 
141

Reclassification of noncredit portion of impairment losses included in net income
2

 

 
3

 

Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities
(3
)
 
16

 
14

 
140

Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities:
 
 
 
 
 
 
 
Noncredit losses on held-to-maturity securities

 

 

 
(1
)
Reclassification of noncredit portion from held-to-maturity securities to available-for-sale securities

 

 

 
1

Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities

 

 

 

   Other comprehensive income related to pension and postretirement benefit plans

 

 
1

 
1

Total other comprehensive (loss) income
(3
)
 
16

 
15

 
141

Total comprehensive income
$
71

 
$
87

 
$
228

 
$
369


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

5


FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CAPITAL
(Unaudited)
(In millions)
 
 
Capital Stock Class B Putable
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Capital    
 
Shares        
 
Par Value
 
Restricted    
 
Unrestricted    
 
Total        
 
Balance, December 31, 2012
49

 
$
4,898

 
$
73

 
$
1,362

 
$
1,435

 
$
(58
)
 
$
6,275

Issuance of capital stock
34

 
3,427

 

 

 

 

 
3,427

Repurchase/redemption of capital stock
(40
)
 
(3,966
)
 

 

 

 

 
(3,966
)
Net shares reclassified to mandatorily redeemable capital stock

 
(8
)
 

 

 

 

 
(8
)
Comprehensive income

 

 
46

 
182

 
228

 
141

 
369

Cash dividends on capital stock

 

 

 
(84
)
 
(84
)
 

 
(84
)
Balance, September 30, 2013
43

 
$
4,351

 
$
119

 
$
1,460

 
$
1,579

 
$
83

 
$
6,013

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2013
49

 
$
4,883

 
$
141

 
$
1,516

 
$
1,657

 
$
112

 
$
6,652

Issuance of capital stock
34

 
3,415

 

 

 

 

 
3,415

Repurchase/redemption of capital stock
(37
)
 
(3,640
)
 

 

 

 

 
(3,640
)
Net shares reclassified to mandatorily redeemable capital stock

 
(4
)
 

 

 

 

 
(4
)
Comprehensive income

 

 
43

 
170

 
213

 
15

 
228

Cash dividends on capital stock

 

 

 
(131
)
 
(131
)
 

 
(131
)
Balance, September 30, 2014
46

 
$
4,654

 
$
184

 
$
1,555

 
$
1,739

 
$
127

 
$
6,520


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

6


FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
 
For the Nine Months Ended September 30,
 
2014
 
2013
Operating activities
 
 
 
Net income
$
213

 
$
228

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization, and accretion
(87
)
 
(64
)
  (Reversal) provision for credit losses
(4
)
 
4

  Loss due to change in net fair value adjustment on derivative and hedging activities
60

 
7

  Net change in fair value adjustment on trading securities
46

 
79

  Net impairment losses recognized in earnings
3

 

  Gain on early extinguishment of debt
(15
)
 
(2
)
Net change in:
 
 
 
  Accrued interest receivable
15

 
26

  Other assets
41

 
(14
)
  Affordable Housing Program payable
(7
)
 
(13
)
  Accrued interest payable
19

 
38

  Other liabilities
(37
)
 
1

  Total adjustments
34

 
62

Net cash provided by operating activities
247

 
290

Investing activities
 
 
 
Net change in:
 
 
 
  Interest-bearing deposits
224

 
968

  Securities purchased under agreements to resell
(455
)
 
(750
)
  Federal funds sold
(2,300
)
 
4,240

Trading securities:
 
 
 
  Proceeds from maturities
200

 
251

Available-for-sale securities:
 
 
 
  Proceeds from maturities
261

 
435

Held-to-maturity securities:
 
 
 
  Net change in short-term

 
550

  Proceeds from maturities of long-term
2,091

 
2,897

  Purchases of long-term
(3,022
)
 
(6,042
)
Advances:
 
 
 
  Proceeds from principal collected
131,994

 
127,399

  Made
(131,197
)
 
(119,605
)
Mortgage loans:
 
 
 
  Proceeds from principal collected
119

 
228

     Proceeds from sale of held for sale

 
18

Proceeds from sale of foreclosed assets
19

 
19

Purchase of premise, equipment, and software
(3
)
 
(2
)
Net cash (used in) provided by investing activities
(2,069
)
 
10,606

 
 
 
 
 
 
 
 
 
 
 
 

7


FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CASH FLOWS—(Continued)
(Unaudited)
(In millions)

 
For the Nine Months Ended September 30,
 
2014
 
2013
Financing activities
 
 
 
Net change in deposits
(491
)
 
(199
)
Net payments on derivatives containing a financing element
(72
)
 
(121
)
Proceeds from issuance of consolidated obligations:
 
 
 
 Discount notes
353,473

 
197,307

 Bonds
64,255

 
62,917

Payments for debt issuance costs
(7
)
 
(6
)
Payments for maturing and retiring consolidated obligations:
 
 
 
 Discount notes
(359,620
)
 
(212,758
)
 Bonds
(55,339
)
 
(57,996
)
Proceeds from issuance of capital stock
3,415

 
3,427

Payments for repurchase/redemption of capital stock
(3,640
)
 
(3,966
)
Payments for repurchase/redemption of mandatorily redeemable capital stock
(9
)
 
(24
)
Cash dividends paid
(131
)
 
(84
)
Net cash provided by (used in) financing activities
1,834

 
(11,503
)
Net increase (decrease) in cash and due from banks
12

 
(607
)
Cash and due from banks at beginning of the period
4,374

 
4,083

Cash and due from banks at end of the period
$
4,386

 
$
3,476

Supplemental disclosures of cash flow information:
 
 
 
 Cash paid for:
 
 
 
Interest
$
261

 
$
327

Affordable Housing Program assessments, net
$
31

 
$
34

 Noncash investing and financing activities:
 
 
 
Net shares reclassified to mandatorily redeemable capital stock
$
4

 
$
8

Held-to-maturity securities acquired with accrued liabilities
$
282

 
$
41

Transfer of held-to-maturity securities to available-for-sale securities
$

 
$
11

Transfers of mortgage loans to real estate owned
$
15

 
$
23


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

 


8


FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

Note 1—Basis of Presentation

The accompanying unaudited interim financial statements of the Federal Home Loan Bank of Atlanta (Bank) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could be different from these estimates. The foregoing interim financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods, have been included. The results of operations for interim periods are not necessarily indicative of results to be expected for the year ending December 31, 2014, 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, 2013, which are contained in the Bank’s 2013 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 14, 2014 (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 13Derivatives 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.

During the three-month period ended March 31, 2014, the Bank made certain enhancements to its allowance for credit loss calculation related to the Bank’s conventional single-family residential mortgage loan portfolio.  The allowance for conventional single-family residential mortgage loans is determined by an analysis (performed at least quarterly) that includes segregating the portfolio into various aging groups.  For loans that are 60 days or less past due, the Bank calculates a loss severity, default rate, and the expected loss based on individual loan characteristics.  For loans that are more than 60 days past due, the allowance is determined using an automated valuation model.  Inherent in the Bank’s evaluation of loan performance is an analysis of various credit enhancements at the individual master commitment level to determine the credit enhancement available to recover losses on conventional single-family residential mortgage loans under each individual master commitment. 

Additionally, during the three-month period ended March 31, 2014, the Bank began to classify as a loss and charge-off the portion of outstanding conventional single-family residential mortgage loan balances in excess of the fair value of the underlying property, less costs to sell and adjusted for any available credit enhancements, once the loans are 180 days delinquent. These changes did not have a material effect on the Bank's financial condition or results of operations.

A description of all of the Bank’s significant accounting policies is included in Note 2Summary of Significant Accounting Policies to the 2013 audited financial statements contained in the Bank’s Form 10-K. There have been no material changes to these policies as of September 30, 2014.

Revision

During the three-month period ended September 30, 2014, the Bank identified a classification error in its previously reported Statements of Cash Flows for the three-month period ended March 31, 2014 and the six-month period ended June 30, 2014, contained in the previously filed Quarterly Reports on Form 10-Q for those periods. After evaluating the quantitative and qualitative aspects of the classification error, the Bank determined that the error was not material to the previously issued Statements of Cash Flows. Accordingly, the classification error has been corrected in this Quarterly Report on Form 10-Q. The correction had no impact on the Bank’s financial condition or results of operations for any period.








9

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table summarizes the revisions made to the Bank’s Statement of Cash Flows for the three-month period ended March 31, 2014 and the six-month period ended June 30, 2014:

 
For the Three Months Ended March 31, 2014
 
For the Six Months Ended June 30, 2014
 
As Originally Reported
 
As Revised
 
As Originally Reported
 
As Revised
Operating activities
 
 
 
 
 
 
 
Net change in:
 
 
 
 
 
 
 
Other liabilities
$
(320
)
 
$
(11
)
 
$
(322
)
 
$
(13
)
Total adjustments
(304
)
 
5

 
(304
)
 
5

Net cash (used in) provided by operating activities
(227
)
 
82

 
(165
)
 
144

 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
Held-to-maturity securities:
 
 
 
 
 
 
 
Purchases of long-term
(1,436
)
 
(1,745
)
 
(1,664
)
 
(1,973
)
Net cash provided by (used in) investing activities
331

 
22

 
(9,201
)
 
(9,510
)

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. In August 2014, the Financial Accounting Standards Board (FASB) issued guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. This guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. The guidance becomes effective for the Bank for the interim and annual periods ending after December 15, 2016, and early application is permitted. The adoption of this guidance will have no effect on the Bank's financial condition or results of operations.

Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure. In August 2014, the FASB issued amended guidance related to the classification and measurement of certain government-guaranteed mortgage loans upon foreclosure. The amendments in this guidance require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if certain conditions are met. This guidance becomes effective for the Bank for the interim and annual periods beginning after December 15, 2014, and may be adopted using either the modified retrospective transition method or the prospective transition method. The adoption of this guidance is not expected to materially effect the Bank’s financial condition or results of operations.

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. In June 2014, the FASB issued amended guidance for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings. Specifically, this guidance requires entities to account for (1) repurchase-to-maturity transactions as secured borrowings rather than as sales with forward repurchase agreements; and (2) repurchase agreements executed contemporaneously with the initial transfer of the underlying financial asset with the same counterparty as separate transactions only. In addition, this guidance requires a transferor to disclose additional information about certain transactions, including those in which it retains substantially all of the exposure to the economic returns of the underlying transferred asset over the transaction’s term. This guidance becomes effective for the Bank for the first interim or annual period beginning after December 15, 2014. The changes in accounting for transactions outstanding on the effective date are required to be presented on a cumulative-effect approach. The adoption of this guidance is not expected to materially effect the Bank’s financial condition or results of operations.

Revenue from Contracts with Customers. In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual reporting periods beginning after December

10

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


15, 2016, including interim periods within that reporting period, and will be applied retrospectively either to each prior reporting period or with a cumulative effect recognized at the date of initial application. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition or results of operations is not expected to be material.

Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. In January 2014, the FASB issued guidance intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. The guidance clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure; or (b) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. This guidance is effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2014. The adoption of this guidance will result in increased disclosures, but is not expected to materially affect the Bank’s financial condition or results of operations.

Recently Adopted Accounting Guidance

Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date. In February 2013, the FASB issued guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This guidance requires an entity to measure these obligations as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The Bank adopted this guidance effective January 1, 2014. The adoption of this guidance did not have any effect on the Bank's financial condition or results of operations.

Note 3—Trading Securities

Major Security Types. Trading securities were as follows:
 
 
As of September 30, 2014
 
As of December 31, 2013
Government-sponsored enterprises debt obligations
$
1,366

 
$
1,601

Another FHLBank’s bond (1)
61

 
65

State or local housing agency debt obligations
1

 
1

Total
$
1,428

 
$
1,667

 ____________
(1) 
The Federal Home Loan Bank of Chicago is the primary obligor of this consolidated obligation bond.
Net losses on trading securities were as follows:
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net losses on trading securities held at period end
$
(19
)
 
$
(15
)
 
$
(46
)
 
$
(77
)
Net losses on trading securities sold or matured during the period

 

 

 
(2
)
Net losses on trading securities
$
(19
)
 
$
(15
)
 
$
(46
)
 
$
(79
)







11

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


Note 4—Available-for-sale Securities

The Bank transferred a private-label residential mortgaged-backed security (MBS) from its held-to-maturity portfolio to its available-for-sale portfolio on March 31, 2013. This security represents a private-label residential MBS in the Bank’s held-to-maturity portfolio for which the Bank has recorded an other-than-temporary impairment loss. The Bank believes the other-than-temporary impairment loss constitutes evidence of a significant deterioration in the issuer’s creditworthiness. The Bank has no current plans to sell this security nor is the Bank under any requirement to sell this security.
The following table presents information on the private-label residential MBS transferred. The amounts below represent the value as of the transfer date.
 
Amortized    
Cost
 
Other-than-temporary
Impairment
Recognized in
Accumulated Other
Comprehensive Income
 
Estimated
Fair Value
Transferred at March 31, 2013
$
12

 
$
1

 
$
11


Major Security Types. Private-label residential MBS were as follows:
 
 
Amortized    
Cost
 
Other-than-temporary
Impairment
Recognized in
Accumulated Other
Comprehensive Income
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair Value
As of September 30, 2014
$
1,934

 
$
17

 
$
156

 
$

 
$
2,073

As of December 31, 2013
$
2,174

 
$
27

 
$
152

 
$

 
$
2,299


The following tables summarize the private-label residential MBS with unrealized losses. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
  Number of  
Positions
 
Estimated
  Fair  Value  
 
Gross
  Unrealized  
Losses
 
  Number of  
Positions
 
Estimated
  Fair  Value  
 
Gross
  Unrealized  
Losses
 
  Number of  
Positions
 
Estimated
  Fair  Value  
 
Gross
  Unrealized  
Losses
As of September 30, 2014
3

 
$
135

 
$
1

 
9

 
$
202

 
$
16

 
12

 
$
337

 
$
17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2013
6

 
$
137

 
$
1

 
10

 
$
243

 
$
26

 
16

 
$
380

 
$
27


A summary of available-for-sale MBS issued by members or affiliates of members, Bank of America Corporation, Charlotte, NC, follows:
 
 
Amortized  
Cost
 
Other-than-temporary  
Impairment
Recognized in
 Accumulated Other
Comprehensive Income
 
Gross
  Unrealized  
Gains
 
Gross
  Unrealized  
Losses
 
Estimated
  Fair  Value  
As of September 30, 2014
$
1,250

 
$
16

 
$
103

 
$

 
$
1,337

 
 
 
 
 
 
 
 
 
 
As of December 31, 2013
$
1,390

 
$
26

 
$
98

 
$

 
$
1,462



12

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


Note 5—Held-to-maturity Securities

Major Security Types. Held-to-maturity securities were as follows:
 
 
As of September 30, 2014
 
As of December 31, 2013
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair  Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair  Value
State or local housing agency debt obligations
$
84

 
$
1

 
$

 
$
85

 
$
92

 
$
1

 
$

 
$
93

Government-sponsored enterprises debt obligations
4,913

 
2

 
16

 
4,899

 
3,738

 

 
24

 
3,714

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency obligations-guaranteed residential
388

 
5

 

 
393

 
465

 
7

 

 
472

Government-sponsored enterprises residential
14,104

 
126

 
62

 
14,168

 
13,952

 
109

 
115

 
13,946

Private-label residential
1,593

 
13

 
10

 
1,596

 
1,929

 
12

 
20

 
1,921

Total
$
21,082

 
$
147

 
$
88

 
$
21,141

 
$
20,176

 
$
129

 
$
159

 
$
20,146


The following tables summarize the held-to-maturity securities with unrealized losses. The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.
 
 
As of September 30, 2014
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
Government-sponsored enterprises debt obligations
4

 
$
399

 
$
1

 
5

 
$
1,129

 
$
15

 
9

 
$
1,528

 
$
16

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored enterprises residential
8

 
298

 
2

 
47

 
3,248

 
60

 
55

 
3,546

 
62

Private-label residential
15

 
176

 
1

 
31

 
434

 
9

 
46

 
610

 
10

Total
27

 
$
873

 
$
4

 
83

 
$
4,811

 
$
84

 
110

 
$
5,684

 
$
88

 
 
As of December 31, 2013
 
Less than 12 Months
 
12 Months or More
 
Total
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
 
Number of
Positions
 
Estimated
Fair  Value
 
Gross
Unrealized
Losses
Government-sponsored enterprises debt obligations
9

 
$
1,970

 
$
24

 

 
$

 
$

 
9

 
$
1,970

 
$
24

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Government-sponsored enterprises residential
65

 
3,932

 
108

 
1

 
147

 
7

 
66

 
4,079

 
115

Private-label residential
40

 
817

 
12

 
18

 
241

 
8

 
58

 
1,058

 
20

Total
114

 
$
6,719

 
$
144

 
19

 
$
388

 
$
15

 
133

 
$
7,107

 
$
159



13

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


Redemption Terms. The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity are shown below. Expected maturities of some securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

 
As of September 30, 2014
 
As of December 31, 2013
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Non-mortgage-backed securities:
 
 
 
 
 
 
 
Due in one year or less
$
568

 
$
568

 
$
430

 
$
430

Due after one year through five years
4,429

 
4,416

 
3,400

 
3,377

Total non-mortgage-backed securities
4,997

 
4,984

 
3,830

 
3,807

Mortgage-backed securities
16,085

 
16,157

 
16,346

 
16,339

Total
$
21,082

 
$
21,141

 
$
20,176

 
$
20,146


A summary of held-to-maturity MBS issued by members or affiliates of members, Bank of America Corporation, Charlotte, NC, follows:
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
As of September 30, 2014
 
$
490

 
$
3

 
$
4

 
$
489

 
 
 
 
 
 
 
 
 
As of December 31, 2013
 
$
619

 
$
4

 
$
8

 
$
615


Note 6—Other-than-temporary Impairment

The Bank evaluates its individual available-for-sale and held-to-maturity securities holdings in an unrealized loss position for other-than-temporary impairment on a quarterly basis. As part of this process, the Bank considers its intent to sell each debt security and whether it is more likely than not the Bank will be required to sell the security before its anticipated recovery. If either of these conditions is met, the Bank recognizes the maximum impairment loss in earnings which is equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statements of Condition dates. For securities in an unrealized loss position that meet neither of these conditions, the Bank evaluates whether there is other-than-temporary impairment by performing an analysis to determine if any of these securities will incur a credit loss, which could be up to the difference between the security’s amortized cost basis and its fair value.
Mortgage-backed Securities. The Bank’s investments in MBS consist of U.S. agency guaranteed securities and senior tranches of private-label MBS. The Bank has increased exposure to the risk of loss on its investments in MBS when the loans backing the MBS exhibit high rates of delinquency and foreclosures, as well as losses on the sale of foreclosed properties. The Bank regularly requires high levels of credit enhancements from the structure of the collateralized mortgage obligation to reduce its risk of loss on such securities. Credit enhancements are defined as the percentage of subordinate tranches, overcollateralization, or excess spread, or the support of monoline insurance, if any, in a security structure that will absorb the losses before the security the Bank purchased will take a loss. The Bank does not purchase credit enhancements for its MBS from monoline insurance companies.
The Bank’s investments in private-label MBS were rated “AAA” (or its equivalent) by a nationally recognized statistical rating organization (NRSRO), such as Moody’s Investors Service (Moody’s) and Standard and Poor’s Ratings Services (S&P), at their purchase dates. The “AAA”-rated securities achieved their ratings through credit enhancement, overcollateralization, and senior-subordinated shifting interest features; the latter results in subordination of payments by junior classes to ensure cash flows to the senior classes. The ratings on all of the Bank’s private-label MBS have changed since their purchase dates.
Non-private-label MBS. The unrealized losses related to U.S. agency MBS are caused by interest rate changes and not credit quality. These securities are guaranteed by government agencies or government-sponsored enterprises (GSEs) and the Bank does not expect these securities to be settled at a price less than their amortized cost basis. In addition, the Bank does not

14

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


intend to sell these investments and it is not more likely than not that the Bank will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The Bank does not consider these investments to be other-than-temporarily impaired as of September 30, 2014.
Private-label MBS. To assess whether the entire amortized cost basis of its private-label MBS will be recovered, the Bank performs a cash flow analysis for each of its private-label MBS. In performing the cash flow analysis for each of these securities, the Bank uses two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank’s securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults, and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core based statistical areas (CBSAs), which are based upon an assessment of the individual housing markets. The term CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area of 10,000 or more people. The Bank’s housing price forecast as of September 30, 2014 included a short-term housing price forecast with projected changes ranging from a decrease of three percent to an increase of nine percent over the 12 month period beginning July 1, 2014. For the vast majority of markets, the projected short-term housing price changes range from zero percent to an increase of six percent. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults, and loss severities, were then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. The model classifies securities based on current characteristics and performance, which may be different from the securities’ classification as determined by the originator at the time of origination.
At each quarter end, the Bank compares the present value of the cash flows (discounted at the securities' effective yield) expected to be collected with respect to its private-label MBS to the amortized cost basis of the security to determine whether a credit loss exists. For the Bank’s variable rate and hybrid private-label MBS, the Bank uses a forward interest rate curve to project the future estimated cash flows. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows. For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a quarterly basis.
The following table represents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings for those securities for which an other-than-temporary impairment was determined to have occurred during the three-month period ended September 30, 2014, as well as related current credit enhancement:
 
 
Significant Inputs
 
 
 
Prepayment Rate
 
Default Rates
 
Loss Severities
 
Current Credit Enhancement
Year of
Securitization
 
Weighted    
Average
(%)
 
Weighted    
Average
(%)
 
Weighted    
Average
(%)
 
Weighted    
Average
(%)
Prime:
 
 
 
 
 
 
 
 
2005
 
15.79
 
7.96
 
32.82
 
0.16
Alt-A:
 
 
 
 
 
 
 
 
2007
 
13.49
 
26.94
 
40.27
 
0.00


15

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table presents a roll-forward of the amount of credit losses on the Bank’s investment securities recognized in earnings during the life of the securities for which a portion of the other-than-temporary loss was recognized in accumulated other comprehensive income:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Balance, beginning of period
$
559

 
$
584

 
$
574

 
$
586

Amount related to credit loss for which an other-than-temporary impairment was previously recognized
2

 

 
3

 

Increase in cash flows expected to be collected, recognized over the remaining life of the securities
(9
)
 
(4
)
 
(25
)
 
(6
)
Balance, end of period
$
552

 
$
580

 
$
552

 
$
580


Certain other private-label MBS that have not been designated as other-than-temporarily impaired have experienced unrealized losses and decreases in fair value due to interest rate volatility, illiquidity in the marketplace, and general disruption in the U.S. mortgage markets. These declines in fair value are considered temporary as the Bank expects to recover the amortized cost basis of the securities, the Bank does not intend to sell these securities, and it is not more likely than not that the Bank will be required to sell these securities before the anticipated recovery of the securities’ remaining amortized cost basis, which may be at maturity. This assessment is based on the fact that the Bank has sufficient capital and liquidity to operate its business and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would require the Bank to sell these securities.

Note 7—Advances

Redemption Terms. The Bank had advances outstanding, as summarized below.  
 
As of September 30, 2014
 
As of December 31, 2013
Overdrawn demand deposit accounts
$

 
$
2

Due in one year or less
47,104

 
51,331

Due after one year through two years
11,049

 
5,366

Due after two years through three years
9,554

 
6,136

Due after three years through four years
6,241

 
8,495

Due after four years through five years
2,868

 
5,088

Due after five years
10,268

 
11,464

Total par value
87,084

 
87,882

Discount on AHP (1) advances
(7
)
 
(8
)
Discount on EDGE (2) advances
(6
)
 
(7
)
Hedging adjustments
1,560

 
1,726

Deferred commitment fees
(4
)
 
(5
)
Total
$
88,627

 
$
89,588

___________
(1) The Affordable Housing Program
(2) The Economic Development and Growth Enhancement program


16

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table summarizes advances by year of contractual maturity or, for convertible advances, next conversion date:
 
 
As of September 30, 2014
 
As of December 31, 2013
Overdrawn demand deposit accounts
$

 
$
2

Due or convertible in one year or less
50,223

 
54,522

Due or convertible after one year through two years
10,886

 
5,414

Due or convertible after two years through three years
8,203

 
5,867

Due or convertible after three years through four years
4,872

 
6,643

Due or convertible after four years through five years
2,787

 
4,168

Due or convertible after five years
10,113

 
11,266

Total par value
$
87,084

 
$
87,882


Interest-rate Payment Terms. The following table details interest-rate payment terms for advances:
 
 
As of September 30, 2014
 
As of December 31, 2013
Fixed-rate:
 
 
 
 Due in one year or less
$
34,599

 
$
46,343

 Due after one year
29,691

 
28,535

Total fixed-rate
64,290

 
74,878

Variable-rate:
 
 
 
 Due in one year or less
12,505

 
4,990

 Due after one year
10,289

 
8,014

Total variable-rate
22,794

 
13,004

Total par value
$
87,084

 
$
87,882


Credit Risk. The Bank’s potential credit risk from advances is concentrated in commercial banks, thrifts, and credit unions and further is concentrated in certain larger borrowing relationships. As of September 30, 2014 and December 31, 2013, the concentration of the Bank’s advances was $62,761 and $65,472, respectively, to 10 member institutions, representing 72.1 percent and 74.5 percent, respectively, of total advances outstanding.
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, 2014 and December 31, 2013. No advance was past due as of September 30, 2014 and December 31, 2013.

Note 8—Mortgage Loans Held for Portfolio

The following table presents information on mortgage loans held for portfolio by contractual maturity at the time of purchase:
 
 
As of September 30, 2014
 
As of December 31, 2013
Fixed-rate medium-term (1) single-family residential mortgage loans
 
$
113

 
$
150

Fixed-rate long-term single-family residential mortgage loans
 
680

 
781

Total unpaid principal balance
 
793

 
931

Premiums
 
3

 
3

Discounts
 
(4
)
 
(5
)
Total
 
$
792

 
$
929

____________
(1) Medium-term is defined as a term of 15 years or less.


17

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table details the unpaid principal balance of mortgage loans held for portfolio by collateral or guarantee type:
 
 
As of September 30, 2014
 
As of December 31, 2013
Conventional loans
 
$
737

 
$
864

Government-guaranteed or insured loans
 
56

 
67

Total unpaid principal balance
 
$
793

 
$
931


For information related to the Bank's credit risk on mortgage loans and allowance for credit losses, see Note 9Allowance for Credit Losses to the Bank’s interim financial statements.

Note 9—Allowance for Credit Losses

The activity in the allowance for credit losses was as follows:

 
 
For the Three Months Ended September 30,
 
 
2014
 
2013
 
 
Conventional Single-family Residential Mortgage Loans
 
Conventional Single-family Residential Mortgage Loans
 
Multifamily Residential Mortgage Loans
 
Total
Balance, beginning of period
 
$
6

 
$
11

 
$
1

 
$
12

(Reversal) provision for credit losses
 
(2
)
 
1

 

 
1

Charge-offs
 

 
(1
)
 

 
(1
)
Mortgage loans transferred to held for sale
 

 

 
(1
)
 
(1
)
Balance, end of period
 
$
4

 
$
11

 
$

 
$
11


 
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
 
Conventional Single-family Residential Mortgage Loans
 
Conventional Single-family Residential Mortgage Loans
 
Multifamily Residential Mortgage Loans
 
Total
Balance, beginning of period
 
$
11

 
$
10

 
$
1

 
$
11

(Reversal) provision for credit losses
 
(4
)
 
4

 

 
4

Charge-offs
 
(3
)
 
(3
)
 

 
(3
)
Mortgage loans transferred to held for sale
 

 

 
(1
)
 
(1
)
Balance, end of period
 
$
4

 
$
11

 
$

 
$
11


18

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)



The recorded investment in conventional single-family residential mortgage loans by impairment methodology was as follows:
 
 
As of September 30, 2014
 
As of December 31, 2013
Allowance for credit losses:
 
 
 
 
   Individually evaluated for impairment
 
$
1

 
$
2

   Collectively evaluated for impairment
 
3

 
9

Total allowance for credit losses
 
$
4

 
$
11

Recorded investment:
 
 
 
 
   Individually evaluated for impairment
 
$
15

 
$
15

   Collectively evaluated for impairment
 
724

 
851

Total recorded investment
 
$
739

 
$
866


Key credit quality indicators for mortgage loans include the migration of past due loans, nonaccrual loans, loans in process of foreclosure, and impaired loans. The tables below summarize the Bank's recorded investment in mortgage loans by these key credit quality indicators:
 
As of September 30, 2014
 
Conventional Single-family Residential Mortgage Loans
 
Government-guaranteed or Insured Single-family Residential Mortgage Loans
 
Total
Past due 30-59 days
$
21

 
$
6

 
$
27

Past due 60-89 days
7

 
2

 
9

Past due 90 days or more
35

 
5

 
40

Total past due mortgage loans
63

 
13

 
76

Total current mortgage loans
676

 
43

 
719

Total mortgage loans (1)
$
739

 
$
56

 
$
795

Other delinquency statistics:
 
 
 
 
 
  In process of foreclosure (2)
$
21

 
$
2

 
$
23

  Seriously delinquent rate (3)
4.65
%
 
9.27
%
 
4.98
%
  Past due 90 days or more and still accruing interest (4)
$

 
$
5

 
$
5

  Loans on nonaccrual status (5)
$
34

 
$

 
$
34

____________
(1) The difference between the recorded investment and the carrying value of total mortgage loans of $3 relates to accrued interest.
(2) Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in lieu has been reported. Loans in the process of foreclosure are included in past due or current loans depending on their delinquency status.
(3) Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total loan portfolio segment.
(4) Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.
(5) Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest.


19

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


 
As of December 31, 2013
 
Conventional Single-family Residential Mortgage Loans
 
Government-guaranteed or Insured Single-family Residential Mortgage Loans
 
Total
Past due 30-59 days
$
30

 
$
7

 
$
37

Past due 60-89 days
9

 
3

 
12

Past due 90 days or more
51

 
9

 
60

Total past due mortgage loans
90

 
19

 
109

Total current mortgage loans
776

 
48

 
824

Total mortgage loans (1)
$
866

 
$
67

 
$
933

Other delinquency statistics:
 
 
 
 
 
  In process of foreclosure (2)
$
38

 
$
3

 
$
41

  Seriously delinquent rate (3)
5.90
%
 
13.13
%
 
6.42
%
Past due 90 days or more and still accruing interest (4)
$

 
$
9

 
$
9

  Loans on nonaccrual status (5)
$
51

 
$

 
$
51

____________
(1) The difference between the recorded investment and the carrying value of total mortgage loans of $4 relates to accrued interest.
(2) Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in lieu has been reported. Loans in the process of foreclosure are included in past due or current loans depending on their delinquency status.
(3) Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total loan portfolio segment.
(4) Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.
(5) Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest.

A troubled debt restructuring is considered to have occurred when a concession is granted to a borrower for economic or legal reasons related to the borrower's financial difficulties and that concession would not have been considered otherwise. The Bank has granted a concession when it does not expect to collect all amounts due under the original contract as a result of the restructuring. The Bank's conventional single-family residential mortgage loan troubled debt restructurings primarily involve modifying the borrower's monthly payment for a period of up to 36 months to achieve a target housing expense ratio of 31.0 percent of their qualifying monthly income. The outstanding principal balance is first re-amortized to reflect a principal and interest payment for a term not to exceed 40 years. This would result in a balloon payment at the original maturity date of the loan as the maturity date and number of remaining monthly payments are not adjusted. If the 31.0 percent housing expense ratio is not achieved through re-amortization, the interest rate is reduced in 0.125 percent increments below the original note rate, to a floor rate of 3.00 percent, resulting in reduced principal and interest payments, for the temporary payment modification period of up to 36 months, until the target 31.0 percent housing expense ratio is met. A conventional single-family residential mortgage loan in which the borrower filed for Chapter 7 bankruptcy and the bankruptcy court discharged the borrower's obligation to the Bank is considered a troubled debt restructuring.

The table below presents the Bank's recorded investment balance in troubled debt restructured loans as of September 30, 2014 and December 31, 2013:
 
 
 
Performing
 
Non-performing
 
Total
Conventional single-family residential loans
 
 
$
11

 
$
4

 
$
15


Due to the minimal change in terms of modified loans (i.e., no write-offs of principal), the Bank's pre-modification recorded investment was not materially different than the post-modification recorded investment in troubled debt restructuring during the three and nine months ended September 30, 2014 and 2013.




20

FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table shows troubled debt restructurings from the previous 12 months that subsequently defaulted during the periods presented. A payment default on a troubled debt restructuring is considered to have occurred if the contractually due principal or interest is 60 days or more past due at any time during the periods presented.

 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Conventional single-family residential loans (1)
 
$

 
$

 
$
2

 
$
1

____________
(1) For purposes of this disclosure, only the initial default was included; however, a loan can experience another payment default in a subsequent period.

The following tables summarize the recorded investment, unpaid principal balance, and related allowance for credit losses for impaired loans as of September 30, 2014 and December 31, 2013, and the average recorded investment on these loans during the three and nine months ended September 30, 2014 and 2013. Related interest income recognized on these loans during the three and nine months ended September 30, 2014 and 2013 was less than $1.

 
 
As of September 30, 2014
 
As of December 31, 2013
 
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
With no related allowance
 
 
 
 
 
 
 
 
 
 
 
 
Conventional single-family residential loans
 
$
8

 
$
8

 
$

 
$

 
$

 
$

With an allowance
 
 
 
 
 
 
 
 
 
 
 
 
Conventional single-family residential loans
 
7