false--12-31FY20170001331465YesNon-accelerated Filer0Federal Home Loan Bank of Atlanta135645888NoNo07000000P1Y00P15YP15Y10P5Y1008000000420000008000000440000008000000420000008000000440000001000000100000030000006000000600000020000005000000220000004000000400000020000000333P3YP5YP8Y2000000 0001331465 2017-01-01 2017-12-31 0001331465 us-gaap:TradingAccountAssetsMember 2017-01-01 2017-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember 2017-01-01 2017-12-31 0001331465 us-gaap:HeldtomaturitySecuritiesMember 2017-01-01 2017-12-31 0001331465 2018-02-28 0001331465 2017-06-30 0001331465 2017-12-31 0001331465 2016-12-31 0001331465 fhlba:SubclassB1Member 2016-12-31 0001331465 fhlba:SubclassB1Member 2017-12-31 0001331465 fhlba:SubclassB2Member 2017-12-31 0001331465 fhlba:SubclassB2Member 2016-12-31 0001331465 2015-01-01 2015-12-31 0001331465 2016-01-01 2016-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2015-12-31 0001331465 us-gaap:RetainedEarningsMember 2017-01-01 2017-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2016-01-01 2016-12-31 0001331465 us-gaap:CommonStockMember 2017-01-01 2017-12-31 0001331465 us-gaap:RetainedEarningsMember 2014-12-31 0001331465 us-gaap:CommonStockMember 2014-12-31 0001331465 us-gaap:CommonStockMember 2016-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2014-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2014-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-01-01 2016-12-31 0001331465 us-gaap:CommonStockMember 2015-01-01 2015-12-31 0001331465 us-gaap:CommonStockMember 2016-01-01 2016-12-31 0001331465 2014-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2017-01-01 2017-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2015-01-01 2015-12-31 0001331465 us-gaap:RetainedEarningsMember 2015-01-01 2015-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2016-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2015-12-31 0001331465 us-gaap:RetainedEarningsMember 2016-01-01 2016-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2015-01-01 2015-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2017-01-01 2017-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2015-01-01 2015-12-31 0001331465 2015-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2016-01-01 2016-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2015-12-31 0001331465 us-gaap:RetainedEarningsMember 2015-12-31 0001331465 us-gaap:RetainedEarningsMember 2016-12-31 0001331465 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0001331465 us-gaap:CommonStockMember 2017-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2017-12-31 0001331465 us-gaap:RetainedEarningsMember 2017-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2014-12-31 0001331465 us-gaap:CommonStockMember 2015-12-31 0001331465 us-gaap:RetainedEarningsAppropriatedMember 2016-12-31 0001331465 us-gaap:RetainedEarningsUnappropriatedMember 2017-12-31 0001331465 us-gaap:BuildingMember 2017-01-01 2017-12-31 0001331465 us-gaap:ComputerSoftwareIntangibleAssetMember 2016-01-01 2016-12-31 0001331465 fhlba:OfficeFurnitureAndBuildingImprovementsMember 2017-01-01 2017-12-31 0001331465 us-gaap:ComputerSoftwareIntangibleAssetMember 2017-12-31 0001331465 us-gaap:ComputerSoftwareIntangibleAssetMember 2017-01-01 2017-12-31 0001331465 us-gaap:ComputerSoftwareIntangibleAssetMember 2016-12-31 0001331465 us-gaap:ComputerSoftwareIntangibleAssetMember 2015-01-01 2015-12-31 0001331465 us-gaap:OtherAssetsMember 2017-12-31 0001331465 us-gaap:OtherAssetsMember 2016-12-31 0001331465 fhlba:AutomobilesAndComputerHardwareMember 2017-01-01 2017-12-31 0001331465 us-gaap:OfficeEquipmentMember 2017-01-01 2017-12-31 0001331465 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:USStatesAndPoliticalSubdivisionsMember 2017-12-31 0001331465 us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:ResidentialMortgageBackedSecuritiesMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:ResidentialMortgageBackedSecuritiesMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 fhlba:FixedInterestRateMember 2016-12-31 0001331465 fhlba:FixedInterestRateMember 2017-12-31 0001331465 fhlba:VariableInterestRateMember 2017-12-31 0001331465 fhlba:VariableInterestRateMember 2016-12-31 0001331465 fhlba:MBSIssuedByMembersOrAffiliatesOfMembersMember 2017-12-31 0001331465 fhlba:MBSIssuedByMembersOrAffiliatesOfMembersMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember fhlba:MBSIssuedByMembersOrAffiliatesOfMembersMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember fhlba:MBSIssuedByMembersOrAffiliatesOfMembersMember 2017-12-31 0001331465 fhlba:OtherThanMortgageBackedSecuritiesMember 2017-12-31 0001331465 fhlba:OtherThanMortgageBackedSecuritiesMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001331465 us-gaap:MortgageBackedSecuritiesMember 2016-12-31 0001331465 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:SingleFamilyMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:MultifamilyMember 2016-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember us-gaap:ResidentialMortgageBackedSecuritiesMember 2016-12-31 0001331465 us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:USStatesAndPoliticalSubdivisionsMember 2017-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember us-gaap:ResidentialMortgageBackedSecuritiesMember 2017-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:MultifamilyMember 2017-12-31 0001331465 us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember us-gaap:SingleFamilyMember 2017-12-31 0001331465 fhlba:SingleFamilyMortgageBackedSecuritiesOtherUSObligationMember us-gaap:SingleFamilyMember 2017-12-31 0001331465 fhlba:SingleFamilyMortgageBackedSecuritiesOtherUSObligationMember us-gaap:SingleFamilyMember 2016-12-31 0001331465 us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 fhlba:FixedInterestRateMember fhlba:OtherThanMortgageBackedSecuritiesMember 2016-12-31 0001331465 fhlba:VariableInterestRateMember us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001331465 fhlba:FixedInterestRateMember us-gaap:MortgageBackedSecuritiesMember 2017-12-31 0001331465 fhlba:VariableInterestRateMember us-gaap:MortgageBackedSecuritiesMember 2016-12-31 0001331465 fhlba:FixedInterestRateMember fhlba:OtherThanMortgageBackedSecuritiesMember 2017-12-31 0001331465 fhlba:VariableInterestRateMember fhlba:OtherThanMortgageBackedSecuritiesMember 2017-12-31 0001331465 fhlba:FixedInterestRateMember us-gaap:MortgageBackedSecuritiesMember 2016-12-31 0001331465 fhlba:VariableInterestRateMember fhlba:OtherThanMortgageBackedSecuritiesMember 2016-12-31 0001331465 us-gaap:MinimumMember 2017-12-31 0001331465 us-gaap:PrimeMember us-gaap:ResidentialMortgageBackedSecuritiesMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-01-01 2017-12-31 0001331465 fhlba:AltAMember us-gaap:ResidentialMortgageBackedSecuritiesMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-01-01 2017-12-31 0001331465 us-gaap:ResidentialMortgageBackedSecuritiesMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-01-01 2017-12-31 0001331465 us-gaap:FederalHomeLoanBankAdvancesCallableOptionMember 2016-12-31 0001331465 us-gaap:FederalHomeLoanBankAdvancesConvertibleOptionMember 2017-12-31 0001331465 us-gaap:FederalHomeLoanBankAdvancesConvertibleOptionMember 2016-12-31 0001331465 us-gaap:MaximumMember 2017-12-31 0001331465 us-gaap:FederalHomeLoanBankAdvancesCallableOptionMember 2017-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestLongTermMember 2017-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestLongTermMember 2016-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestMediumTermMember 2016-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestMediumTermMember 2017-12-31 0001331465 us-gaap:UsGovernmentAgencyInsuredLoansMember 2017-12-31 0001331465 us-gaap:UsGovernmentAgencyInsuredLoansMember 2016-12-31 0001331465 us-gaap:ConventionalLoanMember 2016-12-31 0001331465 us-gaap:ConventionalLoanMember 2017-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestMediumTermMember 2017-01-01 2017-12-31 0001331465 fhlba:LoansReceivableWithFixedRatesOfInterestMediumTermMember 2016-01-01 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2016-12-31 0001331465 us-gaap:NonperformingFinancingReceivableMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2016-12-31 0001331465 us-gaap:NonperformingFinancingReceivableMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2017-12-31 0001331465 us-gaap:PerformingFinancingReceivableMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2017-12-31 0001331465 us-gaap:PerformingFinancingReceivableMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2017-01-01 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2016-01-01 2016-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2015-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2015-01-01 2015-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember 2014-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:ConventionalLoanMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:UsGovernmentAgencyInsuredLoansMember 2017-12-31 0001331465 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2017-12-31 0001331465 fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:OtherFhlbanksMember 2017-12-31 0001331465 fhlba:EarlierOfContractualMaturityOrNextCallDateMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:EarlierOfContractualMaturityOrNextCallDateMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:ShortTermDebtMember 2017-12-31 0001331465 us-gaap:ShortTermDebtMember 2016-12-31 0001331465 fhlba:FederalHomeLoanBankConsolidatedObligationsCallableOptionMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:FederalHomeLoanBankConsolidatedObligationsWithNoRelatedOptionMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:FederalHomeLoanBankConsolidatedObligationsWithNoRelatedOptionMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:FederalHomeLoanBankConsolidatedObligationsCallableOptionMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:InterestRatePaymentTypeStepUpOrDownMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:FixedInterestRateMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:FixedInterestRateMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:InterestRatePaymentTypeSimpleVariableRateMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 fhlba:InterestRatePaymentTypeStepUpOrDownMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 fhlba:InterestRatePaymentTypeSimpleVariableRateMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2015-01-01 2015-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2016-01-01 2016-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2015-01-01 2015-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2014-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2016-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2016-01-01 2016-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2014-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-01-01 2017-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-01-01 2017-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2016-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2015-12-31 0001331465 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2015-12-31 0001331465 us-gaap:AvailableforsaleSecuritiesMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-12-31 0001331465 us-gaap:OtherLiabilitiesMember 2017-12-31 0001331465 fhlba:QualifedDefinedContributionPlanMember 2017-01-01 2017-12-31 0001331465 us-gaap:OtherLiabilitiesMember 2016-12-31 0001331465 fhlba:QualifedDefinedContributionPlanMember 2016-01-01 2016-12-31 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2015-07-01 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2017-07-01 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2016-07-01 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2017-01-01 2017-12-31 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2016-01-01 2016-12-31 0001331465 fhlba:PentegraDefinedBenefitPlanMember 2015-01-01 2015-12-31 0001331465 us-gaap:MultiemployerPlansPensionMember 2017-01-01 2017-12-31 0001331465 fhlba:QualifedDefinedContributionPlanMember 2015-01-01 2015-12-31 0001331465 us-gaap:ShortTermDebtMember 2015-01-01 2015-12-31 0001331465 us-gaap:UnsecuredDebtMember 2015-01-01 2015-12-31 0001331465 fhlba:AdvancesMember 2015-01-01 2015-12-31 0001331465 us-gaap:InterestRateSwapMember 2016-01-01 2016-12-31 0001331465 fhlba:NetInterestSettlementsMember 2015-01-01 2015-12-31 0001331465 fhlba:NetInterestSettlementsMember 2016-01-01 2016-12-31 0001331465 fhlba:NetInterestSettlementsMember 2017-01-01 2017-12-31 0001331465 us-gaap:InterestRateSwapMember 2015-01-01 2015-12-31 0001331465 fhlba:InterestRateCapsorFloorsMember 2017-01-01 2017-12-31 0001331465 us-gaap:InterestRateSwapMember 2017-01-01 2017-12-31 0001331465 fhlba:InterestRateCapsorFloorsMember 2015-01-01 2015-12-31 0001331465 fhlba:InterestRateCapsorFloorsMember 2016-01-01 2016-12-31 0001331465 us-gaap:CreditRiskContractMember 2017-12-31 0001331465 us-gaap:CreditRiskContractMember 2016-12-31 0001331465 us-gaap:MortgagesMember us-gaap:NondesignatedMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:DesignatedAsHedgingInstrumentMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:NondesignatedMember 2016-12-31 0001331465 fhlba:InterestRateCapsorFloorsMember us-gaap:NondesignatedMember 2017-12-31 0001331465 us-gaap:NondesignatedMember 2016-12-31 0001331465 us-gaap:NondesignatedMember 2017-12-31 0001331465 fhlba:InterestRateCapsorFloorsMember us-gaap:NondesignatedMember 2016-12-31 0001331465 us-gaap:MortgagesMember us-gaap:NondesignatedMember 2017-12-31 0001331465 fhlba:AdvancesMember 2017-01-01 2017-12-31 0001331465 us-gaap:ShortTermDebtMember 2017-01-01 2017-12-31 0001331465 us-gaap:UnsecuredDebtMember 2017-01-01 2017-12-31 0001331465 us-gaap:ShortTermDebtMember 2016-01-01 2016-12-31 0001331465 us-gaap:UnsecuredDebtMember 2016-01-01 2016-12-31 0001331465 fhlba:AdvancesMember 2016-01-01 2016-12-31 0001331465 us-gaap:OverTheCounterMember 2016-12-31 0001331465 us-gaap:OverTheCounterMember 2017-12-31 0001331465 us-gaap:ExchangeClearedMember 2016-12-31 0001331465 us-gaap:ExchangeClearedMember 2017-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2015-01-01 2015-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-01-01 2017-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2014-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2016-01-01 2016-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 fhlba:AvailableforSaleSecuritiesPrivateLabelResidentialMortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2015-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueMeasurementsRecurringMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember fhlba:ConsolidatedObligationDiscountNotesMember 2017-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2017-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ShortTermDebtMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:ShortTermDebtMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel3Member fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:ShortTermDebtMember 2017-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember fhlba:ConsolidatedObligationBondsMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:ShortTermDebtMember 2017-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember 2016-12-31 0001331465 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member 2016-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member 2016-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel3Member us-gaap:ShortTermDebtMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member us-gaap:ShortTermDebtMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel1Member us-gaap:ShortTermDebtMember 2016-12-31 0001331465 us-gaap:FairValueInputsLevel2Member fhlba:ConsolidatedObligationBondsMember 2016-12-31 0001331465 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:ShortTermDebtMember 2016-12-31 0001331465 us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:ShortTermDebtMember 2016-12-31 0001331465 us-gaap:StandbyLettersOfCreditMember 2016-12-31 0001331465 us-gaap:StandbyLettersOfCreditMember 2017-12-31 0001331465 us-gaap:LoanOriginationCommitmentsMember 2017-12-31 0001331465 us-gaap:UnsecuredDebtMember 2016-12-31 0001331465 us-gaap:UnsecuredDebtMember 2017-12-31 0001331465 us-gaap:LoanOriginationCommitmentsMember 2016-12-31 0001331465 us-gaap:MortgagesMember 2017-12-31 0001331465 us-gaap:MortgagesMember 2016-12-31 0001331465 fhlba:CapitalOneNationalAssociationMember 2016-12-31 0001331465 fhlba:BankOfAmericaMember 2016-12-31 0001331465 fhlba:NavyFederalCreditUnionMember 2016-12-31 0001331465 fhlba:BankOfAmericaMember 2017-12-31 0001331465 fhlba:NavyFederalCreditUnionMember 2017-12-31 0001331465 2016-12-01 2016-12-31 0001331465 2017-01-01 2017-01-31 0001331465 2018-02-01 2018-02-01 iso4217:USD iso4217:USD xbrli:shares fhlba:positions fhlba:bank xbrli:pure xbrli:shares fhlba:class fhlba:Institutions fhlba:investor fhlba:letter_of_credit
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
                                                                              For the transition period from to
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
____________________________

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class B Stock, par value $100
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    x  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes   x  No
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 requirements for the past 90 days.     x 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).    x  Yes    ¨  No

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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
¨
 
 
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 Act).    ¨  Yes   x  No

Registrant’s stock is not publicly traded and is only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. As of June 30, 2017, the aggregate par value of the stock held by current and former members of the registrant was $4,681,354,700. As of February 28, 2018, 58,472,142 total shares were outstanding, including mandatorily redeemable capital stock.


Table of Contents

Table of Contents
 
 
PART I.
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
PART II.
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9
Item 9A.
Item 9B.
 
PART III.
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
PART IV.
 
Item 15.
Item 16.
 
 
 


Table of Contents


Important Notice About Information in this Annual Report
In this annual report on Form 10-K (Report), unless the context suggests otherwise, references to the “Bank” mean the Federal Home Loan Bank of Atlanta. “FHLBanks” means the 11 district Federal Home Loan Banks, including the Bank, and “FHLBank System” means the FHLBanks and the Federal Home Loan Banks Office of Finance (Office of Finance), as regulated by the Federal Housing Finance Agency (Finance Agency). “FHLBank Act” means the Federal Home Loan Bank Act of 1932, as amended.
The information contained in this Report is accurate only as of the date of this Report and as of the dates specified herein.
The product and service names used in this Report are the property of the Bank and, in some cases, the other FHLBanks. Where the context suggests otherwise, the products, services, and company names mentioned in this Report are the property of their respective owners.

Special Cautionary Notice Regarding Forward-looking Statements

This Report includes statements describing anticipated developments, projections, estimates, or future predictions of the Bank that are “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided by the same regulations. These statements may use forward-looking terminology such as, but not limited to, “anticipates,” “believes,” “expects,” “plans,” “intends,” “may,” “could,” “estimates,” “assumes,” “should,” “will,” ”likely,” or their negatives or other variations on these terms. The Bank cautions that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Item 1A--Risk Factors and the risks set forth below. Accordingly, the Bank cautions that actual results could differ materially from those expressed or implied in these forward-looking statements or could impact the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, the reader is cautioned not to place undue reliance on such statements. These forward-looking statements speak only as of the date they are made, and the Bank does not undertake to update any forward-looking statement herein or that may be made from time to time on its behalf.

Forward-looking statements in this report may include, among others, the Bank’s expectations for:

the Bank’s business strategy and changes in operations, including, without limitation, product growth and change in product mix;

future performance, including profitability, dividends, retained earnings, developments, or market forecasts;

repurchases of stock in excess of a stockholder’s total stock investment requirement (excess stock);

credit losses on advances and investments in mortgage loans and mortgage-backed securities (MBS), particularly private-label MBS;

balance sheet changes and components thereof, such as changes in advances balances and the size of the Bank’s portfolio of investments in mortgage assets;

the Bank’s minimum retained earnings target;

the interest rate environment in which the Bank does business;

forward-looking accounting and financial statement effects; and

those other factors identified and discussed in the Bank’s public filings with the Securities and Exchange Commission (SEC).

Actual results may differ from forward-looking statements for many reasons including, but not limited to:

future economic and market conditions, including, for example, inflation and deflation, the timing and volume of market activity; general consumer confidence and spending habits; the strength of local economies in which the Bank conducts its business; housing prices, employment rates, and interest-rate changes that affect the housing markets;

3

Table of Contents


changes in the demand for the Bank’s advances and other products and services resulting from changes in members’ deposit flows and credit demands, as well as from changes in other sources of funding and liquidity available to members;

changes in the financial health of the Bank’s members;

volatility of market prices, rates, and indices that could affect the value of collateral held by the Bank as security for the obligations of Bank members and counterparties to derivatives and similar agreements;

the risk of changes in interest rates on the Bank’s interest-rate sensitive assets and liabilities;

changes in various governmental monetary or fiscal policies, as well as legislative and regulatory changes, including changes in accounting principles generally accepted in the United States of America (GAAP) and related industry practices and standards, or the application thereof;

changes in the credit ratings of the U.S. government and/or the FHLBanks;

political, national, and world events, including acts of war, terrorism, natural disasters or other catastrophic events, and legislative, regulatory, judicial, or other developments that affect the economy, the Bank’s market area, the Bank, its members, counterparties, its federal regulators, and/or investors in the consolidated obligations of the FHLBanks;

competitive forces, including other sources of funding available to Bank members, other entities borrowing funds in the capital markets, and the ability to attract and retain skilled individuals;

the Bank’s ability to develop, implement, promote the efficient performance of, and support and safeguard, technology and information systems, including those provided by third-parties, sufficient to measure and effectively manage the risks of the Bank’s business without significant interruption;

changes in investor demand for consolidated obligations of the FHLBanks and/or the terms of derivatives and similar agreements, including changes in investor preference and demand for certain terms of these instruments, which may be less attractive to the Bank, or which the Bank may be unable to offer;

the Bank’s ability to introduce, support, and manage the growth of new products and services and to successfully manage the risks associated with those products and services;

the Bank’s ability to successfully manage the credit and other risks associated with any new types of collateral securing advances;

the availability from acceptable counterparties, upon acceptable terms, of swaps, options, and other derivative financial instruments of the types and in the quantities needed for investment funding and risk-management purposes;

the uncertainty and costs of litigation, including litigation filed against one or more of the FHLBanks;

membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members, which could result in decreased advances or other business from such members;

changes in the FHLBank Act or Finance Agency regulations that affect FHLBank operations and regulatory oversight or changes in other statutes or regulations applicable to the FHLBanks; and

adverse developments or events, including financial restatements, affecting or involving one or more other FHLBanks or the FHLBank System in general.
These risk factors are not exhaustive. New risk factors may emerge from time to time. The Bank cannot predict such new risk factors nor can it assess the impact, if any, of such new risk factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements.

 


4

Table of Contents








PART I

Item 1. Business.

Overview

General. The Bank is a federally chartered corporation that was organized in 1932 and is one of 11 district FHLBanks. The FHLBanks, along with the Office of Finance, comprise the FHLBank System. The FHLBanks are U.S. government-sponsored enterprises (GSEs) organized under the authority of the FHLBank Act. Each FHLBank operates as a separate entity within a defined geographic district and has its own management, employees, and board of directors. The Bank’s defined geographic district includes Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and the District of Columbia. The Bank is supervised and regulated by the Finance Agency, an independent federal agency in the executive branch of the United States government.

Cooperative. The Bank is a cooperative owned by member institutions that are required to purchase capital stock in the Bank as a condition of membership. Federally insured depository institutions, insurance companies, privately insured state-chartered credit unions, and community development financial institutions (CDFIs) located in the Bank’s defined geographic district and engaged in residential housing finance are eligible to apply for membership. The Bank’s capital stock is not publicly traded and is owned entirely by current or former members and certain non-members that own the Bank’s capital stock as a result of a merger with or acquisition of a Bank member. The Bank’s membership totaled 866 financial institutions, comprised of 533 commercial banks, 76 savings institutions, 217 credit unions, 33 insurance companies, and seven CDFIs as of December 31, 2017.

Mission. The primary function of the Bank is to provide readily available, competitively priced funding to its member institutions. The Bank serves the public by providing its member institutions with a source of liquidity, thereby enhancing the availability of credit for residential mortgages and targeted community developments. The Bank primarily supports this mission by offering collateralized loans, known as advances, to its members. The Bank also offers other products and services, discussed below, that are intended to support the availability of residential-mortgage and community-investment credit.

The Bank’s primary source of funds is proceeds from the sale of FHLBank debt instruments to the public. These debt instruments, known as “consolidated obligations,” are the joint and several obligations of all the FHLBanks. Because of the FHLBanks’ GSE status, the FHLBanks are generally able to raise funds at favorable rates. The Bank’s cooperative ownership structure allows the Bank to pass along the benefit of these low funding rates to its members. The U.S. government does not guarantee the debt securities or other obligations of the Bank or the FHLBank System.

Business. The Bank manages its operations as one business segment. Management and the Bank’s board of directors review enterprise-wide financial information in order to make operating decisions and assess performance.

The Finance Agency assesses each FHLBank’s core mission achievement by evaluating its core mission asset ratio, calculated as the ratio of primary mission assets, which includes advances and acquired member assets, to consolidated obligations. The Bank’s core mission activities primarily include the making of advances. This ratio is calculated annually at year-end, using annual average par values. Based on this ratio, the Finance Agency has provided the following expectations for each FHLBank’s strategic plan:

when the ratio is at least 70 percent or higher, the strategic plan should include an assessment of the FHLBank’s prospects for maintaining this level;

when the ratio is at least 55 percent but less than 70 percent, the strategic plan should explain the FHLBank’s plan to increase its mission focus; and

when the ratio is below 55 percent, the strategic plan should include an explanation of the circumstances that caused the ratio to be at that level and detailed plans to increase the ratio. If the FHLBank maintains a ratio below 55 percent

5

Table of Contents

over the course of several consecutive reviews, then the board of directors should consider possible strategic alternatives.

The Bank’s core mission asset ratio was 74.3 percent as of December 31, 2017.

Under the FHLBank Act, the Bank is exempt from ordinary federal, state, and local taxation, except real property taxes. It does not have any subsidiaries nor does it sponsor any off-balance sheet special purpose entities.

For additional information regarding the Bank’s financial condition, changes in financial condition, and results of operations, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.


Products and Services

The Bank’s products and services include the following:

Credit Products;

Community Investment Services; and

Cash Management and Other Services.

Credit Products

The credit products that the Bank offers to its members include advances and standby letters of credit.

Advances

Advances are the Bank’s primary product. Advances are fully secured loans made to members and eligible housing finance agencies, authorities, and organizations called “housing associates” (non-members that are approved mortgagees under Title II of the National Housing Act). The carrying value of the Bank’s outstanding advances was $102.4 billion and $99.1 billion as of December 31, 2017 and 2016, respectively, and advances represented 69.9 percent and 71.5 percent of total assets as of December 31, 2017 and 2016, respectively. Advances generated 53.8 percent, 53.0 percent, and 23.2 percent of total interest income for the years ended December 31, 2017, 2016, and 2015, respectively.

Advances serve as a funding source for the Bank’s members for a variety of conforming and nonconforming mortgages. Thus, advances support important housing markets, including those focused on low- and moderate-income households. For those members that choose to sell or securitize their mortgages, advances can supply interim funding.

Generally, member institutions use the Bank’s advances for one or more of the following purposes:

providing funding for mortgages held in the member’s portfolio, including both conforming and nonconforming mortgages;

providing temporary funding during the origination, packaging, and sale of mortgages into the secondary market;

providing funding for commercial real estate loans;

assisting with asset-liability management by matching the maturity and prepayment characteristics of mortgage loans or adjusting the sensitivity of the member’s balance sheet to interest-rate changes;

providing a cost-effective alternative to meet contingent liquidity needs and adhere to liquidity management strategies; and

providing funding for community investment and economic development.

Pursuant to statutory and regulatory requirements, the Bank may only make long-term advances to community financial institutions for the purpose of enabling a member to purchase or fund new or existing residential housing finance assets, which may include defined small business loans, small farm loans, small agri-business loans, and community development loans. The Bank’s management indirectly monitors the purpose for which members use advances through limitations on eligible collateral and as described below.
 

6

Table of Contents

The Bank obtains a security interest in eligible collateral to secure a member’s advance prior to the time that the Bank originates or renews an advance. Eligible collateral is defined by the FHLBank Act, Finance Agency regulations, and the Bank’s credit and collateral policy. The Bank requires its borrowers to execute an advances and security agreement that establishes the Bank’s security interest in all collateral pledged by the borrower. The Bank perfects its security interest in collateral prior to making an advance to the borrower. As additional security for a member’s indebtedness, the Bank has a statutory and contractual lien on the member’s capital stock in the Bank. The Bank may also require additional or substitute collateral from a borrower, as provided in the FHLBank Act and the financing documents between the Bank and its borrowers.

The Bank’s management assesses member creditworthiness and financial condition, typically on a quarterly basis, to determine the term and maximum dollar amount of advances that the Bank will lend to a particular member. In addition, the Bank discounts eligible collateral and periodically revalues the collateral pledged by each member to secure its outstanding advances. The Bank has never experienced a credit loss on an advance.

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.

Pursuant to its regulations, the Federal Deposit Insurance Corporation (FDIC) has recognized the priority of an FHLBank’s security interest under the FHLBank Act and the right of an FHLBank to require delivery of collateral held by the FDIC, as receiver, for a failed depository institution.

The Bank offers standard and customized advances to fit a variety of member needs. Generally, the Bank offers maturities as described below, but longer maturities are available, which are subject to a member’s financial condition and available funding. The Bank’s advances include, among other products, the following:

Adjustable- or variable-rate indexed advances. Adjustable- or variable-rate indexed advances include the following:

Daily Rate Credit Advance (DRC Advance). The DRC Advance provides short-term funding with rate resets on a daily basis, similar to federal funds lines. The DRC Advance is available generally from one day to 12 months.

Adjustable Rate Credit Advance (ARC Advance). The ARC Advance is a long-term advance available for a term generally of up to 10 years with rate resets at specified intervals.

Float-to-Fixed Advance. This is an advance that floats to London Interbank Offered Rate (LIBOR) and changes to a predetermined fixed rate on a predetermined date prior to maturity. The Bank offers this product with a maturity generally of up to 15 years.

Fixed-rate advances. Fixed-rate advances include the following:

Fixed Rate Credit Advance (FRC Advance). The FRC Advance offers fixed-rate funds with principal due at maturity generally from one month to 20 years.

Callable Advance. The callable advance is a fixed-rate advance with a fixed maturity and the option for the borrower to prepay the advance on an option exercise date(s) before maturity without a fee. The options can be Bermudan (periodically during the life of the advance) or European (one-time). The Bank offers this product with a maturity generally of up to 10 years with options generally from three months to 10 years.

Expander Advance. The expander advance is a fixed-rate advance with a fixed maturity and an option by the borrower to increase the amount of the advance in the future at a predetermined interest rate. The option may be Bermudan or European. The Bank has established internal limits on the amount of such options that may be sold based upon which quarter they will mature. The Bank offers this product with a maturity generally of two years to 20 years with an option exercise date that can be set generally from one month to 10 years.

Principal Reducing Credit Advance (PRC Advance). The PRC Advance is a fixed-rate advance with a final maturity generally of up to 20 years and predetermined principal reductions on specific dates. The reduction schedule is predetermined by the borrower and may be scheduled on a monthly, quarterly, semi-annual, or annual basis. Amortization options include equal payments or structures similar to a mortgage.

7

Table of Contents


Hybrid advances. The hybrid advance is a fixed- or variable-rate advance that allows the inclusion of interest-rate caps and/or floors. The Bank offers this product with a maturity generally of up to 10 years with options generally from three months to 10 years.

Convertible advances. In a convertible advance, the Bank purchases an option from the borrower that allows the Bank to modify the interest rate on the advance from fixed to variable on certain specified dates. The Bank’s option can be Bermudan or European. The Bank offers this product with a maturity generally of up to 15 years with options generally from three months to 15 years.

Forward starting advances. With the forward starting advance, the borrower may enter into the terms of any structured advance, including the fixed-rate Hybrid, ARC Advance, Expander Advance, or Float-to-Fixed Advance, with a future settlement date. Interest accrues beginning on the settlement date. A termination fee applies if the borrower voluntarily terminates the advance prior to the settlement date.

The following table presents the par value of outstanding advances by product characteristics (dollars in millions). See Note 9Advances to the Bank’s 2017 audited financial statements for further information on the distinction between par value and carrying value of outstanding advances.

 
As of December 31,
 
2017
 
2016
 
Amount
 
Percent of Total  
 
Amount
 
Percent of Total  
Fixed rate (1)
$
42,984

 
42.04
 
$
38,941

 
39.62
Adjustable or variable-rate indexed
38,344

 
37.50
 
34,930

 
35.54
Hybrid
18,901

 
18.48
 
21,453

 
21.83
Convertible
693

 
0.68
 
1,497

 
1.52
Principal reducing credit
1,327

 
1.30
 
1,467

 
1.49
Total par value
$
102,249

 
100.00
 
$
98,288

 
100.00
 ____________
(1) Includes convertible advances whose conversion options have expired.

The Bank establishes interest rates on advances using the Bank’s cost of funds on consolidated obligations and the interest-rate swap market. The Bank establishes an interest rate applicable to each type of advance each day and then adjusts those rates during the day to reflect changes in the cost of funds and interest rates.

The Bank includes prepayment fee provisions in most advance transactions. With respect to callable advances, prepayment fees apply to prepayments on dates other than option exercise dates. The Bank also offers variable-rate prepayable advances, in which prepayment fees apply to prepayments made on dates other than certain specified dates. As required by Finance Agency regulations, the prepayment fee is intended to make the Bank financially indifferent to a borrower’s decision to prepay an advance before maturity or, with respect to a callable advance, on a date other than an option exercise date.


8

Table of Contents

The following table presents information on the Bank’s 10 largest borrowers of advances (dollars in millions):
 
 
 
 
As of December 31, 2017
Institution
 
State
 
Advances
 Par Value
 
Percent of Total Advances
 
Weighted-average Interest
Rate
(%) (1)
 
 
Bank of America, National Association
 
North Carolina
 
$
21,010

 
20.55
 
1.32
Navy Federal Credit Union
 
Virginia
 
15,530

 
15.19
 
2.26
Capital One, National Association
 
Virginia
 
8,608

 
8.42
 
1.45
TIAA, FSB
 
Florida
 
7,081

 
6.92
 
1.78
Branch Banking and Trust Company
 
North Carolina
 
5,042

 
4.93
 
1.90
BankUnited, National Association
 
Florida
 
4,771

 
4.67
 
1.40
Regions Bank
 
Alabama
 
4,152

 
4.06
 
1.44
Pentagon Federal Credit Union
 
Virginia
 
2,361

 
2.31
 
2.48
Compass Bank
 
Alabama
 
1,625

 
1.59
 
1.73
United Bank
 
Virginia
 
1,260

 
1.23
 
1.60
Subtotal (10 largest borrowers)
 
 
 
71,440

 
69.87
 
1.69
Subtotal (all other borrowers)
 
 
 
30,809

 
30.13
 
1.72
Total par value
 
 
 
$
102,249

 
100.00
 
1.70
 ____________
(1) The average interest rate of the member’s advance portfolio weighted by each advance’s outstanding balance.

A description of the Bank’s credit risk management and collateral valuation methodology as it relates to its advance activity is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Advances.

Standby Letters of Credit

The Bank issues irrevocable standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. Members may use standby letters of credit for residential housing financing and community lending or for liquidity and asset-liability management. In particular, members often use standby letters of credit as collateral for deposits from public sector entities. Standby letters of credit are generally available for nonrenewable terms of up to five years or for one-year terms that are renewable annually with a final expiration date of up to 10 years after issuance. The Bank requires members to fully collateralize the face amount of any standby letter of credit issued by the Bank during the term of the standby letter of credit. The Bank also charges members a fee based on the face amount of the standby letter of credit. If the Bank is required to make a payment for a beneficiary’s draw, the amount must be reimbursed by the member immediately or, subject to the Bank’s discretion, may be converted into an advance to the member. The Bank’s underwriting and collateral requirements for standby letters of credit are the same as they are for advances. Standby letters of credit are not subject to activity-based capital stock purchase requirements. The Bank has never experienced a credit loss related to a standby letter of credit reimbursement obligation. Unlike advances, standby letters of credit are accounted for as financial guarantees because a standby letter of credit may expire in accordance with its terms without ever being drawn upon by the beneficiary. The Bank had $30.2 billion and $32.7 billion of outstanding standby letters of credit as of December 31, 2017 and 2016, respectively.


9

Table of Contents

Advances and Standby Letters of Credit Combined

The following table presents information on the Bank’s 10 largest borrowers of advances and standby letters of credit combined (dollars in millions):

 
 
 
 
As of December 31, 2017
Institution
 
State
 
Advances Par Value and Standby Letters of Credit Balance
 
Percent of Total Advances Par Value and Standby Letters of Credit
Bank of America, National Association
 
North Carolina
 
$
31,108

 
23.49
Navy Federal Credit Union
 
Virginia
 
15,661

 
11.82
Capital One, National Association
 
Virginia
 
9,115

 
6.88
Compass Bank
 
Alabama
 
8,218

 
6.21
TIAA, FSB
 
Florida
 
7,232

 
5.46
SunTrust Bank
 
Georgia
 
6,708

 
5.06
Branch Banking and Trust Company
 
North Carolina
 
5,042

 
3.81
BankUnited, National Association
 
Florida
 
4,771

 
3.60
Pentagon Federal Credit Union
 
Virginia
 
4,289

 
3.24
Regions Bank
 
Alabama
 
4,152

 
3.14
Subtotal (10 largest borrowers)
 
 
 
96,296

 
72.71
Subtotal (all other borrowers)
 
 
 
36,142

 
27.29
Total advances par value and standby letters of credit
 
$
132,438

 
100.00

Community Investment Services

Each FHLBank contributes 10 percent of its income subject to assessment to the Affordable Housing Program (AHP), or such additional prorated sums as may be required so that the aggregate annual contribution of the FHLBanks is not less than $100 million. For purposes of the AHP calculation, each FHLBank’s income subject to assessment is defined as the individual FHLBank’s net income before assessments, plus interest expense related to mandatorily redeemable capital stock. The assessment for AHP is further discussed under the Taxation/Assessments heading below.

AHP provides no-cost or low-cost funds in the form of a direct subsidy or a subsidized advance to members to support the financing of rental and for-sale housing for very low-, low-, and moderate-income households. The Bank offers a Competitive AHP, a Set-aside AHP, and a discounted advance program that supports projects that provide affordable housing and economic development benefiting those households. A description of each program is as follows:

the Competitive AHP is offered annually through a competitive application process and provides funds for either rental or ownership real estate projects submitted through member financial institutions;

the Set-aside AHP currently consists of the following nine distinct products: First-time Homebuyer, Community Partners, Foreclosure Recovery, Veterans Purchase, Returning Veterans Purchase, Veterans Rehabilitation, Returning Veterans Rehabilitation, Community Rebuild and Restore, and Structured Partnership Product. The Set-aside AHP products are available on a first-come, first-served basis and provide no-cost funds through member financial institutions to be used for down payments, closing costs, and other costs associated with the purchase, purchase/rehabilitation, or rehabilitation of homes for families at or below 80 percent of the area median income; and

the discounted advance program consists of the Community Investment Program and the Economic Development Program, which both provide the Bank’s members with access to low-cost funding to create affordable rental and homeownership opportunities and to engage in commercial and economic development activities that benefit low- and moderate-income individuals and neighborhoods.

The Bank’s AHP assessments were $39 million, $31 million, and $33 million for the years ended December 31, 2017, 2016, and 2015, respectively.


10

Table of Contents

Cash Management and Other Services

The Bank provides a variety of services to help members meet day-to-day cash management needs. These services include cash management services that support member advance activity, such as daily investment accounts, automated clearing house (ACH) transactions, and custodial mortgage accounts. In addition to cash management services, the Bank provides other noncredit services, including wire transfer services and safekeeping services. These cash management, wire transfer, and safekeeping services do not generate material amounts of income and are performed primarily as ancillary services for the Bank’s members.

The Bank also acts as an intermediary to meet the derivatives needs of its smaller members that have limited or no access to the capital markets. This service assists members with asset-liability management by giving them indirect access to the capital markets. These intermediary transactions involve the Bank entering into a derivative with a member and then entering into a mirror-image derivative with one of the Bank’s approved counterparties. The derivatives entered into by the Bank as a result of its intermediary activities do not qualify for hedge accounting treatment and are separately marked to fair value through earnings. The Bank attempts to earn income from this service sufficient to cover its operating expenses through the minor difference in rates on these mirror-image derivatives. The net result of the accounting for these derivatives is not material to the operating results of the Bank. The Bank may require both the member and the counterparty to post collateral for any market value exposure that may exist during the life of the transaction.

Mortgage Loan Purchase Programs

The Bank’s mortgage loan purchase programs provide members an alternative to holding mortgage loans in a portfolio or selling them into the secondary market. Prior to 2008, the Bank purchased loans directly from member participating financial institutions (PFIs) through the Mortgage Partnership Finance® Program (MPF® Program), a program developed by FHLBank Chicago and the Mortgage Purchase Program (MPP), a program separately established by the Bank. The Bank ceased directly purchasing new mortgage assets under these mortgage programs in 2008. However, the Bank continues to support its existing MPP and MPF Program mortgage loan portfolios. In 2014, the Bank renewed its participation in the MPF Program. The Bank now offers the following MPF Program products: MPF Xtra, MPF Direct, and MPF Government MBS, through which the Bank facilitates third parties’ purchases of PFI loans rather than holding such loans as Bank assets.

MPF Program

From time to time, the Bank has offered various products to members through the MPF Program. FHLBank Chicago, as the MPF provider, is responsible for providing transaction processing services, as well as developing and maintaining the underwriting criteria and program servicing guide. The Bank pays FHLBank Chicago a fee for providing these services. Conventional loans purchased from PFIs under the MPF Program are subject to varying levels of loss allocation and credit enhancement structures. Federal Housing Administration (FHA)-insured and Department of Veterans Affairs (VA)-guaranteed loans are not subject to the credit enhancement obligations applicable to conventional loans under the MPF Program. The PFI may retain the right and responsibility for servicing the loans or sell the servicing rights, and the PFI may be required to repurchase a loan in the event of a breach of eligibility requirement or other warranty.

Traditional MPF Products. The Bank maintains a portfolio of mortgage loans that were historically purchased directly from PFIs and are recorded on the balance sheet. One of the Bank’s PFIs under the traditional MPF products, Branch Banking and Trust Company, was among the Bank’s top 10 borrowers as of December 31, 2017.

MPF Xtra. In 2014, the Bank began to offer the MPF Xtra product to members. Under the MPF Xtra product, FHLBank Chicago purchases residential, conforming fixed-rate mortgage loans from the Bank’s PFIs and concurrently sells these loans to Fannie Mae. The Bank receives a counterparty fee from FHLBank Chicago for each PFI loan sold to FHLBank Chicago through the MPF Xtra product in exchange for the Bank’s role in facilitating the sale. The MPF Xtra loans are passed through to Fannie Mae as a third-party investor and do not become Bank assets.

MPF Direct. In 2015, the Bank began to offer the MPF Direct product to members. MPF Direct is a jumbo loan product that partners the MPF program with Redwood Trust, Inc., a real estate investment trust. This partnership offers PFIs the opportunity to sell their fixed-rate mortgages with loan balances greater than the conforming loan limit up to $2.5 million into the secondary market. The Bank receives a counterparty fee from FHLBank Chicago for each PFI loan sold through the MPF Direct product in exchange for the Bank’s role in facilitating the sale. The MPF Direct loans are passed through to Redwood Trust, Inc. and do not become Bank assets.

11

Table of Contents

MPF Government MBS. In 2015, the Bank began to offer the MPF Government MBS product to members. MPF Government MBS is a product whereby the FHLBank Chicago purchases government-insured and/or -guaranteed loans from eligible PFIs, and the purchased loans are aggregated as “held for sale” and pooled into securities guaranteed by the Government National Mortgage Association (Ginnie Mae). The Bank receives a counterparty fee from FHLBank Chicago for each PFI loan sold through the MPF Government MBS product in exchange for the Bank’s role in facilitating the sale.

Mortgage Partnership Finance® Program, “Mortgage Partnership Finance®”, “MPF®,” and “MPF Xtra®” are registered trademarks of FHLBank Chicago.

MPP

The Bank’s MPP is independent of other FHLBanks’ mortgage loan programs. Therefore, the Bank has greater control over pricing, quality of customer service, relationships with any third-party service providers, and program changes. Certain benefits of greater Bank control include the Bank’s ability to control operating costs and to manage its regulatory relationship directly with the Finance Agency. There were no MPP PFIs that were among the Bank’s top 10 borrowers as of December 31, 2017.

The MPF Program and MPP are authorized under applicable regulations. Regulatory interpretive guidance provides that an FHLBank may sell loans acquired through its mortgage loan purchase programs so long as it also sells the related credit enhancement obligation. The Bank currently is not selling loans it has acquired through these mortgage loan purchase programs. The contractual maturity dates of some of the purchased loans extend out to 2047.

Descriptions of the MPF Program and MPP underwriting and eligibility standards and credit enhancement structures are contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk—Mortgage Loan Programs.

Investments

The Bank maintains a portfolio of investment securities and other investments for liquidity purposes to provide for the availability of funds to meet member credit needs and to provide additional earnings for the Bank. As of December 31, 2017, the Bank’s investment securities consist of MBS issued by GSEs, U.S. government agencies, or private-label securities; securities issued by the U.S. government or U.S. government agencies; and state and local housing agency obligations. The Bank ceased purchasing private-label MBS in 2008. The investment securities portfolio generally provides the Bank with higher returns than those available in other investments. The Bank’s other investments may consist of interest-bearing deposits, overnight and term federal funds sold, and securities purchased under agreements to resell. U.S. agency and GSE securities were 61.0 percent and 65.8 percent of the Bank’s total investments as of December 31, 2017 and 2016, respectively, as discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionInvestments. Investments generated 44.6 percent, 44.2 percent, and 70.3 percent of total interest income for the years ended December 31, 2017, 2016, and 2015, respectively.

The Bank’s MBS investment practice is to purchase MBS from a group of Bank-approved dealers, which may include “primary dealers.” Primary dealers are banks and securities brokerages that trade in U.S. government securities with the Federal Reserve System. The Bank does not purchase MBS from its members, except in the case in which a member or its affiliate is on the Bank’s list of approved dealers. In all cases, the Bank bases its investment decisions on the relative rates of return of competing investments and does not consider whether an MBS is being purchased from or issued by a member or an affiliate of a member. The MBS balance included a carrying value of $866 million and $1.1 billion, respectively, of MBS that were issued by one of the Bank’s members or an affiliate of a member as of December 31, 2017 and 2016. See Note 6Available-for-sale Securities and Note 7Held-to-maturity Securities to the Bank’s 2017 audited financial statements for a tabular presentation of the available-for-sale and held-to-maturity securities issued by members or affiliates of members.

Finance Agency regulations prohibit the Bank from investing in certain types of securities. These restrictions are discussed in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsRisk ManagementCredit RiskInvestments.
 
Finance Agency regulations prohibit an FHLBank from purchasing MBS and asset-backed securities if its investment in such securities exceeds 300 percent of the FHLBank’s previous month-end regulatory capital on the day it purchases the securities. Regulatory capital is defined as the sum of permanent capital, the amount paid-in for Class A stock (if any), the amount of the Bank’s general allowance for losses (if any), and the amount of any other instruments identified in the capital plan and approved by the Finance Agency. For discussion regarding the Bank’s compliance with this regulatory requirement, refer to

12

Table of Contents

Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionInvestments.
 
The Bank is subject to credit and market risk on its investments. For discussion as to how the Bank manages these risks, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsRisk ManagementCredit RiskInvestments.

Funding Sources

Consolidated Obligations

Consolidated obligations, consisting of bonds and discount notes, are the joint and several obligations of the FHLBanks, backed only by the financial resources of the FHLBanks. Consolidated obligations are not obligations of the U.S. government, and the United States does not guarantee the consolidated obligations. The Office of Finance has responsibility for facilitating and executing the issuance of consolidated obligations for all the FHLBanks. It also services all outstanding debt. The Bank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf); however, the Bank is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. If the principal or interest on any consolidated obligation issued on behalf of the Bank is not paid in full when due, the Bank may not pay any extraordinary expenses or pay dividends to, or redeem or repurchase shares of capital stock from, any member of the Bank. 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.

To the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the noncomplying FHLBank. However, if the Finance Agency determines that the noncomplying FHLBank is unable to satisfy its obligations, the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis the Finance Agency may determine.

Finance Agency regulations also state that the Bank must maintain the following types of assets that are free from any lien or pledge in an aggregate amount at least equal to the amount of the Bank’s portion of the consolidated obligations outstanding, provided that any assets that are subject to a lien or pledge for the benefit of the holders of any issue of consolidated obligations shall be treated as if they were assets free from any lien or pledge for purposes of this negative pledge requirement:

cash;

obligations of, or fully guaranteed by, the United States;
 
secured advances;

mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States; and

investments described in Section 16(a) of the FHLBank Act which, among other items, include securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.

The Bank was in compliance with this Finance Agency regulation as of December 31, 2017 and 2016.

Consolidated obligations are issued with either fixed- or variable-rate coupon payment terms that may use a variety of indices. The Bank, working through the Office of Finance, is able to customize consolidated obligations to meet investor demands. Customized features can include different indices and embedded derivatives. The Bank offsets these customized features predominantly by derivatives to reduce the market risk associated with the consolidated obligations.
 
Consolidated Obligation Bonds. Consolidated obligation bonds satisfy longer-term funding requirements. Typically, the maturity of these securities ranges from one year to 10 years, but the maturity is not subject to any statutory or regulatory limit. Consolidated obligation bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members. The FHLBanks also use the TAP issue program for fixed-rate, noncallable bonds. Under this program, the FHLBanks offer debt obligations at specific maturities that may be reopened daily, generally during a three-month period through competitive auctions. The goal of the TAP program is to aggregate frequent smaller issues into a

13

Table of Contents

larger bond issue that may have greater market liquidity.

Consolidated Obligation Discount Notes. Through the Office of Finance, the FHLBanks also issue consolidated obligation discount notes to provide short-term funds for advances to members, for the Bank’s other investments, and for the Bank’s variable-rate and convertible advance programs. These securities have maturities up to 366 days and are offered daily through a consolidated obligation discount note selling group. Discount notes are issued at a discount and mature at par.

Certification and Reporting Obligations. Under Finance Agency regulations, before the end of each calendar quarter and before paying any dividends for that quarter, the president of the Bank must certify to the Finance Agency that, based upon known current facts and financial information, the Bank will remain in compliance with applicable liquidity requirements and will remain capable of making full and timely payments of all current obligations (which includes the Bank’s obligation to pay principal and interest on consolidated obligations issued on its behalf through the Office of Finance) coming due during the next quarter. The Bank is required to provide notice to the Finance Agency upon the occurrence of any of the following:

the Bank is unable to provide the required certification;

the Bank projects, at any time, that it will fail to comply with its liquidity requirements or will be unable to meet all of its current obligations due during the quarter;

the Bank actually fails to comply with its liquidity requirements or to meet all of its current obligations due during the quarter; or

the Bank negotiates to enter or enters into an agreement with one or more other FHLBanks to obtain financial assistance to meet its current obligations due during the quarter.

The Bank must file a consolidated obligation payment plan for Finance Agency approval upon the occurrence of any of the following:
 
the Bank becomes a noncomplying FHLBank as a result of failing to provide a required certification related to liquidity requirements and ability to meet all current obligations;

the Bank becomes a noncomplying FHLBank as a result of being required to provide notice to the Finance Agency of certain matters related to liquidity requirements or inability to meet current obligations; or

the Finance Agency determines that the Bank will cease to be in compliance with its liquidity requirements or will lack the capacity to meet all of its current obligations due during the quarter.

Regulations permit a noncompliant FHLBank to continue to incur and pay normal operating expenses in the regular course of business. However, a noncompliant FHLBank may not incur or pay any extraordinary expenses, declare or pay dividends, or redeem any capital stock until the Finance Agency has approved the FHLBank’s consolidated obligation payment plan or inter-FHLBank assistance agreement or has ordered another remedy, and the noncompliant FHLBank has paid all its direct obligations.

Deposits

The FHLBank Act allows the Bank to accept deposits from its members, any institution for which it is providing correspondent services, other FHLBanks, or other governmental instrumentalities. Deposits provide some of the Bank’s funding resources while also giving members a low-risk earning asset that satisfies their regulatory liquidity requirements. The Bank had demand and overnight deposits of $1.2 billion and $1.1 billion as of December 31, 2017 and 2016, respectively.

To support its member deposits, the FHLBank Act requires the Bank to have an amount equal to or greater than the current deposits received from its members as a reserve. These reserves are required to be invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. The Bank had excess deposit reserves of $106.4 billion and $88.7 billion as of December 31, 2017 and 2016, respectively.


14

Table of Contents

Capital and Capital Rules

The Bank must comply with regulatory requirements for total regulatory capital, leverage capital, and risk-based capital. To satisfy these capital requirements, the Bank maintains a capital plan. Each member’s minimum stock requirement is an amount equal to the sum of a “membership” stock component and an “activity-based” stock component under the plan. The FHLBank Act and applicable regulations require that the minimum stock requirement for members must be sufficient to enable the Bank to meet its minimum leverage and risk-based capital requirements. If necessary, the Bank may adjust the minimum stock requirement from time to time within the ranges established in the capital plan. Each member is required to comply promptly with any adjustment to the minimum stock requirement.

As of December 31, 2017, the membership stock requirement was 0.09 percent (nine basis points) of the member’s total assets, subject to a cap of $15 million.

As of December 31, 2017, the activity-based stock requirement was the sum of the following:

4.25 percent of the member’s outstanding par value of advances; and

8.00 percent of any outstanding targeted debt/equity investment (such as multifamily residential mortgage loan assets) sold by the member to the Bank on or after December 17, 2004.

In addition, the activity-based stock requirement may include a percentage of any outstanding balance of acquired member assets (such as residential mortgage loan assets), although this percentage was set at zero as of December 31, 2017. The Bank did not have any multifamily residential mortgage loan assets purchased from members or other targeted debt/equity investments outstanding; therefore, the 8.00 percent activity-based stock requirement was inapplicable as of December 31, 2017.

Although applicable regulations allow the Bank to issue Class A stock or Class B stock, or both, to its members, the Bank’s capital plan allows it to issue only Class B stock.

The Bank’s financial management policy contains provisions to help preserve the value of the members’ investment in the Bank and reasonably mitigate the effect on capital of unanticipated operating and accounting events. For additional information regarding the Bank’s capital and capital requirements, as well as information regarding the Bank’s retained earnings and dividends, refer to Item 5, Market for Registrant’s Common EquityRelated Stockholder Matters and Issuer Purchases of Equity Securities; Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionCapital; and Note 14Capital and Mandatorily Redeemable Capital Stock to the Bank’s 2017 audited financial statements.

Derivatives

Finance Agency regulations and the Bank’s Risk Management Policy (RMP) establish guidelines for derivatives. These policies and regulations prohibit the trading or speculative use of these instruments and limit permissible credit risk arising from these instruments. The Bank enters into derivatives to manage the exposure to interest-rate risk inherent in otherwise unhedged assets and funding positions and to achieve the Bank’s risk management objectives. These derivatives consist of interest-rate swaps (including callable and putable swaps), swaptions, interest-rate cap and floor agreements, and forward contracts. Generally, the Bank uses derivatives in its overall interest-rate risk management to accomplish one or more of the following objectives:


15

Table of Contents

preserve a favorable interest-rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation bond used to fund the advance) by converting both fixed-rate instruments to a variable rate using interest-rate swaps;

reduce funding costs by combining a derivative with a consolidated obligation because the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation bond;

reduce the interest-rate sensitivity and repricing gaps of assets and liabilities;

mitigate the adverse earnings effects of the shortening or lengthening of certain assets (e.g., mortgage assets);

protect the value of existing asset or liability positions;

manage embedded options in assets and liabilities; and

achieve overall asset/liability management objectives.

The total notional amount of the Bank’s outstanding derivatives was $58.9 billion and $81.2 billion as of December 31, 2017 and 2016, respectively. The contractual or notional amount of a derivative is not a measure of the amount of credit risk from that transaction; rather, the notional amount serves as a basis for calculating periodic interest payments or cash flows.

The Bank may enter into derivatives concurrently with the issuance of consolidated obligations with embedded options. When issuing bonds, the Bank generally simultaneously enters into derivatives to, in effect, convert fixed-rate liabilities into variable-rate liabilities. The continued attractiveness of such debt depends on price relationships in both the bond market and derivatives markets. If conditions in these markets change, the Bank may alter the types or terms of the bonds issued. Similarly, the Bank may enter into derivatives in conjunction with the origination of advances with embedded options. Issuing fixed-rate advances while simultaneously entering into derivatives, in effect, converts fixed-rate advances into variable-rate earning assets.

The Bank is subject to credit risk in all derivatives due to potential nonperformance by the derivative counterparty. For further discussion as to how the Bank manages its credit risk and market risk on its derivatives, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationRisk Management.

Competition

Advances. A number of factors affect demand for the Bank’s advances, including, but not limited to, the availability and cost of other sources of liquidity for the Bank’s members, such as demand deposits, brokered deposits, and the repurchase market. The Bank individually competes with other suppliers of secured and unsecured wholesale funding. Such other suppliers may include investment banks, commercial banks, and in certain circumstances, other FHLBanks. Smaller members may have access to alternative funding sources through sales of securities under agreements to repurchase, while larger members may have access to all the alternatives listed above. Larger members also may have independent access to the national and global credit markets. The availability of alternative funding sources to members can significantly influence the demand for the Bank’s advances and can vary as a result of a number of factors, including market conditions, member liquidity levels, members’ creditworthiness, and availability of collateral.

Debt Issuance. The Bank competes with Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lesser amounts of debt issued at the same cost than otherwise would be the case. In addition, the availability and cost of funds raised through the issuance of certain types of unsecured debt may be affected adversely by regulatory initiatives that tend to reduce investments by certain depository institutions in unsecured debt with greater price volatility or interest-rate sensitivity than fixed-rate, fixed-maturity instruments of the same maturity. Further, a perceived or actual higher level of government support for other GSEs may increase demand for their debt securities relative to similar FHLBank securities.

Interest-rate Exchange Agreements. The sale of callable debt and the simultaneous execution of callable interest-rate swaps that mirror the debt have been important sources of competitive funding for the Bank. As such, the availability of markets for callable debt and interest-rate swaps may be an important determinant of the Bank’s relative cost of funds. There is considerable competition among high credit quality issuers in the markets for these instruments.



16

Table of Contents

Regulatory Oversight, Audits, and Examinations

The Finance Agency supervises and regulates the FHLBanks. The Finance Agency is responsible for ensuring that (1) the FHLBanks operate in a safe and sound manner, including maintenance of adequate capital and internal controls; (2) the operations and activities of the FHLBanks foster liquid, efficient, competitive, and resilient national housing finance markets; (3) the FHLBanks comply with applicable laws and regulations; and (4) the FHLBanks carry out their housing finance mission through authorized activities that are consistent with the public interest. In this capacity, the Finance Agency issues regulations and policies that govern, among other things, the permissible activities, powers, investments, risk-management practices, and capital requirements of the FHLBanks, and the authorities and duties of FHLBank directors. The Finance Agency conducts annual, on-site examinations of the Bank, as well as periodic off-site reviews. In addition, the Bank must submit to the Finance Agency monthly financial information on the condition and results of operations of the Bank. The Bank is also subject to regulation by the SEC.

The Government Corporation Control Act provides that, before a government corporation (which includes each of the FHLBanks) issues and offers obligations to the public, the Secretary of the Treasury shall prescribe (1) the form, denomination, maturity, interest rate, and conditions of the obligations; (2) the time and manner in which issued; and (3) the selling price. Under the FHLBank Act, the Secretary of the Treasury has the authority, at his discretion, to purchase consolidated obligations up to an aggregate principal amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.

The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the Bank and to decide the extent to which they fairly and effectively fulfill the purposes of the FHLBank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, he or she must report the results and provide his or her recommendations to Congress, the Office of Management and Budget, and the FHLBank in question. The Comptroller General also may conduct his or her own audit of any financial statements of the Bank.

The Bank has an internal audit department; the Bank’s board of directors has an audit committee; and an independent registered public accounting firm audits the annual financial statements of the Bank. The independent registered public accounting firm conducts these audits following the standards of the Public Company Accounting Oversight Board (United States) and Government Auditing Standards issued by the Comptroller General. The Finance Agency receives the Bank’s Report and audited financial statements. The Bank must submit annual management reports to Congress, the President of the United States, the Office of Management and Budget, and the Comptroller General. These reports include audited financial statements, a statement of internal accounting and administrative control systems, and the report of the independent registered public accounting firm on the financial statements.

Available Information

The Bank is required to file with the SEC an annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. The SEC maintains a website containing these reports and other information regarding the Bank’s electronic filings located at http://www.sec.gov. These reports may also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. Further information about the operation of the Public Reference Room may be obtained at 1-800-SEC-0330.

The Bank’s website is located at www.fhlbatl.com. The Bank posts its annual report on Form 10-K on its website as soon as reasonably practicable after it is filed with the SEC, and the Bank also provides a link to the SEC website that has all of the Bank’s SEC filings.

The content of the websites referenced above is not incorporated by reference into this Report or in any other report or document that the Bank files with the SEC, and any references to these websites are intended to be inactive textual references only.

Personnel

As of December 31, 2017, the Bank employed 322 full-time and 3 part-time employees.


17

Table of Contents

Taxation/Assessments

The Bank is exempt from ordinary federal, state, and local taxation, except for real property tax. However, each FHLBank must set aside 10 percent of their income subject to assessment for the AHP, or such additional prorated sums as may be required so that the aggregate annual contribution of the FHLBanks is not less than $100 million. For purposes of the AHP calculation, each FHLBank’s income subject to assessment is defined as the individual FHLBank’s net income before assessments, plus interest expense related to mandatorily redeemable capital stock. If an FHLBank experiences a net loss for a full year, the FHLBank would have no obligation to the AHP for that year since each FHLBank’s required annual AHP contribution is limited to its annual income subject to assessment. AHP assessments for the Bank were $39 million, $31 million, and $33 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Item 1A. Risk Factors.

The following discussion summarizes some of the more important risks that the Bank faces. This discussion is not exhaustive, and there may be other risks that the Bank faces, which are not described below. These risks should be read in conjunction with the other information included in this Report, including, without limitation, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, the financial statements and notes, and “Special Cautionary Notice Regarding Forward-looking Statements.” The risks described below, if realized, could negatively impact the Bank’s business operations, financial condition, and future results of operations and, among other things, could result in the Bank’s inability to pay dividends on, and/or repurchase or redeem, its capital stock.

Business and Regulatory Risk

The Bank is subject to a complex body of laws and regulations, which could change or be applied in a manner detrimental to the Bank’s operations.

The FHLBanks are GSEs, organized under the authority of the FHLBank Act, and governed by federal laws and regulations as adopted and applied by the Finance Agency. Congress may amend the FHLBank Act or amend or adopt other statutes in ways that significantly affect the rights and obligations of the FHLBanks and the manner in which the FHLBanks carry out their housing finance mission and business operations. New or modified legislation enacted by Congress or regulations adopted by the Finance Agency or other financial services regulators could have a negative effect on the Bank’s ability to conduct business or on the cost of doing business. In addition, certain regulations affecting our members could impact the extent to which they can engage in business with the Bank. Due to recent changes in the U.S. government administration and recent executive actions, there are additional uncertainties in the legislative and regulatory environment.

Changes in statutory or regulatory requirements, or their application, could result in, among other things, an increase in the FHLBanks’ cost of funding and regulatory compliance; a change in membership or permissible business activities; additional liquidity requirements; or a decrease in the size, scope, or nature of the FHLBanks’ lending or investment activities, any of which could negatively impact the Bank’s financial condition and results of operations.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of OperationsLegislative and Regulatory Developments for a discussion of recent legislative and regulatory activity that could affect the Bank.

Competition for advances and refinancing risk on short-term advances could have an adverse effect on earnings.

We operate in a highly competitive environment. Advances are the Bank’s primary product offering and represented 69.9 percent of the Bank’s total assets for the year ended December 31, 2017. Demand for advances is affected by, among other factors, the cost and availability of other sources of liquidity for the Bank’s members, including deposits. The Bank competes with other suppliers of wholesale funding, both secured and unsecured. Such other suppliers may include the United States government, investment banks, commercial banks and, in certain circumstances, other FHLBanks. Large institutions may also have independent access to the national and global credit markets. From time to time, these alternative funding sources may offer more favorable terms on their loans than the Bank does on its advances. The Bank’s members have continued to experience high deposit levels, which may reduce member demand for advances. Any change made by the Bank in the pricing of its advances in an effort to effectively compete with these competitive funding sources may decrease the Bank’s profitability on advances, which could have a material adverse impact on the Bank’s financial condition and results of operations, including dividend yields to members.

The prolonged low interest rate environment has resulted in a concentration of short-term advances. Although the Federal Reserve raised interest rates in 2016 and 2017, and has indicated its intention to raise rates further in 2018, the Bank expects

18

Table of Contents

this short-term advance preference to continue during 2018. If members do not extend or renew these short-term advances as they come due, the Bank may experience a significant reduction in advances, which could have a material adverse impact on the Bank’s financial condition and results of operations. Advances due in one year or less comprised 59.5 percent of the Bank’s total advances outstanding as of December 31, 2017.

The Bank is exposed to risks because of customer concentration.

The Bank is subject to customer concentration risk as a result of the Bank’s reliance on a relatively small number of member institutions for a large portion of the Bank’s total advances and resulting interest income. The Bank’s largest borrowers as of December 31, 2017, were Bank of America, National Association, which accounted for $21.0 billion, or 20.6 percent, and Navy Federal Credit Union, which accounted for $15.5 billion, or 15.2 percent, of the Bank’s total advances then outstanding. In addition, as of December 31, 2017, 10 of the Bank’s member institutions (including Bank of America, National Association, and Navy Federal Credit Union) collectively accounted for $71.4 billion, or 69.9 percent, of the Bank’s total advances then outstanding. If, for any reason, the Bank were to lose, or experience a decrease in the amount of, its business relationships with its largest borrower or a combination of several of its large borrowers - whether as the result of any such member becoming a party to a merger or other transaction, or as a result of market conditions, competition or otherwise - the Bank’s financial condition and results of operations could be negatively affected.

Liquidity Risk

The Bank’s funding depends upon its ability to regularly access the capital markets.

The Bank seeks to be in a position to meet its members’ credit and liquidity needs and pay its obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. The Bank’s primary source of funds is from the sale of consolidated obligations in the capital markets, including the short-term discount note market. The Bank competes with Fannie Mae, Freddie Mac, and other GSEs as well as corporate, sovereign, and supranational entities for funds raised through the issuance of consolidated obligations. The Bank’s ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in financial markets, which are beyond the Bank’s control. The failure to obtain such funds on terms and conditions favorable to the Bank could adversely impact the Bank’s ability to manage its future liquidity.

Market Risk

Changes in interest rates could significantly affect the Bank’s earnings.

Like many financial institutions, the Bank realizes income primarily from the spread between interest earned on the Bank’s outstanding loans and investments and interest paid on the Bank’s borrowings and other liabilities. Although the Bank uses a number of measures to monitor and manage changes in interest rates, the Bank may experience “gaps” in the interest-rate sensitivities of its assets and liabilities resulting from both duration and convexity mismatches. The existence of gaps in interest-rate sensitivities means that either the Bank’s interest-bearing liabilities will be more sensitive to changes in interest rates than its interest-earning assets, or vice versa. In either case, if interest rates move contrary to the Bank’s position, any such gap could adversely affect the net present value of the Bank’s interest-sensitive assets and liabilities, which could negatively affect the Bank’s financial condition and results of operations.

The Bank’s businesses and results of operations are affected by the fiscal and monetary policies of the U.S. government, foreign governments and their agencies. The Federal Reserve Board’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities, which could affect the success of the Bank’s asset and liability management activities and negatively affect the Bank’s financial condition and results of operations. Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Interest Income for further discussion of the Bank’s yield on assets and interest-rate spread.

The Bank relies upon derivative instruments to reduce its interest-rate risk associated with certain assets and liabilities on the Bank's balance sheet, including MBS and advances, and the Bank may be required to change its investment strategies and advance product offerings if it is not able to enter into effective derivative instruments on acceptable terms.

The Bank uses a significant amount of derivative instruments to attempt to reduce its interest-rate risk and mortgage prepayment risk. The Bank determines the nature and quantity of hedging transactions based on various factors, including market conditions and the expected volume and terms of advances. As a result, the Bank's effective use of these instruments

19

Table of Contents

depends on the ability of the Bank to determine the appropriate hedging positions in light of the Bank's assets, liabilities, and prevailing and anticipated market conditions. In addition, the effectiveness of the Bank's hedging strategy depends upon the Bank's ability to enter into these instruments with acceptable parties, upon terms satisfactory to the Bank, and in the quantities necessary to hedge the Bank's corresponding obligations.

The Dodd-Frank Act resulted in certain changes to statutory and regulatory requirements for derivative transactions, including those transactions used by the Bank to hedge interest-rate risk and other risks. As a result of these requirements, certain interest-rate swap transactions, whether they are initially executed with a swap dealer or subject to mandatory execution through a swap execution facility, are required to be cleared through a third-party central clearinghouse. Additionally, initial margin and variation margin are required to be posted for cleared derivatives, and variation margin is required to be exchanged daily for non-cleared swaps. Furthermore, certain regulators have issued final rules that would subject non-cleared swaps to a mandatory two-way initial margin requirement, among other things. Any of these margin and capital requirements could adversely affect the liquidity and pricing of derivative transactions entered into by the Bank, making derivative trades more costly and less attractive as risk management tools.

If the Bank is unable to manage its hedging positions properly or is unable to enter into hedging instruments upon acceptable terms, the Bank may be unable to manage its interest-rate and other risks or may be required to change its investment strategies and advance product offerings, which could affect the Bank's financial condition and results of operations.

Prepayment or refinancing of mortgage assets could affect earnings.

The Bank invests in MBS and whole mortgage loans. Changes in interest rates can significantly affect the prepayment patterns of these assets, and such prepayment patterns could affect the Bank’s earnings. In the Bank’s experience, it is difficult to hedge prepayment risk in mortgage loans. Therefore, prepayments of mortgage assets could have an adverse effect on the income of the Bank.

The Bank may not be able to pay dividends or to repurchase or redeem members’ capital stock consistent with past practice.

The Bank’s board of directors may declare dividends on the Bank’s capital stock, payable to members, from the Bank’s unrestricted retained earnings and current net earnings. The Bank’s ability to pay dividends and to repurchase or redeem capital stock is subject to compliance with statutory and regulatory liquidity and capital requirements. The Bank’s financial management policy addresses regulatory guidance issued to all FHLBanks regarding retained earnings. It requires the Bank to establish a target amount of retained earnings by considering factors such as forecasted income, mark-to-market adjustments on derivatives and trading securities, market risk, operational risk, and credit risk, all of which may be influenced by events beyond the Bank’s control. The Bank’s Capital Plan addresses minimum regulatory capital requirements. Events such as changes in interest rates, collateral value, credit quality of members, and any future other-than-temporary impairment losses may affect the adequacy of the Bank’s retained earnings and may require the Bank to reduce its dividends, suspend dividends altogether, or limit capital stock repurchases and redemptions to achieve and maintain the targeted amount of retained earnings or regulatory capital requirements. These actions could cause a reduction in members’ demand for advances, or make it difficult for the Bank to retain existing members or to attract new members.

Credit Risk

The Bank’s exposure to credit risk could have an adverse effect on the Bank’s financial condition and results of operations.

The Bank faces credit risk on advances, standby letters of credit, investments, derivatives, and mortgage loan assets. The Bank requires advances and standby letters of credit to be fully secured with collateral. The Bank evaluates the types of collateral pledged by the member and assigns a borrowing capacity to the collateral, based on the risk associated with that type of collateral. If the Bank has insufficient collateral before or after an event of payment default or failure of the member or the Bank is unable to liquidate the collateral for the value assigned to it in the event of a payment default or failure of a member, the Bank could experience a credit loss on advances or standby letters of credit, which could adversely affect its financial condition and results of operations.

20

Table of Contents


The Bank assumes secured and unsecured credit risk exposure associated with securities transactions, money market transactions, supplemental mortgage insurance agreements, and derivative contracts. The Bank routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. The insolvency or other inability of a significant counterparty to perform its obligations under a derivative contract or other agreement could have an adverse effect on the Bank’s financial condition and results of operations. The Bank’s credit risk may be exacerbated based on market movements that impact the value of the derivative or collateral positions, the failure of a counterparty to return collateral owed by the counterparty to the Bank, or when the collateral pledged to the Bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Bank. Any failure to properly perfect the Bank’s security interest in collateral or any disruptions in the servicing of collateral in the event of a default could create credit losses for the Bank.

The Bank invests in U.S. agency (Fannie Mae, Freddie Mac, and Ginnie Mae) MBS and has historically invested in private-label MBS. As of December 31, 2017, 7.99 percent of the Bank’s MBS portfolio consisted of private-label MBS. Market prices for many of these private-label MBS have continued to improve since the 2008 financial crisis; however, given continued uncertainty in market conditions and the significant judgments involved in determining market value, there is a risk that declines in fair value in the Bank’s MBS portfolio may occur and that the Bank may record additional other-than-temporary impairment losses in future periods, which could materially adversely affect the Bank’s financial condition and results of operation.

The Bank uses master derivative contracts that contain provisions that require the Bank to net the exposure under all transactions with a counterparty to one amount in order to calculate collateral requirements. Although the Bank attempts to monitor the creditworthiness of all counterparties, it is possible that the Bank may not be able to terminate the agreement with a foreign commercial bank before the counterparty would become subject to an insolvency proceeding.

The Bank is jointly and severally liable for payment of principal and interest on the consolidated obligations issued by the other FHLBanks.

Each of the FHLBanks relies upon the issuance of consolidated obligations as a primary source of funds. Consolidated obligations are the joint and several obligations of all of the FHLBanks, backed only by the financial resources of the FHLBanks. Accordingly, the Bank is jointly and severally liable with the other FHLBanks for the consolidated obligations issued by the FHLBanks through the Office of Finance.

The Finance Agency by regulation, may require any FHLBank to make principal or interest payments due on any consolidated obligation at any time, whether or not the FHLBank that was the primary obligor has defaulted on the payment of that obligation. The Finance Agency may allocate the liability among one or more FHLBanks on a pro rata basis or on any other basis the Finance Agency may determine. Accordingly, the Bank could incur significant liability beyond its primary obligation under consolidated obligations due to the failure of other FHLBanks to meet their obligations, which could negatively impact the Bank’s financial condition and results of operations.

Changes in the Bank’s credit ratings may adversely affect the Bank’s ability to issue consolidated obligations on acceptable terms, and such changes may be outside the Bank’s control due to changes in the U.S. sovereign ratings.

The Bank has an issuer credit rating of Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. The consolidated obligations of the FHLBanks (consolidated bonds and consolidated discount notes) carry credit ratings of Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. All ratings are with a stable outlook. Because of the FHLBanks’ GSE status, the credit ratings of the FHLBank System and the FHLBanks are directly influenced by the sovereign credit of the U.S., which is beyond the Bank’s control. Downgrades to the U.S. sovereign credit rating and outlook would likely result in downgrades in the credit ratings and outlook on the Bank and the consolidated obligations of the FHLBanks even though the consolidated obligations are not obligations of the United States.

These ratings are subject to revision or withdrawal at any time by the rating agencies; therefore, the Bank may not be able to maintain these credit ratings. Negative ratings actions or negative guidance, including as a consequence of U.S. debt levels, the U.S. fiscal budget process, or other uncertainties may adversely affect the Bank’s cost of funds and ability to issue consolidated obligations or other financial instruments on acceptable terms, trigger additional collateral requirements under the Bank’s derivative contracts, and reduce the attractiveness of the Bank’s standby letters of credit. This could have a negative impact on the Bank’s financial condition and results of operations, including the Bank’s ability to make advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.

21

Table of Contents


Operational Risk

The financial models and the underlying assumptions used to value financial instruments and manage risk may differ materially from actual results.

The Bank makes significant use of business and financial models for managing risk. For example, the Bank uses models to measure and monitor exposures to various risks, including interest rate, prepayment, and other market risks, as well as credit risk. The Bank also uses models in determining the fair value of certain financial instruments when independent price quotations are not available or reliable. The degree of judgment in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility, dealer prices or prices of similar instruments. Pricing models and their underlying assumptions are based on the Bank’s best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions may have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities.

While models used by the Bank to value instruments and measure risk exposures are subject to periodic validation by the Bank’s staff and independent parties, rapid changes in market conditions could impact the value of the Bank’s instruments, as well as the Bank’s financial condition and results of operations. Models are inherently imperfect predictors of actual results because they are based on assumptions about future performance. Changes in any models or in any of the assumptions, judgments, or estimates used in the models may cause the results generated by the model to be materially different from actual results.

If the models are not reliable or the Bank does not use them appropriately, the Bank could make poor business decisions, including asset and liability management decisions, or other decisions, which could result in an adverse financial impact. Further, any strategies that the Bank employs to attempt to manage the risks associated with the use of models may not be effective.

The Bank relies heavily upon information systems and other technology, and any disruption or failure of such information systems or other technology could adversely impact its reputation, financial condition, and results of operations.

The Bank relies heavily upon information systems and other technology to conduct and manage its business. The Bank owns some of these systems and technology, and third parties own and provide to the Bank some of those systems and technology. Computer systems, software, and networks can be vulnerable to failures and interruptions, including as the result of any cyberattacks (e.g., breaches, unauthorized access, misuse, computer viruses or other malicious code, and other events) or other breaches of technology security, that may derive from human error or malfeasance on the part of employees or third parties, other disruptions during the process of upgrading or replacing computer software or hardware, failure to implement key information technology initiatives, or accidental technological failure. These failures, interruptions, or cyberattacks could jeopardize the confidentiality or integrity of information, including personally identifiable information, or otherwise interrupt the Bank’s ability to conduct and manage its business effectively, including, without limitation, its deposit account management, hedging activities and advances activities. The Bank can make no assurance that it or its third-party vendors will be able to prevent, timely and adequately address, or mitigate the negative effects of any such failure, interruption, or cyberattack. Like many financial institutions, the Bank has seen an increase in cyberattack attempts. For the Bank, these attempts have predominantly occurred through phishing and social engineering scams, and in particular, ransomware. The Bank’s system redundancies and other continuity measures may be ineffective or insufficient, and the Bank’s business continuity and disaster recovery planning may not be sufficient for all eventualities. A failure, interruption or cyberattack could significantly harm the Bank’s reputation, its customer relations, risk management, and profitability, and could result in financial losses, legal and regulatory sanctions, increased costs or other harm. While the Bank maintains insurance coverage that is intended to address certain aspects of data security risks, such insurance may be insufficient to cover all losses or types of claims that may arise.

The Bank’s controls and procedures may fail or be circumvented, and risk management policies and procedures may be inadequate.

The Bank may fail to identify and manage risks related to a variety of aspects of its business, including operational risk, legal and compliance risk, interest-rate risk, liquidity risk, market risk, and credit risk. The Bank has adopted controls, procedures, policies, and systems to monitor and manage these risks. The Bank’s management cannot provide complete assurance that those controls, procedures, policies, and systems are adequate to identify and manage the risks inherent in the Bank’s business.

22

Table of Contents

In addition, because the Bank’s business continues to evolve, the Bank may fail to fully understand the implications of changes in the business, and therefore, it may fail to enhance the Bank’s risk governance framework to timely or adequately address those changes. Failed or inadequate controls and risk management practices could have an adverse effect on the Bank’s financial condition and results of operations.

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

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

Possible replacement of the LIBOR benchmark interest rate may have an impact on the Bank’s business, financial condition or results of operations.

On July 27, 2017, the Financial Conduct Authority (FCA), a regulator of financial services firms in the United Kingdom, announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The FCA and the submitting LIBOR banks have indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board. Other financial services regulators and industry groups are evaluating the possible phase-out of LIBOR and the development of alternate reference rate indices or reference rates. As noted throughout this report, many of the Bank’s assets and liabilities are indexed to LIBOR. The Bank is evaluating the potential impact of the possible replacement of the LIBOR benchmark interest rate. The Bank is not able to predict whether LIBOR will cease to be available after 2021, whether the alternative rates the Federal Reserve Board proposes to publish will become market benchmarks in place of LIBOR, or what the impact of such a transition will have on the Bank’s business, financial condition, or results of operations.

The inability to retain key personnel could adversely affect the Bank’s operations.

The Bank relies on key personnel for many of its functions and has a relatively small workforce, given the size and complexity of its business. The Bank’s ability to retain such personnel is important for it to conduct its operations and measure and maintain risk and financial controls. The Bank’s ability to retain key personnel could be challenged as the U.S. employment market improves, particularly in the Atlanta area.


Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The Bank owns approximately 235,514 square feet of office space at 1475 Peachtree Street, NE, Atlanta, Georgia 30309. The Bank occupies approximately 189,412 square feet of this space. The Bank maintains two leased off-site backup facilities comprising approximately 11,477 square feet for the Bank’s disaster recovery data center. The Bank also leases 2,993 square feet of office space located in Washington, D.C., which is shared with two other FHLBanks. The Bank’s management believes these facilities are well maintained and are adequate for the purposes for which they currently are used.


Item 3. Legal Proceedings.
The Bank is subject to various legal proceedings and actions from time to time 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 impact on the Bank’s financial condition or results of operations.
 

23

Table of Contents

Item 4. Mine Safety Disclosure.

Not applicable.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Bank’s members 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 the Bank’s member, own the remaining capital stock to support business transactions still carried on the Bank’s balance sheet. The Bank’s capital stock is not publicly traded or quoted, and there is no established marketplace for it, nor does the Bank expect a market to develop. The FHLBank Act and the Bank’s capital plan prohibit the trading of its capital stock, except in connection with merger or acquisition activity.

A member may request in writing that the Bank redeem its excess capital stock at par value. Excess capital stock is FHLBank capital stock not required to be held by the member to meet its minimum stock requirement under an FHLBank’s capital plan. Any such redemption request is subject to a five year redemption period after the Bank receives the request, subject to certain regulatory requirements and to the satisfaction of any ongoing stock investment requirements applicable to the member. In addition, any member may withdraw from membership upon five years written notice to the Bank. Subject to the member’s satisfaction of any outstanding indebtedness and other statutory requirements, the Bank redeems the member’s capital stock at par value upon withdrawal from membership. The Bank, in its discretion, may repurchase shares held by a member in excess of its required stock holdings, subject to certain limitations and thresholds in the Bank’s capital plan. The par value of all capital stock is $100 per share, and the operating threshold for daily excess capital stock repurchases is $100 thousand. As of February 28, 2018, the Bank had 869 member and non-member shareholders and 58 million shares of its capital stock outstanding (including mandatorily redeemable shares).

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 quarterly cash dividends in 2017 and 2016 (dollars in millions).

 
 
2017
 
2016
 
 
Amount
 
Annualized Rate (%) (1)
 
Amount
 
Annualized Rate (%) (2)
First quarter
 
$
57

 
4.77
 
$
52

 
4.66
Second quarter
 
61

 
4.77
 
59

 
4.87
Third quarter
 
58

 
4.91
 
55

 
4.64
Fourth quarter
 
62

 
5.01
 
60

 
4.64
____________
(1) Dividend rate was equal to the average three-month LIBOR for the preceding quarter, plus 385 basis points for the first quarter of 2017, and 370 basis points for each of the remaining quarters of 2017.
(2) Dividend rate was equal to the average three-month LIBOR for the preceding quarter, plus 425 basis points for the first and second quarters of 2016, 400 basis points for the third quarter of 2016, and 385 basis points for the fourth quarter of 2016.

The Bank may pay dividends on its capital stock only out of its unrestricted retained earnings account or out of its current net income. The Bank’s board of directors has discretion to declare or not to declare dividends and to determine the rate of any dividends declared. The Bank’s board of directors may neither declare nor require the Bank to pay dividends when it is not in compliance with all of its capital requirements or if, after giving the effect of the dividend, the Bank would fail to meet any of its capital requirements or it is determined that the dividend would create a financial safety and soundness issue for the Bank.

Finance Agency regulations prohibit any FHLBank from issuing dividends in the form of capital stock or otherwise issuing new excess capital stock if that FHLBank has excess capital stock greater than one percent of that FHLBank’s total assets or if issuing such dividends or new excess capital stock would cause that FHLBank to exceed the one percent excess capital stock limitation. As of December 31, 2017, the Bank’s excess capital stock did not exceed one percent of its total assets. Historically, the Bank has not issued dividends in the form of capital stock or issued new excess capital stock, and a member’s existing excess activity-based stock is applied to any activity-based stock requirements related to new advances.

The Bank’s board of directors has adopted a financial management policy that includes a targeted amount of retained earnings separate and apart from the restricted retained earnings account. For further discussion of those provisions of the financial

24

Table of Contents

management policy, dividends, and the Amended Joint Capital Enhancement Agreement (Capital Agreement) pursuant to which the restricted retained earnings account was established, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Capital.

Because only members, former members, and certain non-member institutions, not individuals, may own the Bank’s capital stock, the Bank has no equity compensation plans.

The Bank also issues standby letters of credit in the ordinary course of its business. From time to time, the Bank provides standby letters of credit to support members’ obligations, members’ standby letters of credit, or obligations issued to support unaffiliated, third-party offerings of notes, bonds, or other securities. The Bank issued $40.7 billion, $25.1 billion, and $13.8 billion in standby letters of credit in 2017, 2016, and 2015, respectively. To the extent that these standby letters of credit are securities for purposes of the Securities Act of 1933, the issuance of the standby letter of credit by the Bank is exempt from registration pursuant to section 3(a)(2) thereof.


25

Table of Contents

Item 6. Selected Financial Data.

The following table presents selected historical financial data of the Bank and should be read in conjunction with the Bank’s 2017 audited financial statements and related notes thereto and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Report. The following data, insofar as it relates to each of the years 2013 to 2017, have been derived from annual financial statements, including the statements of condition as of December 31, 2017 and 2016 and the related statements of income for the years ended December 31, 2017, 2016, and 2015 and notes thereto appearing elsewhere in this Report. The financial information presented in the following table and in the financial statements included in this Report is not necessarily indicative of the financial condition or results of operations of any other interim or annual periods (dollars in millions):
 
As of and for the Years Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Statements of Condition (as of year end)
 
 
 
 
 
 
 
 
 
Total assets (1)
$
146,566

 
$
138,671

 
$
142,246

 
$
138,344

 
$
122,316

Advances
102,440

 
99,077

 
104,168

 
99,644

 
89,588

Mortgage loans held for portfolio
436

 
524

 
586

 
749

 
929

Allowance for credit losses on mortgage loans
(1
)
 
(1
)
 
(2
)
 
(3
)
 
(11
)
Investments (2)
40,378

 
36,510

 
35,175

 
36,502

 
26,944

Interest-bearing deposits
1,177

 
1,118

 
1,084

 
1,110

 
1,752

Consolidated obligations, net:
 
 
 
 
 
 
 
 
 
  Discount notes (1) (3)
50,139

 
41,292

 
69,434

 
37,162

 
32,202

  Bonds (1) (3)
87,523

 
88,647

 
63,953

 
92,088

 
80,728

Total consolidated obligations, net (1) (3)
137,662

 
129,939

 
133,387

 
129,250

 
112,930

Mandatorily redeemable capital stock
1

 
1

 
14

 
19

 
24

Affordable Housing Program payable
77

 
69

 
63

 
65

 
74

Capital stock - putable
5,154

 
4,955

 
5,101

 
5,150

 
4,883

Retained earnings
2,003

 
1,892

 
1,840

 
1,746

 
1,657

Accumulated other comprehensive income
110

 
104

 
75

 
95

 
112

Total capital
7,267

 
6,951

 
7,016

 
6,991

 
6,652

Statements of Income (for the year ended)
 
 
 
 
 
 
 
 
 
Net interest income
157

 
334

 
243

 
323

 
341

(Reversal) provision for credit losses

 
(1
)
 
(1
)
 
(5
)
 
5

Net impairment losses recognized in earnings
(2
)
 
(3
)
 
(5
)
 
(3
)
 

Net losses on trading securities
(5
)
 
(30
)
 
(61
)
 
(60
)
 
(100
)
Net gains on derivatives and hedging activities
341

 
119

 
261

 
120

 
204

Standby letters of credit fees
26

 
28

 
28

 
26

 
20

Other income (4)
7

 
(3
)
 
2

 
22

 
42

Noninterest expense
136

 
137

 
135

 
132

 
127

Income before assessments
388

 
309

 
334

 
301

 
375

Affordable Housing Program assessments
39

 
31

 
33

 
30

 
37

Net income
349

 
278

 
301

 
271

 
338

Performance Ratios (%)
 
 
 
 
 
 
 
 
 
Return on equity (5)
4.97

 
4.08

 
4.63

 
4.11

 
5.42

Return on assets (6)
0.25

 
0.20

 
0.23

 
0.21

 
0.28

Net interest margin (7)
0.11

 
0.24

 
0.19

 
0.25

 
0.29

Regulatory capital ratio (as of year end) (8)
4.88

 
4.94

 
4.89

 
5.00

 
5.37

Equity to assets ratio (9)
4.97

 
4.88

 
4.91

 
5.09

 
5.18

Dividend payout ratio (10)
68.40

 
81.08

 
68.48

 
67.30

 
34.52


26

Table of Contents

____________
(1) 
The Bank adopted new accounting guidance related to the presentation of debt issuance costs effective January 1, 2016. As a result, $7 million of debt issuance costs that were included in other assets were reclassified as a reduction in the corresponding consolidated obligations balance on the Bank’s Statements of Condition as of December 31, 2015.
(2) 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.
(3) 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):
December 31, 2017
$
896,441

December 31, 2016
859,361

December 31, 2015
771,948

December 31, 2014
718,218

December 31, 2013
654,076


(4) Other income includes service fees and other. For the year ended December 31, 2016, amount includes a $6 million loss on litigation settlements, net. For the years ended December 31, 2014 and 2013, amount includes a $15 million and $6 million gain on extinguishment of debt, respectively, and a $4 million and $33 million gain on litigation settlements, net, respectively.
(5) Calculated as net income, divided by average total equity.
(6) Calculated as net income, divided by average total assets.
(7) Net interest margin is net interest income as a percentage of average earning assets.
(8) Regulatory capital ratio is regulatory capital, which does not include accumulated other comprehensive income, but does include mandatorily redeemable capital stock, as a percentage of total assets as of year end.
(9) Calculated as average total equity, divided by average total assets.
(10) Calculated as dividends declared during the year, divided by net income during the year.


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis relates to the Bank’s financial condition as of December 31, 2017 and 2016, and results of operations for the years ended December 31, 2017, 2016, and 2015. This section explains the changes in certain key items in the Bank’s financial statements from year to year, the primary factors driving those changes, the Bank’s risk management processes and results, known trends or uncertainties that the Bank believes may have a material effect on the Bank’s future performance, as well as how certain accounting principles affect the Bank’s financial statements.

This discussion should be read in conjunction with the Bank’s audited financial statements and related notes for the year ended December 31, 2017 included in Item 8 of this Report. Readers also should carefully review “Special Cautionary Notice Regarding Forward-looking Statements” and Item 1A, Risk Factors, for a description of the forward-looking statements in this Report and a discussion of the factors that might cause the Bank’s actual results to differ, perhaps materially, from these forward-looking statements.

Executive Summary

Financial Condition
As of December 31, 2017, total assets were $146.6 billion, an increase of $7.9 billion, or 5.69 percent, from December 31, 2016. This increase was primarily due to a $3.8 billion, or 37.0 percent, increase in other investments, and a $3.4 billion, or 3.39 percent, increase in advances.
As of December 31, 2017, total liabilities were $139.3 billion, an increase of $7.6 billion, or 5.75 percent, from December 31, 2016. This increase was primarily due to a $7.7 billion, or 5.94 percent, increase in consolidated obligations as a result of the increased funding and liquidity needs during the year.
As of December 31, 2017, total capital was $7.3 billion, an increase of $316 million, or 4.55 percent, from December 31, 2016. This increase was primarily due to an increase in the Bank’s retained earnings and subclass B2 activity-based capital stock resulting from an increase in the total outstanding advances during the year.


27

Table of Contents

Results of Operations
The Bank recorded net income of $349 million for 2017, an increase of $71 million, or 25.3 percent, from net income of $278 million for 2016. This increase in net income was primarily due to increased interest rates during the year. The Federal Reserve raised interest rates in December 2016, March 2017, June 2017, and December 2017.
Net interest income was $157 million for 2017, a decrease of $177 million, from net interest income of $334 million for 2016. This decrease was primarily due to increased prepayments of previously restructured and redesignated advances that occurred during 2017. These prepayments resulted in $307 million of accelerated amortization during 2017, which reduced net interest income for the year. This decrease in net interest income related to the prepayment of previous restructured and redesignated advances was offset by a corresponding increase in net gains on derivatives and hedging activities, reflected in noninterest income.
One way in which the Bank analyzes its performance is by comparing its annualized return on equity (ROE) to three-month average LIBOR. The Bank has chosen to measure ROE as a spread to average three-month LIBOR because the Bank has significant assets and liabilities priced to average three-month LIBOR. The Bank’s ROE was 4.97 percent for 2017, compared to 4.08 percent for 2016. This increase in ROE was primarily due to an increase in net income during the year. ROE spread to average three-month LIBOR increased to 371 basis points for 2017, compared to 334 basis points for 2016. This increase in the ROE spread to LIBOR was primarily due to the increase in ROE.
The Bank’s interest-rate spread was seven basis points and 21 basis points for 2017 and 2016, respectively. The decrease in the Bank’s interest-rate spread for 2017, compared to 2016, was primarily due to increased prepayments on previously restructured and redesignated advances during 2017, which decreased net interest income.

Business Outlook
During 2017, the Bank continued to maintain its focus on an advances-driven and lower-risk business model, which enabled the Bank to report net income, pay dividends, and repurchase excess stock consistently throughout the year. As part of the Bank’s cooperative structure, the Bank has chosen to operate with narrow margins, passing on its low funding costs to members, which causes the Bank’s profitability to be sensitive to changes in market conditions. Compared to FHLB System peers, the Bank has a lower risk balance sheet structure with more funds allocated to lower yielding advances than higher yielding investment securities and mortgage loans.
The state of the economy is a significant component in determining the Bank’s overall business outlook as it impacts advance demand, asset and collateral values, member financial stability, funding costs, and many other facets of the Bank’s portfolio. While the U.S. economy has experienced strong growth over the last three quarters of 2017, factors such as interest rates, liquidity levels at member institutions, fiscal and monetary policies, performance of global economies, and regulatory changes could have a significant effect - either positive or negative - on the Bank’s financial performance.
The gradually rising but relatively low interest rate environment has resulted in borrowers strongly favoring short-term advances. Although the Federal Reserve raised interest rates in 2016 and 2017, and indicated its intention to raise rates further in 2018, the Bank expects this short-term advance preference to continue during 2018. This higher proportion of short-term advances will continue to subject the Bank to advance rollover risk. In addition, members continue to experience high levels of liquidity, which may continue to reduce overall member demand for advances. Although a higher interest rate environment is more favorable for the Bank’s total profitability, it may have a negative impact on ROE spread to LIBOR.
From a regulatory perspective, changes in money market fund investment regulations during 2016 have caused the Bank to experience increased demand from the mutual fund industry for short-term GSE debt, which the Bank expects to continue in 2018. Earnings on the Bank’s investment portfolio will continue to be affected by tighter interest rate spreads on new investments as older investments with wider spreads prepay or mature. There is uncertainty, in light of recent changes in the U.S. government administration and recent executive actions, about regulatory changes that could occur in the financial services industry, and what impact those changes could have on the Bank and/or its members.


28

Table of Contents

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 December 31,
 
 
 
 
 
2017
 
2016
 
Increase (Decrease)
 
Amount
 
Percent
of Total
 
Amount
 
Percent
of Total
 
Amount
 
Percent
Advances
$
102,440

 
69.89
 
$
99,077

 
71.45
 
$
3,363

 
3.39

Investment securities
26,322

 
17.96
 
26,248

 
18.93
 
74

 
0.28

Other investments
14,056

 
9.59
 
10,262

 
7.40
 
3,794

 
36.96

Mortgage loans, net
435

 
0.30
 
523

 
0.38
 
(88
)
 
(16.78
)
Loan to another FHLBank
200

 
0.14
 

 
 
200

 
100.00

Other assets
3,113

 
2.12
 
2,561

 
1.84
 
552

 
21.58

Total assets
$
146,566

 
100.00
 
$
138,671

 
100.00
 
$
7,895

 
5.69

Consolidated obligations, net:
 
 
 
 
 
 
 
 
 
 
 
  Discount notes
$
50,139

 
35.99
 
$
41,292

 
31.35
 
$
8,847

 
21.43

  Bonds
87,523

 
62.83
 
88,647

 
67.30
 
(1,124
)
 
(1.27
)
Deposits
1,177

 
0.85
 
1,118

 
0.85
 
59

 
5.28

Other liabilities
460

 
0.33
 
663

 
0.50
 
(203
)
 
(30.52
)
Total liabilities
$
139,299

 
100.00
 
$
131,720

 
100.00
 
$
7,579

 
5.75

Capital stock
$
5,154

 
70.93
 
$
4,955

 
71.28
 
$
199

 
4.03

Retained earnings
2,003

 
27.56
 
1,892

 
27.22
 
111

 
5.82

Accumulated other comprehensive income
110

 
1.51
 
104

 
1.50
 
6

 
5.91

Total capital
$
7,267

 
100.00
 
$
6,951

 
100.00
 
$
316

 
4.55


Advances

The following table presents the Bank’s advances outstanding by year of maturity and the related weighted-average interest rate (dollars in millions):
 
As of December 31,
 
2017
 
2016
 
Amount
 
Weighted-average Interest Rate (%)
 
Amount
 
Weighted-average Interest Rate (%)
Due in one year or less
$
60,795

 
1.51
 
$
47,325

 
0.86
Due after one year through two years
10,779

 
1.70
 
8,244

 
2.11
Due after two years through three years
14,210

 
1.68
 
5,904

 
1.53
Due after three years through four years
4,162

 
2.22
 
5,859

 
1.33
Due after four years through five years
3,729

 
2.19
 
11,846

 
1.68
Due after five years
8,574

 
2.92
 
19,110

 
1.78
Total par value
102,249

 
1.72
 
98,288

 
1.31
Discount on AHP advances
(4
)
 
 
 
(5
)
 
 
Discount on EDGE (1) advances
(3
)
 
 
 
(4
)
 
 
Hedging adjustments
198

 
 
 
798

 
 
Total
$
102,440

 
 
 
$
99,077

 
 
____________ 
(1) Economic Development and Growth Enhancement Program
Advances outstanding as of December 31, 2017 increased by 3.39 percent, compared to December 31, 2016. As a result of shareholder demand, the majority of new advances in 2017 were short-term advances. As of December 31, 2017 and 2016, 57.9

29

Table of Contents

percent and 64.2 percent, respectively, of the Bank’s advances were fixed-rate. However, the Bank often simultaneously enters into derivatives with the issuance of advances to convert the rates on them, in effect, into short-term variable interest rates, the majority of which are based on LIBOR. As of December 31, 2017 and 2016, 42.1 percent and 44.6 percent, respectively, of the Bank’s fixed-rate advances were swapped, and 0.27 percent and 0.68 percent, respectively, of the Bank’s variable-rate advances were swapped. The Bank also offers variable-rate advances that may be tied to indices such as the federal funds rate, prime rate, or constant maturity swap rates.

The Bank’s 10 largest borrowing member institutions had 69.9 percent of the Bank’s total advances outstanding as of December 31, 2017. Further information regarding the Bank’s 10 largest borrowing member institutions and breakdown of their individual advance balances as of December 31, 2017 is contained in Item 1, Business—Credit Products—Advances. Management believes that the Bank holds sufficient collateral, on a member-specific basis, to secure the advances to all borrowers, including these 10 institutions, and the Bank does not expect to incur any credit losses on these advances.

Supplementary financial data on the Bank’s advances is set forth under Item 8, Financial Statements and Supplementary Information (Unaudited).

Investments
The following table presents more detailed information regarding investments held by the Bank (dollars in millions).
 
 
As of December 31,
 
Increase (Decrease)
 
2017
 
2016
 
Amount    
 
Percent    
Investment securities:
 
 
 
 
 
 
 
State or local housing agency debt obligations
$
1

 
$
77

 
$
(76
)
 
(98.31
)
Government-sponsored enterprises debt obligations
5,406

 
6,302

 
(896
)
 
(14.23
)
Mortgage-backed securities:
 
 
 
 
 
 
 
    U.S. agency obligations-guaranteed residential
157

 
209

 
(52
)
 
(24.97
)
    Government-sponsored enterprises residential
9,357

 
10,752

 
(1,395
)
 
(12.96
)
    Government-sponsored enterprises commercial
9,729

 
6,773

 
2,956

 
43.65

    Private-label residential
1,672

 
2,135

 
(463
)
 
(21.71
)
   Total mortgage-backed securities
20,915

 
19,869

 
1,046

 
5.27

Total investment securities
26,322

 
26,248

 
74

 
0.28

Other investments:
 
 
 
 
 
 
 
Interest-bearing deposits (1)
2,176

 
1,106

 
1,070

 
96.64

Securities purchased under agreements to resell
2,500

 
1,386

 
1,114

 
80.40

Federal funds sold
9,380

 
7,770

 
1,610

 
20.72

Total other investments
14,056

 
10,262

 
3,794

 
36.96

Total investments
$
40,378

 
$
36,510

 
$
3,868

 
10.59

____________ 
(1) 
Interest-bearing deposits include a $401 million and $1.1 billion, business money market account with Branch Banking and Trust Company, one of the Bank’s 10 largest borrowers as of December 31, 2017 and 2016, and a $46 million business money market account with United Bank one of the Bank’s 10 largest borrowers as of December 31, 2017.

The increase in total investments was primarily due to an increase in total other investments from December 31, 2016 to December 31, 2017. The amount held in other investments will vary each day based on the Bank’s liquidity requirements as a result of advances demand, the earnings rates, and the availability of high quality counterparties in the federal funds market. The Bank ceased purchasing private-label MBS in 2008.
 
The Finance Agency regulations prohibit an FHLBank from purchasing MBS and asset-backed securities if its investment in such securities would exceed 300 percent of the FHLBank’s previous month-end regulatory capital on the day it would purchase the securities. The Bank was in compliance with this regulatory requirement as of December 31, 2017 and 2016, as these investments amounted to 290 percent and 288 percent of regulatory capital, respectively.
Refer to Note 6—Available-for-sale Securities and Note 7—Held-to-maturity Securities to the Bank’s 2017 audited financial statements for information on securities with unrealized losses as of December 31, 2017 and 2016.

30

Table of Contents

The Bank evaluates its individual investment securities for other-than-temporary impairment on a quarterly basis, as described in Note 8—Other-than-temporary Impairment to the Bank’s 2017 audited financial statements.

Mortgage Loans Held for Portfolio
The Bank had previously ceased purchasing new mortgage loans in 2008. However, in December 2016, the Bank agreed to purchase a 90 percent participating interest in a $100 million master commitment of certain newly acquired MPP loans from the FHLBank Indianapolis. Principal amounts settled totaled $18 million and $72 million in January 2017 and December 2016, respectively. The decrease in mortgage loans held for portfolio from December 31, 2016 to December 31, 2017 was primarily due to the maturity and prepayments of these assets during the year, partially offset by new mortgage loans acquired through the participation in the master commitment with the FHLBank Indianapolis.
Prior to 2008, members that were selling mortgage loans to the Bank were located primarily in the southeastern United States; therefore the Bank’s conventional mortgage loan portfolio is concentrated in that region as of December 31, 2017 and 2016. 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 December 31,
 
2017
 
2016
 
Percent of Total
 
Percent of Total
Florida
23.14

 
24.44

South Carolina
20.80

 
22.00

Georgia
10.22

 
11.18

Virginia
10.70

 
9.82

North Carolina
8.62

 
9.08

All other
26.52

 
23.48

Total
100.00

 
100.00


Supplementary financial data on the Bank’s mortgage loans is set forth under Item 8, Financial Statements and Supplementary Data—Supplementary Financial Information (Unaudited).

Consolidated Obligations
The Bank funds its assets primarily through the issuance of consolidated obligation bonds and consolidated obligation discount notes. The increase in consolidated obligations from December 31, 2016 to December 31, 2017 was a result of increased funding and liquidity needs during the year. Consolidated obligation issuances financed 93.9 percent of the $146.6 billion in total assets as of December 31, 2017, remaining relatively stable compared to the financing ratio of 93.7 percent as of December 31, 2016.
Consolidated obligations outstanding were primarily variable rate as of December 31, 2017 and 2016. The Bank often simultaneously enters into derivatives with the issuance of consolidated obligation bonds to convert the interest rates, in effect, into short-term variable interest rates, usually based on LIBOR. As of December 31, 2017 and 2016, 80.8 percent and 78.1 percent, respectively, of the Bank’s fixed-rate consolidated obligation bonds were swapped. None of the Bank’s variable-rate consolidated obligation bonds were swapped as of December 31, 2017 and 2016. As of December 31, 2017, and 2016, 4.78 percent and 38.9 percent, respectively, of the Bank’s fixed-rate consolidated obligation discount notes were swapped.
Supplementary financial data on the Bank’s short-term borrowings is set forth under Item 8, Financial Statements and Supplementary Data—Supplementary Financial Information (Unaudited).


31

Table of Contents

Deposits

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

Capital
The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank must maintain (1) total regulatory capital in an amount equal to at least four percent of its total assets; (2) leverage capital in an amount equal to at least five percent of its total assets; and (3) permanent capital in an amount equal to at least its regulatory risk-based capital requirement. Permanent capital is defined by the FHLBank Act and applicable regulations as the sum of paid-in capital for Class B stock and retained earnings. Mandatorily redeemable capital stock is considered capital for regulatory purposes. These regulatory capital requirements, and the Bank’s compliance with these requirements, are presented in detail in Note 14—Capital and Mandatorily Redeemable Capital Stock to the Bank’s 2017 audited 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 December 11, 2017, the Bank received notification from the Director that, based on September 30, 2017 data, the Bank meets the definition of “adequately capitalized.”

All of the FHLBanks entered into a Capital Agreement, which is intended to enhance the capital position of each FHLBank. Under the Capital Agreement, each FHLBank allocates 20 percent of its net income each quarter to a separate restricted retained earnings account until the account balance equals at least one percent of the FHLBank’s average balance of outstanding consolidated obligations for the previous quarter. Restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.

Finance Agency regulations require the Bank to perform annual stress tests under various scenarios and publicly disclose a summary of the stress test results for the severely adverse scenario. The Bank filed the results of its stress test with the Finance Agency on August 31, 2017, and publicly disclosed a summary of the adverse scenario results on November 16, 2017.

Under the Bank’s financial management policy, the Bank targets to maintain (1) a capital-to-assets ratio of 4.50 percent to 5.00 percent; (2) a retained earnings account balance equal to the restricted retained earnings account balance, plus extremely stressed scenario losses; and (3) additional retained earnings equal to two quarters of dividends, based on the current dividend rate and current stock balance. The Bank believes that daily excess stock repurchases and consistent dividends give members greater certainty of a return of their principal or the receipt of a dividend, which in turn may have a positive impact on members’ appetite for advances. The Bank seeks to pay an amount of dividends each quarter that are consistent with an

32

Table of Contents

attractive rate of return on capital to its member shareholders relative to an established benchmark, LIBOR, after providing for retained earnings as discussed above. Historically, the Bank’s dividend rate has increased with increases in LIBOR, while the spread between the dividend rate and LIBOR may shrink. Conversely, the dividend rate may decrease during periods of lower LIBOR, while the spread may increase. The Bank’s ability to maintain dividends consistent with its recent trend depends on LIBOR remaining relatively stable, the Bank’s actual financial performance, its ability to maintain adequate retained earnings, other factors described in Item 1A, Risk Factors, and the discretion of the Bank’s board of directors. Information about the Bank’s dividends declared during 2017 and 2016 is contained in Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


33

Table of Contents

Results of Operations

During 2017, two significant hurricanes impacted the southeastern coasts of the United States. On August 25, 2017, Hurricane Harvey made landfall near Corpus Christi, Texas and caused substantial damage and flooding to southeastern Texas, including the Houston metropolitan area. On September 10, 2017, Hurricane Irma made landfall on the Florida mainland near Marco Island, Florida. Hurricane Irma then moved northward through Florida and into Georgia, causing significant damage to property in Florida, Georgia, and certain other southeastern states. 

The Bank has analyzed the potential impact that damage related to Hurricanes Irma and Harvey might have on the Bank’s advances, letters of credit, mortgage loans held for portfolio, and non-agency MBS. Based on its assessment, the Bank does not expect losses related to the hurricanes, if any, to have a material impact to the Bank’s financial condition or results of operations.

The following is a discussion and analysis of the Bank’s results of operations for the years ended December 31, 2017, 2016, and 2015.

Net Income
The following table presents the Bank’s significant income items for the years ended December 31, 2017, 2016, and 2015, and provides information regarding the changes during those years (dollars in millions). These items are discussed in more detail below.
 
 
 
 
 
 
 
 
Increase (Decrease)    
 
For the Years Ended December 31,
 
2017 vs. 2016
 
2016 vs. 2015
 
2017
 
2016
 
2015
 
Amount
 
Percent
 
Amount
 
Percent
Net interest income
$
157

 
$
334

 
$
243

 
$
(177
)
 
(53.12
)
 
$
91

 
37.87

Reversal of provision for credit losses

 
(1
)
 
(1
)
 
1

 
40.48

 

 
11.16

Noninterest income
367

 
111

 
225

 
256

 
228.54

 
(114
)
 
(50.54
)
Noninterest expense
136

 
137

 
135

 
(1
)
 
(0.86
)
 
2

 
2.22

Total assessments
39

 
31

 
33

 
8

 
25.11

 
(2
)
 
(7.60
)
Net income
$
349

 
$
278

 
$
301

 
$
71

 
25.26

 
$
(23
)
 
(7.52
)


Net Interest Income

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

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. 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 $536 million, $442 million, and $616 million during the years ended December 31, 2017, 2016 and 2015, respectively.

The decrease in net interest income during 2017, compared to 2016, was primarily due to increased prepayments of previously restructured and redesignated advances that occurred during 2017. These prepayments resulted in $307 million of accelerated amortization, which reduced net interest income for the year. This decrease in net interest income was offset by a corresponding increase in net gains on derivatives and hedging activities, reflected in noninterest income. The prepayments of previously restructured and redesignated advances primarily relate to a single member institution. The remaining change in net interest income was due to increased interest rates as a result of the Federal Reserve raising interest rates three times during 2017. This increase in interest rates positively impacted interest-earning assets more than the offsetting increase in consolidated obligation interest expense.

34

Table of Contents


The increase in net interest income during 2016, compared to 2015, was primarily due to decreased prepayments of previously restructured and redesignated advances during 2016, compared to 2015. These prepayments resulted in $16 million and $181 million of accelerated amortization during 2016 and 2015, respectively, which reduced net interest income for those years. These decreases in net interest income were offset by corresponding increases in net gains on derivatives and hedging activities, reflected in noninterest income. The remaining change in net interest income was due to increased interest rates as a result of the Federal Reserve raising interest rates in December 2015. This increase in interest rates impacted consolidated obligation interest expense more than the offsetting increase in advance interest income.

The following table presents key components of net interest income for the years presented (in millions):
 
For the Years Ended December 31,
 
2017
 
2016
 
2015
Interest income:
 
 
 
 
 
   Advances
$
817

 
$
586

 
$
141

   Investments
677

 
489

 
427

   Mortgage loans
25

 
31

 
40

Total interest income
1,519

 
1,106

 
608

 
 
 
 
 
 
Interest expense:
 
 
 
 
 
   Consolidated obligations
1,351

 
768

 
364

   Interest-bearing deposits
11

 
4

 

   Mandatorily redeemable capital stock

 

 
1

Total interest expense
1,362

 
772

 
365

Net interest income
$
157

 
$
334

 
$
243



35

Table of Contents

The following table presents spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the years ended December 31, 2017, 2016, and 2015 (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, if the 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. If the derivatives do not qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is excluded from net interest income and from the calculation of interest-rate spread and is recorded in “Noninterest income (loss)” as “Net gains on derivatives and hedging activities.” Amortization associated with some hedging-related basis adjustments is also reflected in net interest income, which affects interest-rate spread.

The Bank’s interest-rate spread was seven basis points, 21 basis points, and 17 basis points for 2017, 2016, and 2015, respectively. The decrease in interest-rate spread from 2016 to 2017, and the increase in interest-rate spread from 2015 to 2016, was primarily due to the increased accelerated amortization related to prepayments of previously restructured and redesignated advances during 2017 and 2015 as previously discussed, compared to the lower accelerated amortization during 2016.

 
For the Years Ended December 31,
 
2017
 
2016