Federal Home Loan Bank of Atlanta

05/07/2021 | Press release | Archived content

Quarterly Report (SEC Filing - 10-Q)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________
FORM 10-Q
_____________________________________

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

For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-51845
____________________________________
FEDERAL HOME LOAN BANK OF ATLANTA
(Exact name of registrant as specified in its charter)
_____________________________________
Federally chartered corporation 56-6000442
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1475 Peachtree Street, NE, Atlanta, GA
(Address of principal executive offices)
30309
(Zip Code)

Registrant's telephone number, including area code: (404)888-8000
_____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of 'large accelerated filer,' 'accelerated filer,' 'smaller reporting company,' and 'emerging growth company' in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
None N/A N/A
The number of shares outstanding of the registrant's Class B Stock, par value $100, as of April 30, 2021 was 25,044,790.

Table of Contents

Table of Contents
PART I. FINANCIAL INFORMATION
3
Item 1.
Financial Statements (Unaudited)
3
STATEMENTS OF CONDITION
3
STATEMENTS OF INCOME
4
STATEMENTS OF COMPREHENSIVE INCOME
5
STATEMENTS OF CAPITAL
6
STATEMENTS OF CASH FLOWS
7
NOTES TO FINANCIAL STATEMENTS
9
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
28
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
53
Item 4.
Controls and Procedures
56
PART II. OTHER INFORMATION
57
Item 1.
Legal Proceedings
57
Item 1A.
Risk Factors
57
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
57
Item 3.
Defaults Upon Senior Securities
57
Item 4.
Mine Safety Disclosure
57
Item 5.
Other Information
57
Item 6.
Exhibits
58
SIGNATURES
59


Table of Contents

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.
FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CONDITION
(Unaudited)
(In millions, except par value)
As of March 31, 2021 As of December 31, 2020
Assets
Cash and due from banks $ 2,971 $ 2,905
Interest-bearing deposits (including deposits with other FHLBanks of $5 as of March 31, 2020 and December 31, 2020) 690 1,644
Securities purchased under agreements to resell 4,000 9,500
Federal funds sold 8,701 3,270
Investment securities:
Trading securities
500 1,562
Held-to-maturity securities (fair value of $19,023 and $20,489 as of March 31, 2021 and December 31, 2020, respectively) 18,989 20,404
Total investment securities 19,489 21,966
Advances 49,463 52,168
Mortgage loans held for portfolio, net 199 218
Accrued interest receivable 79 88
Derivative assets 372 391
Other assets, net 131 145
Total assets $ 86,095 $ 92,295
Liabilities
Interest-bearing deposits $ 2,713 $ 1,998
Consolidated obligations, net:
Discount notes 19,901 25,385
Bonds 58,475 59,379
Total consolidated obligations, net 78,376 84,764
Accrued interest payable 48 45
Affordable Housing Program payable 79 82
Derivative liabilities 21 11
Other liabilities
117 135
Total liabilities 81,354 87,035
Commitments and contingencies (Note 12)
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 7 and 10 as of March 31, 2021 and December 31, 2020, respectively 734 943
Subclass B2 issued and outstanding shares: 18 and 21 as of March 31, 2021 and December 31, 2020, respectively 1,809 2,135
Total capital stock Class B putable 2,543 3,078
Retained earnings:
Restricted 596 588
Unrestricted 1,615 1,610
Total retained earnings 2,211 2,198
Accumulated other comprehensive loss (13) (16)
Total capital 4,741 5,260
Total liabilities and capital $ 86,095 $ 92,295

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF INCOME
(Unaudited)
(In millions)
For the Three Months Ended March 31,
2021 2020
Interest income
Advances $ 87 $ 419
Interest-bearing deposits 1 15
Securities purchased under agreements to resell 1 27
Federal funds sold 2 40
Trading securities 1 5
Available-for-sale securities - 3
Held-to-maturity securities 34 130
Mortgage loans 3 4
Total interest income 129 643
Interest expense
Consolidated obligations:
Discount notes 5 211
Bonds 45 342
Interest-bearing deposits - 5
Total interest expense 50 558
Net interest income 79 85
Noninterest income (loss)
Net (losses) gains on trading securities (1) 5
Net realized gains from sale of available-for-sale securities
- 82
Net realized gains from sale of held-to-maturity securities
- 3
Net gains (losses) on derivatives and hedging activities 1 (6)
Standby letters of credit fees 4 7
Other - 2
Total noninterest income 4 93
Noninterest expense
Compensation and benefits 19 41
Other operating expenses 8 9
Federal Housing Finance Agency 3 3
Office of Finance 2 2
Other 4 3
Total noninterest expense 36 58
Income before assessment 47 120
Affordable Housing Program assessment 4 12
Net income $ 43 $ 108

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
For the Three Months Ended March 31,
2021 2020
Net income $ 43 $ 108
Other comprehensive income (loss):
Reclassification of unrealized gains related to the sale of available-for-sale securities
- (41)
Pension and postretirement benefits 3 -
Total other comprehensive income (loss) 3 (41)
Total comprehensive income $ 46 $ 67

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



5
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FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CAPITAL
(Unaudited)
(In millions)
Capital Stock Class B Putable Retained Earnings Accumulated
Other
Comprehensive
Loss
Total Capital
Shares Par Value Restricted Unrestricted Total
Balance, December 31, 2019 50 $ 4,988 $ 537 $ 1,616 $ 2,153 $ 22 $ 7,163
Issuance of capital stock 37 3,702 - - - - 3,702
Repurchase/redemption of capital stock
(20) (2,036) - - - - (2,036)
Net shares reclassified to mandatorily redeemable capital stock
- (2) - - - - (2)
Comprehensive income (loss) - - 22 86 108 (41) 67
Cash dividends on capital stock - - - (76) (76) - (76)
Balance, March 31, 2020 67 $ 6,652 $ 559 $ 1,626 $ 2,185 $ (19) $ 8,818
Balance, December 31, 2020 31 $ 3,078 $ 588 $ 1,610 $ 2,198 $ (16) $ 5,260
Issuance of capital stock 3 358 - - - - 358
Repurchase/redemption of capital stock
(9) (893) - - - - (893)
Net shares reclassified to mandatorily redeemable capital stock
- - - - - - -
Comprehensive income - - 8 35 43 3 46
Cash dividends on capital stock - - - (30) (30) - (30)
Balance, March 31, 2021 25 $ 2,543 $ 596 $ 1,615 $ 2,211 $ (13) $ 4,741

The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
For the Three Months Ended March 31,
2021 2020
Operating activities
Net income $ 43 $ 108
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization
(3) 2
Net change in derivative and hedging activities
452 (1,018)
Net change in fair value adjustment on trading securities 1 (5)
Net realized gains from sale of available-for-sale securities - (82)
Net realized gains from sale of held-to-maturity securities - (3)
Net change in:
Accrued interest receivable 10 54
Other assets 12 22
Affordable Housing Program payable (4) 5
Accrued interest payable 3 (54)
Other liabilities (19) (23)
Total adjustments 452 (1,102)
Net cash provided by (used in) operating activities 495 (994)
Investing activities
Net change in:
Interest-bearing deposits 1,113 (502)
Securities purchased under agreements to resell 5,500 8,800
Federal funds sold (5,431) (8,119)
Trading securities:
Proceeds from sales 61 -
Proceeds from principal collected 1,000 -
Available-for-sale securities:
Proceeds from sales - 726
Held-to-maturity securities:
Proceeds from sales - 195
Proceeds from principal collected 1,412 3,044
Purchases of long-term - (930)
Advances:
Proceeds from principal collected 23,591 83,012
Made (21,552) (121,387)
Mortgage loans:
Proceeds from principal collected 20 15
Proceeds from sale of foreclosed assets - 1
Purchases of premises, equipment, and software (1) (1)
Net cash provided by (used in) investing activities 5,713 (35,146)
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FEDERAL HOME LOAN BANK OF ATLANTA
STATEMENTS OF CASH FLOWS-(Continued)
(Unaudited)
(In millions)
For the Three Months Ended March 31,
2021 2020
Financing activities
Net change in interest-bearing deposits 715 251
Net payments on derivatives containing a financing element (1) (1)
Proceeds from issuance of consolidated obligations:
Discount notes 173,787 175,309
Bonds 17,006 32,434
Payments for debt issuance costs (1) (5)
Payments for maturing and retiring consolidated obligations:
Discount notes (179,263) (130,976)
Bonds (17,820) (39,124)
Proceeds from issuance of capital stock 358 3,702
Payments for repurchase/redemption of capital stock (893) (2,036)
Payments for repurchase/redemption of mandatorily redeemable capital stock - (2)
Cash dividends paid (30) (76)
Net cash (used in) provided by financing activities (6,142) 39,476
Net increase in cash and due from banks 66 3,336
Cash and due from banks at beginning of the period 2,905 911
Cash and due from banks at end of the period $ 2,971 $ 4,247
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 55 $ 609
Affordable Housing Program assessment, net $ 8 $ 6
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock $ - $ 2

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


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

Note 1-Basis of Presentation

The accompanying unaudited interim financial statements of the Federal Home Loan Bank of Atlanta (Bank) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and income and expenses during the reporting period. Actual results could be different from these estimates. The foregoing interim financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods, have been included. The results of operations for interim periods are not necessarily indicative of results to be expected for the year ending 2021, or for other interim periods. The unaudited interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020, which are contained in the Bank's 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 4, 2021 (Form 10-K).

The Bank has certain financial instruments, including derivative instruments and securities purchased under agreements to resell, that are subject to offset under master netting arrangements or by operation of law. Additional information regarding derivative instruments is provided in Note 10-Derivatives and Hedging Activities to the Bank's interim financial statements. The Bank does not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented. Based on the fair value of the related securities held as collateral, the securities purchased under agreements to resell were fully collateralized for the periods presented.

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

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

Refer to Note 2-Summary of Significant Accounting Policies to the Bank's 2020 audited financial statements for a description of all the Bank's significant accounting policies. There have been no changes to these policies as of March 31, 2021.


Note 2-Recently Issued But Not Yet Adopted Accounting Standards

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

Note 3-Trading Securities

Major Security Types.The following table presents trading securities.
As of March 31, 2021 As of December 31, 2020
U.S. Treasury obligations $ 500 $ 1,500
Government-sponsored enterprises debt obligations - 62
Total $ 500 $ 1,562


The following table presents net (losses) gains on trading securities.
For the Three Months Ended March 31,
2021 2020
Net gains on trading securities held at period end
$ - $ 5
Net losses on trading securities that were sold or matured during the period (1) -
Net (losses) gains on trading securities $ (1) $ 5

Note 4-Held-to-maturity Securities

Major Security Types.The following table presents held-to-maturity securities.
As of March 31, 2021 As of December 31, 2020
Amortized
Cost (1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Amortized
Cost (1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
State or local housing agency debt obligations $ 1 $ - $ - $ 1 $ 1 $ - $ - $ 1
Government-sponsored enterprises debt obligations 2,185 7 (2) 2,190 2,245 6 - 2,251
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential 279 1 (1) 279 295 2 - 297
Government-sponsored enterprises residential 6,631 53 (6) 6,678 7,283 62 (6) 7,339
Government-sponsored enterprises commercial 9,893 25 (43) 9,875 10,580 31 (10) 10,601
Total $ 18,989 $ 86 $ (52) $ 19,023 $ 20,404 $ 101 $ (16) $ 20,489
____________
(1) Excludes accrued interest receivable of $8 and $9 as of March 31, 2021 and December 31, 2020, respectively.

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

Redemption Terms. The following table presents the amortized cost and estimated fair value of held-to-maturity securities by contractual maturity. MBS are not presented by contractual maturity because their actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.
As of March 31, 2021 As of December 31, 2020
Amortized
Cost (1)
Estimated
Fair Value
Amortized
Cost (1)
Estimated
Fair Value
Non-mortgage-backed securities:
Due in one year or less $ 250 $ 250 $ 245 $ 245
Due after one year through five years 1,675 1,675 1,740 1,742
Due after five years through 10 years 201 204 201 204
Due after 10 years 60 62 60 61
Total non-mortgage-backed securities 2,186 2,191 2,246 2,252
Mortgage-backed securities 16,803 16,832 18,158 18,237
Total $ 18,989 $ 19,023 $ 20,404 $ 20,489
____________
(1)Excludes accrued interest receivable of $8 and $9 as of March 31, 2021 and December 31, 2020, respectively.

The Bank has not established an allowance for credit loss on any of its held-to-maturity securities as of March 31, 2021 and December 31, 2020 because the securities: (1) were all highly-rated and/or had short remaining terms to maturity, (2) had not experienced, nor did the Bank expect, any payment default on the instruments, and (3) in the case of U.S., government-sponsored enterprises, or other agency obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.

Note 5-Advances

Redemption Terms.The following table presents the Bank's advances outstanding by year of contractual maturity.
As of March 31, 2021 As of December 31, 2020
Due in one year or less $ 23,526 $ 23,326
Due after one year through two years 3,221 3,803
Due after two years through three years 2,932 3,347
Due after three years through four years 3,625 2,643
Due after four years through five years 2,861 3,657
Due after five years 12,441 13,867
Total par value 48,606 50,643
Deferred prepayment fees (54) (55)
Discount on AHP (1) advances
(3) (3)
Discount on EDGE (2) advances
(1) (1)
Hedging adjustments 915 1,584
Total (3)
$ 49,463 $ 52,168
___________
(1)The Affordable Housing Program
(2)The Economic Development and Growth Enhancement Program
(3)Carrying amounts exclude accrued interest receivable of $69 and $77 as of March 31, 2021 and December 31, 2020, respectively.



10
Table of Contents
FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

The following table presents advances by year of contractual maturity or, for convertible advances, next conversion date.
As of March 31, 2021 As of December 31, 2020
Due or convertible in one year or less $ 28,163 $ 28,258
Due or convertible after one year through two years 3,305 4,142
Due or convertible after two years through three years 2,917 3,321
Due or convertible after three years through four years 3,583 2,612
Due or convertible after four years through five years 2,826 3,620
Due or convertible after five years 7,812 8,690
Total par value $ 48,606 $ 50,643

Interest-rate Payment Terms.The following table presents interest-rate payment terms for advances.
As of March 31, 2021 As of December 31, 2020
Fixed-rate:
Due in one year or less $ 15,990 $ 15,304
Due after one year 22,396 24,620
Total fixed-rate 38,386 39,924
Variable-rate:
Due in one year or less 7,536 8,022
Due after one year 2,684 2,697
Total variable-rate 10,220 10,719
Total par value $ 48,606 $ 50,643

Advances concentrations. The Bank's advances are concentrated in commercial banks, savings institutions, and credit unions and further is concentrated in certain larger borrowing relationships. The concentration of the Bank's advances to its 10 largest borrowers was $35,429 and $36,259 as of March 31, 2021 and December 31, 2020, respectively. This concentration represented 72.9 percent and 71.6 percent of total advances outstanding as of March 31, 2021 and December 31, 2020, respectively.
Based on the collateral pledged as security for advances, the Bank's credit analysis of members' financial condition, and prior repayment history, no allowance for credit losses on advances was deemed necessary by the Bank as of March 31, 2021 and December 31, 2020. No advance was past due, on nonaccrual status, or considered impaired as of March 31, 2021 and December 31, 2020. In addition, there were no troubled debt restructurings (TDRs) related to advances as of March 31, 2021 and December 31, 2020.

Note 6-Mortgage Loans Held for Portfolio

The following table presents information on mortgage loans held for portfolio by contractual maturity at the time of purchase.
As of March 31, 2021 As of December 31, 2020
Medium-term (15 years or less) $ 3 $ 3
Long-term (greater than 15 years) 197 216
Total unpaid principal balance 200 219
Premiums 1 1
Discounts (1) (1)
Total mortgage loans held for portfolio (1)
200 219
Allowance for credit losses on mortgage loans (1) (1)
Mortgage loans held for portfolio, net $ 199 $ 218
____________
(1) Exclude accrued interest receivable of $1 as of March 31, 2021 and December 31, 2020.

The following table presents the unpaid principal balance of mortgage loans held for portfolio by collateral or guarantee type.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

As of March 31, 2021 As of December 31, 2020
Conventional mortgage loans $ 184 $ 203
Government-guaranteed or insured mortgage loans 16 16
Total unpaid principal balance $ 200 $ 219

The following table presents the activity in the allowance for credit losses related to conventional residential mortgage loans.
For the Three Months Ended March 31,
2021 2020
Balance, beginning of period $ 1 $ 1
Provision for credit losses
- -
Balance, end of period $ 1 $ 1

Payment status is a key credit quality indicator for conventional mortgage loans and allows the Bank to monitor the migration of past due loans. Other delinquency statistics include, non-accrual loans and loans in process of foreclosure. The following tables present the payment status for conventional mortgage loans. Loans are grouped by loans originated in the most recent five years and those loans originated prior to the most recent five year period.

As of March 31, 2021
Origination Year
2017(2)
Prior to 2017 Total
Payment status, at amortized cost:(1)

Past due 30-59 days $ - $ 5 $ 5
Past due 60-89 days - 3 3
Past due 90 days or more - 11 11
Total past due mortgage loans - 19 19
Current mortgage loans - 165 165
Total conventional mortgage loans $ - $ 184 $ 184
____________
(1) Amortized cost excludes accrued interest receivable of $1 as of March 31, 2021.
(2) Mortgage loans originated in 2017 had a current payment status and the amounts are immaterial.

As of December 31, 2020
Origination Year
2017 and 2016 Prior to 2016 Total
Payment status, at amortized cost:(1)

Past due 30-59 days $ - $ 6 $ 6
Past due 60-89 days - 2 2
Past due 90 days or more 1 11 12
Total past due mortgage loans 1 19 20
Current mortgage loans 42 141 183
Total conventional mortgage loans $ 43 $ 160 $ 203
____________
(1) Amortized cost excludes accrued interest receivable of $1 as of December 31, 2020.



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



The following tables present the other delinquency statistics for all mortgage loans.
As of March 31, 2021
Conventional Residential Mortgage Loans Government-guaranteed or Insured Residential Mortgage Loans Total
Other delinquency statistics, at amortized cost:
In process of foreclosure (1)
$ 1 $ - $ 1
Seriously delinquent rate (2)
5.82 % 8.00 % 5.99 %
Past due 90 days or more and still accruing interest (3)
$ - $ 1 $ 1
Mortgage loans on nonaccrual status (4)
$ 11 $ - $ 11
____________
(1)Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in-lieu, has been reported.
(2)Mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total mortgage loan portfolio segment.
(3)Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.
(4)Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest. As of March 31, 2021, none of these conventional mortgage loans on non-accrual status had an associated allowance for credit losses.
As of December 31, 2020
Conventional Residential Mortgage Loans Government-guaranteed or Insured Residential Mortgage Loans Total
Other delinquency statistics, at amortized cost:
In process of foreclosure (1)
$ - $ - $ -
Seriously delinquent rate (2)
6.03 % 8.10 % 6.18 %
Past due 90 days or more and still accruing interest (3)
$ - $ 1 $ 1
Mortgage loans on nonaccrual status (4)
$ 12 $ - $ 12
____________
(1)Includes mortgage loans where the decision of foreclosure or similar alternative, such as a pursuit of deed-in-lieu, has been reported.
(2) Mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total mortgage loan portfolio segment.
(3)Mortgage loans insured or guaranteed by the Federal Housing Administration or the Department of Veterans Affairs.
(4)Represents mortgage loans with contractual principal or interest payments 90 days or more past due and not accruing interest. As of December 31, 2020, none of these conventional mortgage loans on non-accrual status had an associated allowance for credit losses.


Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides temporary relief from the accounting and reporting requirements for TDRs for certain loan modifications related to Coronavirus Disease 2019 (COVID-19). Specifically, the CARES Act provides that a qualifying financial institution may elect to suspend (1) the requirements under U.S. GAAP for certain loan modifications that would otherwise be categorized as a TDR, and (2) any determination that such loan modifications would be considered a TDR, including the related impairment for accounting purposes. Section 4013 of the CARES Act applies to any modification related to an economic hardship as a result of the COVID-19 pandemic, including an interest rate modification, a repayment plan, or any similar arrangement that defers or delays payment of principal or interest, that occurs during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020 or the date that is 60 days after the declaration of the national emergency related to the COVID-19 pandemic ends for a loan that was not more than 30 days past due as of December 31, 2019. On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law, extending the applicable period to the earlier of January 1, 2022, or 60 days following the termination of the national emergency declared on March 13, 2020. The Bank has elected to suspend TDR accounting for eligible modifications under Section 4013 of the CARES Act. The Bank had none of these modifications outstanding as of March 31, 2021.

The Bank's servicers may grant a forbearance period to borrowers who have requested forbearance based on COVID-19 related difficulties regardless of the status of the loan at the time of the request. The Bank continues to apply its accounting policy for
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

past due loans and charge-offs to loans during the forbearance period unless there is a legal modification made to update the terms of the mortgage loan contract. The accrual status for loans under forbearance will be driven by the past due status of the loan.

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

As of March 31, 2021 As of December 31, 2020
Past due 30-59 days $ 1 $ 1
Past due 60-89 days 1 1
Past due 90 days or more(1)
8 9
Total past due mortgage loans 10 11
Current mortgage loans 7 6
Total unpaid principal balance(2)
$ 17 $ 17
____________
(1) Equals to mortgage loans on nonaccrual payment status.
(2) Represents 8.37 percent and 7.60 percent of the Bank's mortgage loans held for portfolio as of March 31, 2021 and December 31, 2020, respectively.

Note 7-Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are the joint and several obligations of the 11 Federal Home Loan Banks (FHLBanks) and are backed only by the financial resources of the FHLBanks. The Federal Home Loan Banks Office of Finance (Office of Finance) tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks its specific portion of consolidated obligations for which it is the primary obligor and records it as a liability.
Interest-rate Payment Terms.The following table presents the Bank's consolidated obligation bonds by interest-rate payment type.
As of March 31, 2021 As of December 31, 2020
Simple variable-rate $ 44,703 $ 52,935
Fixed-rate 13,420 6,322
Step up/down 395 75
Total par value $ 58,518 $ 59,332

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

Redemption Terms.The following table presents the Bank's participation in consolidated obligation bonds outstanding by year of contractual maturity.
As of March 31, 2021 As of December 31, 2020
Amount Weighted-
average
Interest Rate (%)
Amount Weighted-
average
Interest Rate (%)
Due in one year or less $ 35,709 0.17 $ 43,788 0.24
Due after one year through two years 11,122 0.17 11,205 0.25
Due after two years through three years 2,497 1.58 340 2.05
Due after three years through four years 1,642 0.85 1,719 2.33
Due after four years through five years 3,863 0.73 1,090 0.50
Due after five years 3,685 1.92 1,190 3.76
Total par value 58,518 0.39 59,332 0.40
Premiums 10 11
Discounts (20) (20)
Hedging adjustments (33) 56
Total $ 58,475 $ 59,379

The following table presents the Bank's consolidated obligation bonds outstanding by call feature.
As of March 31, 2021 As of December 31, 2020
Noncallable $ 50,941 $ 59,247
Callable 7,577 85
Total par value $ 58,518 $ 59,332

The following table presents the Bank's consolidated obligation bonds outstanding, by year of contractual maturity, or for callable consolidated obligation bonds, by next call date.
As of March 31, 2021 As of December 31, 2020
Due or callable in one year or less $ 43,285 $ 43,873
Due or callable after one year through two years 11,122 11,205
Due or callable after two years through three years 1,372 315
Due or callable after three years through four years 457 1,659
Due or callable after four years through five years 1,092 1,090
Due or callable after five years 1,190 1,190
Total par value $ 58,518 $ 59,332

Consolidated Obligation Discount Notes.Consolidated obligation discount notes are issued to raise short-term funds and have original contractual maturities of up to one year. These consolidated obligation discount notes are issued at less than their face amounts and redeemed at par value when they mature.
The following table presents the Bank's participation in consolidated obligation discount notes.
Book Value Par Value Weighted-average
Interest Rate (%)
As of March 31, 2021 $ 19,901 $ 19,902 0.04
As of December 31, 2020 $ 25,385 $ 25,389 0.11
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


Note 8-Capital

Capital.The following table presents the Bank's compliance with the Federal Housing Finance Agency's (Finance Agency) regulatory capital rules and requirements.
As of March 31, 2021 As of December 31, 2020
Required Actual Required Actual
Risk-based capital $ 1,326 $ 4,754 $ 1,496 $ 5,276
Total regulatory capital ratio 4.00 % 5.52 % 4.00 % 5.72 %
Total regulatory capital (1)
$ 3,444 $ 4,754 $ 3,692 $ 5,276
Leverage capital ratio 5.00 % 8.28 % 5.00 % 8.58 %
Leverage capital $ 4,304 $ 7,131 $ 4,615 $ 7,914
____________
(1)Total regulatory capital does not include accumulated other comprehensive loss, but does include mandatorily redeemable capital stock.

The Bank declares and pays any dividends only after net income is calculated for the preceding quarter. The following table presents the Bank's declared and paid quarterly cash dividends in 2021 and 2020.
2021 2020
Amount Annualized Rate (%) Amount Annualized Rate (%)
First quarter $ 30 3.72 $ 76 5.93


Note 9-Accumulated Other Comprehensive Loss

The following table presents the components comprising accumulated other comprehensive loss.
Net Unrealized Gains (Losses) on Available-for-sale Securities Net Noncredit Portion of Other-than-temporary Impairment Losses on Available-for-sale Securities Pension and Postretirement Benefits Total Accumulated
Other
Comprehensive
Loss
Balance, December 31, 2019 $ - $ 41 $ (19) $ 22
Other comprehensive income before reclassifications:
Adoption of ASU 2016-13 as amended 41 (41) - -
Net unrealized gains on available-for-sale securities 41 - - 41
Reclassification from accumulated other comprehensive income to net income:
-
Net realized gains from sale of available-for-sale securities (82) - - (82)
Net current period other comprehensive loss - (41) - (41)
Balance, March 31, 2020 $ - $ - $ (19) $ (19)
Balance, December 31, 2020 $ - $ - $ (16) $ (16)
Reclassification from accumulated other comprehensive income to net income:
Amortization of pension and postretirement (1)
- - 3 3
Net current period other comprehensive income - - 3 3
Balance, March 31, 2021 $ - $ - $ (13) $ (13)
____________
(1)Included in Noninterest expense - Other on the Statements of Income.

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

Note 10-Derivatives and Hedging Activities

Nature of Business Activity

The Bank is exposed to interest-rate risk primarily from the effect of interest-rate changes on its interest-earning assets and on its interest-bearing liabilities that finance these assets. To mitigate the risk of loss, the Bank has established policies and procedures, which include guidelines on the amount of exposure to interest-rate changes that it is willing to accept. In addition, the Bank monitors the risk to its interest income, net interest margin, and average maturity of its interest-earning assets and funding sources. The goal of the Bank's interest-rate risk management strategies is not to eliminate interest-rate risk, but to manage it within appropriate limits.

The Bank enters into derivatives to manage the interest-rate risk exposure that is inherent in its otherwise unhedged assets and funding sources, to achieve the Bank's risk management objectives, and to act as an intermediary between its members and counterparties. The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The Bank's over-the-counter derivatives transactions may either be (1) uncleared derivatives, which are executed bilaterally with a counterparty; or (2) cleared derivatives, which are cleared through a Futures Commission Merchant (clearing agent) with a Derivatives Clearing Organization (Clearinghouse). Once a derivatives transaction has been accepted for clearing by a Clearinghouse, the derivatives transaction is novated, and the executing counterparty is replaced with the Clearinghouse as the counterparty. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit. For additional information on the Bank's derivatives and hedging activities, see Note 15-Derivatives and Hedging Activities to the 2020 audited financial statements contained in the Bank's Form 10-K.

Financial Statement Effect and Additional Financial Information

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

The following table presents the notional amount, fair value of derivative instruments, and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.
As of March 31, 2021 As of December 31, 2020
Notional Amount of Derivatives Derivative Assets Derivative Liabilities Notional Amount of Derivatives Derivative Assets Derivative Liabilities
Derivatives in hedging relationships:
Interest-rate swaps (1)
$ 32,124 $ 18 $ 387 $ 28,001 $ 5 $ 502
Derivatives not designated as hedging instruments:
Interest-rate swaps (1)
65 2 1 121 1 1
Interest-rate caps or floors 7,000 1 1 7,000 1 1
Total derivatives not designated as hedging instruments 7,065 3 2 7,121 2 2
Total derivatives before netting and collateral adjustments
$ 39,189 21 389 $ 35,122 7 504
Netting adjustments and cash collateral (2)
351 (368) 384 (493)
Derivative assets and derivative liabilities $ 372 $ 21 $ 391 $ 11
___________
(1) Includes variation margin for daily settled contracts of $577 and $1,065 as of March 31, 2021 and December 31, 2020, respectively.
(2) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty. Cash collateral posted, including accrued interest was $719 and $878 as of March 31, 2021 and December 31, 2020, respectively. Cash collateral received, including accrued interest, was $0 as of March 31, 2021 and December 31, 2020.

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

The following tables present the net gains (losses) on fair value hedging relationships.
For the Three Months Ended March 31, 2021
Interest Income (Expense)
Advances Consolidated Obligation Bonds
Total interest income (expense) recorded in the Statements of Income $ 87 $ (45)
Changes in fair value:
Hedged items $ (621) $ 89
Derivatives 691 (88)
Net changes in fair value 70 1
Net interest settlements on derivatives (1) (2)
(94) 10
Amortization/accretion of active hedging relationships (45) -
Other (3) -
Total net interest income effect from fair value hedging relationships $ (72) $ 11
____________
(1)Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.
(2)Excludes the interest income/expense of the respective hedged items.
For the Three Months Ended March 31, 2020
Interest Income (Expense)
Advances Consolidated Obligation Bonds Consolidated Obligation Discount Notes
Total interest income (expense) recorded in the Statements of Income $ 419 $ (342) $ (211)
Changes in fair value:
Hedged items $ 1,505 $ (43) $ (25)
Derivatives (1,514) 50 9
Net changes in fair value (9) 7 (16)
Net interest settlements on derivatives (1) (2)
(30) 7 12
Amortization/accretion of active hedging relationships (11) - -
Other 2 - -
Total net interest income effect from fair value hedging relationships $ (48) $ 14 $ (4)
____________
(1)Represents interest income/expense on derivatives in qualifying fair-value hedging relationships. Net interest settlements on derivatives that are not in qualifying fair-value hedging relationships are reported in other income.
(2)Excludes the interest income/expense of the respective hedged items.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)


The following table presents the total basis adjustments on hedged items designated as fair value hedges and the related
amortized cost of the hedged items.
As of March 31, 2021 As of December 31, 2020
Line Item in Statement of Conditions of Hedged Item
Amortized Cost of Hedged Asset or Liability (1)
Basis Adjustments for Active Hedging Relationships Included in Amortized Cost Basis Adjustments for Discontinued Hedging Relationships included in Amortized Cost Total Amount of Fair Value Hedging Basis Adjustments
Amortized Cost of Hedged Asset or Liability (1)
Basis Adjustments for Active Hedging Relationships Included in Amortized Cost Basis Adjustments for Discontinued Hedging Relationships included in Amortized Cost Total Amount of Fair Value Hedging Basis Adjustments
Advances $ 23,006 $ 861 $ 54 $ 915 $ 25,380 $ 1,529 $ 55 $ 1,584
Consolidated obligations:
Bonds 9,001 (33) - (33) 1,555 56 - 56
Discount notes - - - - 1,122 - - -
___________
(1) Includes only the portion of amortized cost representing the hedged items in fair value hedging relationships.


The following table presents net gains (losses) related to derivatives and hedging activities recorded in noninterest income on the Statements of Income.
For the Three Months Ended March 31,
2021 2020
Derivatives not designated as hedging instruments - Interest-rate swaps $ 1 $ (6)

Managing Credit Risk on Derivatives

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

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

Certain of the Bank's uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank's credit rating. If the Bank's credit rating is lowered by a Nationally Recognized Statistical Rating Organization (NRSRO), the Bank may be required to deliver additional collateral on uncleared derivative instruments in net liability positions. The aggregate fair value of all uncleared derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest) as of March 31, 2021 was $7, for which the Bank was not required to post collateral as of March 31, 2021. If the Bank's credit ratings had been lowered from its current rating to the next lower rating, the Bank would have been required to deliver $2 of collateral at fair value to its uncleared derivative counterparties as of March 31, 2021.

For cleared derivatives, the Clearinghouse is the Bank's counterparty. The Clearinghouse notifies the clearing agent of the required initial and variation margin, and the clearing agent notifies the Bank. The Bank utilizes two Clearinghouses for all cleared derivative transactions, CME Clearing and LCH Ltd. At both Clearinghouses, variation margin is characterized as daily settlement payments, and initial margin is considered cash collateral. Because the Bank is required to post initial and variation margin through the clearing agent to the Clearinghouse, it exposes the Bank to institutional credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties, and collateral/payments is posted daily through a clearing agent for changes in the fair value of cleared derivatives. The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy,
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

insolvency, or similar proceeding involving the Clearinghouse or the Bank's clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular Clearinghouse.

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

The following table presents the fair value of derivative instruments meeting or not meeting netting requirements, including the related collateral received from or pledged to counterparties.
As of March 31, 2021 As of December 31, 2020
Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
Gross recognized amount:
Uncleared derivatives $ 6 $ 388 $ 6 $ 493
Cleared derivatives 15 1 1 11
Total gross recognized amount 21 389 7 504
Gross amounts of netting adjustments and cash collateral:
Uncleared derivatives (3) (367) (2) (482)
Cleared derivatives 354 (1) 386 (11)
Total gross amounts of netting adjustments and cash collateral
351 (368) 384 (493)
Net amounts after netting adjustments and cash collateral:
Uncleared derivatives 3 21 4 11
Cleared derivatives 369 - 387 -
Total net amounts after netting adjustments and cash collateral
372 21 391 11
Non-cash collateral received or pledged not offset-cannot be sold or repledged: (1)
Uncleared derivatives 1 - 1 -
Cleared derivatives - - - -
Total cannot be sold or repledged (1)
1 - 1 -
Net unsecured amounts: (1)
Uncleared derivatives 2 21 3 11
Cleared derivatives 369 - 387 -
Total net unsecured amount (1)
$ 371 $ 21 $ 390 $ 11
____________
(1) The Bank had net credit exposure of $2 and $3 as of March 31, 2021 and December 31, 2020, respectively, due to instances where the Bank's pledged collateral to a counterparty exceeded the Bank's net derivative liability position.

Note 11-Estimated Fair Values

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

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

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

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

Level 1- inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Bank carried grantor trust assets at fair value hierarchy Level 1 as of March 31, 2021 and December 31, 2020.

Level 2- inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Bank carried trading securities and derivatives at fair value hierarchy Level 2 as of March 31, 2021 and December 31, 2020.

Level 3- inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are supported by limited market activity and reflect the entity's own assumptions. The Bank did not carry any financial assets or liabilities, measured on a recurring basis, at fair value Level 3 as of March 31, 2021 and December 31, 2020.

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

For financial instruments carried at fair value, the Bank reviews the fair value hierarchy classification of financial assets and liabilities on a quarterly basis. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities within the fair value hierarchy. There were no such transfers during the periods presented.
Estimated Fair Value Measurements on a Recurring Basis.The following tables present, for each fair value hierarchy level, the Bank's financial assets and liabilities that are measured at fair value on a recurring basis on its Statements of Condition.
As of March 31, 2021
Fair Value Measurements Using
Netting Adjustments and Cash Collateral (1)
Level 1 Level 2 Total
Assets
Trading securities - U.S. Treasury obligations $ - $ 500 $ - $ 500
Derivative assets - Interest-rate related - 21 351 372
Grantor trust (included in Other assets) 62 - - 62
Total assets at fair value $ 62 $ 521 $ 351 $ 934
Liabilities
Derivative liabilities - Interest-rate related $ - $ 389 $ (368) $ 21
Total liabilities at fair value $ - $ 389 $ (368) $ 21
____________
(1)Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

As of December 31, 2020
Fair Value Measurements Using
Netting Adjustments and Cash Collateral (1)
Level 1 Level 2 Total
Assets
Trading securities:
U.S. Treasury obligations $ - $ 1,500 $ - $ 1,500
Government-sponsored enterprises debt obligations - 62 - 62
Total trading securities - 1,562 - 1,562
Derivative assets - Interest-rate related - 7 384 391
Grantor trust (included in Other assets) 74 - - 74
Total assets at fair value $ 74 $ 1,569 $ 384 $ 2,027
Liabilities
Derivative liabilities - Interest-rate related $ - $ 504 $ (493) $ 11
Total liabilities at fair value $ - $ 504 $ (493) $ 11
____________
(1)Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.

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

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

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

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

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

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

Multiple third-party vendor prices were received for a majority of the Bank's investment securities holdings, and the final prices for those securities were computed by averaging the prices received as of March 31, 2021 and December 31, 2020. Based on the Bank's review of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or the Bank's additional analysis in those instances in which there were outliers or significant yield variances), the Bank believes that its final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further, that the fair value measurements are classified
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

appropriately in the fair value hierarchy.

Derivative assets and liabilities.The Bank calculates the fair values of interest-rate related derivatives using a discounted cash flow analysis which utilizes market-observable inputs. The significant assumptions used in this model are based on management's best estimate of discount rates, market indices, and market volatility. The inputs for interest-rate related derivatives uses the Secured Overnight Financing Rate (SOFR) swap curve for cleared derivatives and the Overnight Index Swap curve for collateralized derivatives.

Derivative instruments are transacted primarily in the institutional dealer market and priced with observable market assumptions at a mid-market valuation point. The Bank does not provide a credit valuation adjustment based on aggregate exposure by derivative counterparty when measuring the fair value of its derivatives. This is because the collateral provisions pertaining to the Bank's derivatives obviate the need to provide such a credit valuation adjustment. The fair values of the Bank's derivatives take into consideration the effects of legally enforceable master netting agreements, where applicable, that allow the Bank to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The Bank and each uncleared derivative counterparty have collateral thresholds that take into account both the Bank's and the counterparty's credit ratings. As a result of these practices and agreements, the Bank has concluded that the impact of the credit differential between the Bank and its derivative counterparties was mitigated to an immaterial level, and no further adjustments were deemed necessary to the recorded fair values of derivative assets and liabilities on the Statements of Condition as of March 31, 2021 and December 31, 2020.

The following estimated fair value amounts have been determined by the Bank using available market information and the Bank's best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank as of March 31, 2021 and December 31, 2020. Although the Bank uses its best judgment in estimating the fair values of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank's financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions although they do reflect the Bank's judgment of how a market participant would estimate the fair value. The fair value tables presented below do not represent an estimate of the overall fair value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets versus liabilities.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

The following tables present the carrying values and estimated fair values of the Bank's financial instruments.
As of March 31, 2021
Estimated Fair Value
Carrying Value Total Level 1 Level 2
Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks $ 2,971 $ 2,971 $ 2,971 $ - $ -
Interest-bearing deposits 690 690 - 690 -
Securities purchased under agreements to resell 4,000 4,000 - 4,000 -
Federal funds sold 8,701 8,701 - 8,701 -
Trading securities 500 500 - 500 -
Held-to-maturity securities 18,989 19,023 - 19,023 -
Advances 49,463 49,851 - 49,851 -
Mortgage loans held for portfolio, net 199 212 - 212 -
Accrued interest receivable 79 79 - 79 -
Derivative assets 372 372 - 21 351
Grantor trust assets (included in Other assets) 62 62 62 - -
Liabilities:
Interest-bearing deposits 2,713 2,713 - 2,713 -
Consolidated obligations, net:
Discount notes 19,901 19,901 - 19,901 -
Bonds 58,475 58,771 - 58,771 -
Accrued interest payable 48 48 - 48 -
Derivative liabilities 21 21 - 389 (368)
____________
(1)Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

As of December 31, 2020
Estimated Fair Value
Carrying Value Total Level 1 Level 2
Netting Adjustments and Cash Collateral (1)
Assets:
Cash and due from banks $ 2,905 $ 2,905 $ 2,905 $ - $ -
Interest-bearing deposits 1,644 1,644 - 1,644 -
Securities purchased under agreements to resell 9,500 9,500 - 9,500 -
Federal funds sold 3,270 3,270 - 3,270 -
Trading securities 1,562 1,562 - 1,562 -
Held-to-maturity securities 20,404 20,489 - 20,489 -
Advances 52,168 52,610 - 52,610 -
Mortgage loans held for portfolio, net 218 234 - 234 -
Accrued interest receivable 88 88 - 88 -
Derivative assets 391 391 - 7 384
Grantor trust assets (included in Other assets) 74 74 74 - -
Liabilities:
Interest-bearing deposits 1,998 1,998 - 1,998 -
Consolidated obligations, net:
Discount notes 25,385 25,387 - 25,387 -
Bonds 59,379 59,835 - 59,835 -
Accrued interest payable 45 45 - 45 -
Derivative liabilities 11 11 - 504 (493)
____________
(1)Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral and related accrued interest held or placed with the same clearing agents and/or counterparty.

Note 12-Commitments and Contingencies

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

The par value of the other FHLBanks' outstanding consolidated obligations for which the Bank is jointly and severally liable was $617,965 and $662,051 as of March 31, 2021 and December 31, 2020, respectively, exclusive of the Bank's own outstanding consolidated obligations. None of the other FHLBanks defaulted on their consolidated obligations, the Finance Agency was not required to allocate any obligation among the FHLBanks, and no amount of the joint and several obligation was fixed as of March 31, 2021 and December 31, 2020. Accordingly, the Bank has not recognized a liability for its joint and several obligation related to the other FHLBanks' consolidated obligations as of March 31, 2021 and December 31, 2020.
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FEDERAL HOME LOAN BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(Dollars in millions)

The following table presents the Bank's outstanding commitments, which represent off-balance sheet obligations.
As of March 31, 2021 As of December 31, 2020
Expire Within One Year Expire After One Year Total Expire Within One Year Expire After One Year Total
Standby letters of credit (1)
$ 9,255 $ 6,577 $ 15,832 $ 9,287 $ 6,754 $ 16,041
Commitments to fund additional advances 82 35 117 10 107 117
Unsettled consolidated obligation bonds, at par (2)
227 - 227 1 - 1
____________
(1)'Expire Within One Year' includes 15 standby letters of credit for a total of $13 and $19 as of March 31, 2021 and December 31, 2020, respectively, which have no stated maturity date and are subject to renewal on an annual basis.
(2)Expiration is based on settlement period rather than underlying contractual maturity of consolidated obligations.
The carrying value of the guarantees related to standby letters of credit is recorded in 'Other liabilities' on the Statements of Condition and amounted to $29 and $30 as of March 31, 2021 and December 31, 2020, respectively. Based on the Bank's credit analyses and collateral requirements, the Bank does not deem it necessary to record any additional liability on the Statement of Condition for these commitments as of March 31, 2021 and December 31, 2020.
The Bank is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate, as of the date of the financial statements, that the ultimate liability, if any, arising out of these matters will have a material effect on the Bank's financial condition or results of operations.

Note 13-Transactions with Shareholders

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

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

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

Shareholder Concentrations. The Bank considers shareholder concentration as members or non-members with regulatory capital stock outstanding in excess of 10 percent of the Bank's total regulatory capital stock. The following tables present transactions with shareholders whose holdings of regulatory capital stock exceed 10 percent of total regulatory capital stock outstanding.
As of March 31, 2021
Regulatory Capital Stock Outstanding Percent of Total Regulatory Capital Stock Outstanding Par Value of Advances Percent of Total Par Value of Advances Interest-bearing Deposits Percent of Total Interest-bearing Deposits
TIAA, FSB $ 299 11.74 $ 7,531 15.49 $ 1 0.05
Bank of America, National Association 298 11.71 7,507 15.44 - -
Navy Federal Credit Union 260 10.21 6,495 13.36 51 1.87

As of December 31, 2020
Regulatory Capital Stock Outstanding Percent of Total Regulatory Capital Stock Outstanding Par Value of Advances Percent of Total Par Value of Advances Interest-bearing Deposits Percent of Total Interest-bearing Deposits
TIAA, FSB $ 337 10.94 $ 7,571 14.95 $ 1 0.07
Bank of America, National Association 334 10.85 7,507 14.82 - 0.01



Note 14-Subsequent Events

On April 29, 2021, the Bank's board of directors approved a cash dividend for the first quarter of 2021. The Bank paid the first quarter 2021 dividend on May 4, 2021 in the amount of $27.

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

Forward-Looking Information

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

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

The forward-looking statements may not be realized due to a variety of factors, including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological and market factors, the impact of the COVID-19 pandemic, as well as those risk factors provided under Item 1A of the Bank's most recent Form 10-K filed on March 4, 2021, and from time to time in the Bank's other filings with the SEC, and elsewhere in this Report.

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

The discussion presented below provides an analysis of the Bank's financial condition as of March 31, 2021 and December 31, 2020, and results of operations for the first quarter of 2021 and 2020. Management's discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in this Report, as well as the Bank's audited financial statements for the year ended December 31, 2020.

Executive Summary

Recent Market Conditions

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

Operating Status Update

As a financial institution, the Bank is part of the nation's critical infrastructure, has continually operated its business, and has continued to serve as a reliable source of funding for our members. The Bank continues to operate in Phase 2 of its return to
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office plan, which provides that up to 33 percent of the Bank's employees may work on-site. To date, the Bank has not experienced significant operational difficulties or disruptions, however the possibility exists, which could impair the Bank's ability to conduct and manage its business effectively. To date, no member of the Bank's executive management team has been incapacitated or unable to perform duties. The Bank's board of directors regularly reviews the Bank's succession plan in the event of incapacitation of any executive team member.

Financial Condition

As of March 31, 2021, total assets were $86.1 billion, a decrease of $6.2 billion, or 6.72 percent, from December 31, 2020. This decrease was primarily due to a $2.7 billion, or 5.18 percent, decrease in advances, and a $3.5 billion, or 9.62 percent, decrease in total investments.

As of March 31, 2021, total liabilities were $81.4 billion, a decrease of $5.7 billion, or 6.53 percent, from December 31, 2020. This decrease was primarily due to a $6.4 billion, or 7.54 percent, decrease in consolidated obligations as a result of decreased funding and liquidity needs during the period.

As of March 31, 2021, total capital was $4.7 billion, a decrease of $519 million, or 9.86 percent, from December 31, 2020. This decrease was primarily due to certain changes in member minimum capital stock requirements that the Bank implemented in March 2021, and a decrease in the Bank's subclass B2 activity-based capital stock resulting from a decrease in the total outstanding advances during the period.

Results of Operations

The Bank recorded net interest income of $79 million for the first quarter of 2021, a decrease of $6 million, or 6.89 percent, from net interest income of $85 million for the same period in 2020. This decrease in net interest income was primarily due to a decrease in advances and other interest-earning assets, partially offset by a decrease in interest rates which impacted interest-bearing liabilities more than interest-earning assets.

The Bank recorded net income of $43 million for the first quarter of 2021, a decrease of $65 million, or 60.5 percent, from net income of $108 million for the same period in 2020. The decrease in net income was primarily due to an $85 million gain from the sale of the Bank's private-label mortgage-backed securities investment portfolio, partially offset by an additional voluntary $20 million retirement plan contribution, during the first quarter of 2020.

The Bank's first quarter 2021 performance resulted in an annualized return on average equity (ROE) of 3.35 percent as compared to 5.97 percent for the same period in 2020. The decrease in ROE was primarily due to the decrease in net income during the first quarter of 2021, compared to the same period in 2020. The ROE spread to average daily SOFR decreased to 331 basis points for the first quarter of 2021, as compared to 474 basis points for the same period in 2020. The decrease in ROE and ROE spread to average daily SOFR was primarily due to the decrease in net income during the first quarter of 2021, compared to the same period in 2020.

The Bank's interest-rate spread was 34 basis points for the first quarter of 2021, compared to 16 basis points for the same period in 2020. The increase in the Bank's interest rate spread for the first quarter of 2021, compared to the same period in 2020, was primarily due to a decrease in interest rates that impacted the expense from interest-bearing liabilities more than the income from interest-earning assets.

Business Outlook

The factors impacting the Bank's business outlook remain largely unchanged from the discussion in the Bank's 2020 Form 10-K. External factors, including changes in interest rates, liquidity levels and loan demand at member institutions, the general state of the economy, and fiscal and monetary policies continue to impact the Bank's overall business outlook and advance demand. The COVID-19 pandemic has and is expected to continue to influence these external factors and the financial markets. At its December 2020 meeting, the Federal Reserve maintained the Federal Funds target range and indicated that rates will remain low through at least 2023. The Bank expects that decreased advance demand resulting from the COVID-19 monetary and fiscal stimulus actions discussed throughout this Report will continue into the foreseeable future, which, combined with the continued low interest rate environment, is expected to reduce the Bank's net income for 2021. If the Bank experiences these lower levels of net income, the amount that the Bank pays as dividends could be impacted. The Bank relies on access to the capital markets to meet its funding needs, and the Bank expects continued sufficient access to capital markets. Given the evolving and unknowable effect of the COVID-19 pandemic on these external factors, the Bank cannot predict the extent to
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which, and the duration of, the impact to the Bank's future business performance and profitability due to the COVID-19 pandemic.


Selected Financial Data

The following table presents a summary of certain financial information for the Bank for the periods presented (dollars in millions):
As of and for the Three Months Ended
March 31,
2021
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
Statements of Condition (at period end)
Total assets $ 86,095 $ 92,295 $ 112,165 $ 126,596 $ 189,392
Advances 49,463 52,168 58,802 67,221 137,037
Investments(1)
32,880 36,380 48,255 54,167 46,429
Mortgage loans held for portfolio 199 218 243 264 282
Allowance for credit losses on mortgage loans - (1) (1) (1) (1)
Interest-bearing deposits 2,713 1,998 1,967 2,192 1,766
Consolidated obligations, net:
Discount notes (2)
19,901 25,385 35,519 58,295 96,490
Bonds (2)
58,475 59,379 68,858 59,925 81,856
Total consolidated obligations, net (2)
78,376 84,764 104,377 118,220 178,346
Mandatorily redeemable capital stock - - 1 1 1
Affordable Housing Program payable 79 82 86 92 95
Capital stock - putable 2,543 3,078 3,341 3,680 6,652
Retained earnings 2,211 2,198 2,198 2,200 2,185
Accumulated other comprehensive loss (13) (16) (17) (18) (19)
Total capital 4,741 5,260 5,522 5,862 8,818
Statements of Income (for the period ended)
Net interest income 79 69 89 90 85
Net (losses) gains on trading securities (1) (1) - - 5
Net realized gains from sale of investment securities - - - - 85
Net gains (losses) on derivatives and hedging activities 1 - 1 (1) (6)
Standby letters of credit fees 4 3 4 5 7
Other income - 3 4 2 2
Noninterest expense 36 36 35 34 58
Income before assessment 47 38 63 62 120
Affordable Housing Program assessment 4 3 7 6 12
Net income 43 35 56 56 108
Performance Ratios (%)
Return on equity (3)
3.35 2.53 3.95 3.01 5.97
Return on assets (4)
0.19 0.14 0.20 0.14 0.28
Net interest margin (5)
0.36 0.28 0.33 0.22 0.23
Regulatory capital ratio (at period end) (6)
5.52 5.72 4.94 4.65 4.67
Equity to assets ratio (7)
5.66 5.43 5.17 4.53 4.76
Dividend payout ratio (8)
70.82 102.39 101.75 125.35 70.70
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____________
(1)Investments consist of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and securities classified as trading, available-for-sale, and held-to-maturity.
(2) The amounts presented are the Bank's primary obligations on consolidated obligations outstanding. The par value of the other FHLBanks' outstanding consolidated obligations for which the Bank is jointly and severally liable was as follows (in millions):
March 31, 2021 $ 617,965
December 31, 2020 662,051
September 30, 2020 715,531
June 30, 2020 797,560
March 31, 2020 996,251

(3)Calculated as net income, divided by average total equity.
(4) Calculated as net income, divided by average total assets.
(5) Net interest margin is net interest income as a percentage of average earning assets.
(6)Regulatory capital ratio is regulatory capital, which does not include accumulated other comprehensive loss, but does include mandatorily redeemable capital stock, as a percentage of total assets as of period end.
(7) Calculated as average total equity, divided by average total assets.
(8)Calculated as dividends declared during the period divided by net income during the period.

Financial Condition

The following table presents the distribution of the Bank's total assets, liabilities, and capital by major class as of the dates indicated (dollars in millions). These items are discussed in more detail below.
As of March 31, 2021 As of December 31, 2020 Increase (Decrease)
Amount Percent
of Total
Amount Percent
of Total
Amount Percent
Advances $ 49,463 57.45 $ 52,168 56.52 $ (2,705) (5.18)
Investment securities 19,489 22.64 21,966 23.80 (2,477) (11.28)
Other investments 13,391 15.55 14,414 15.62 (1,023) (7.10)
Mortgage loans, net 199 0.23 218 0.24 (19) (9.00)
Other assets 3,553 4.13 3,529 3.82 24 0.68
Total assets $ 86,095 100.00 $ 92,295 100.00 $ (6,200) (6.72)
Consolidated obligations, net:
Discount notes $ 19,901 24.46 $ 25,385 29.17 $ (5,484) (21.61)
Bonds 58,475 71.88 59,379 68.22 (904) (1.52)
Deposits 2,713 3.33 1,998 2.30 715 35.81
Other liabilities 265 0.33 273 0.31 (8) (3.35)
Total liabilities $ 81,354 100.00 $ 87,035 100.00 $ (5,681) (6.53)
Capital stock $ 2,543 53.65 $ 3,078 58.53 $ (535) (17.38)
Retained earnings 2,211 46.62 2,198 41.79 13 0.57
Accumulated other comprehensive loss (13) (0.27) (16) (0.32) 3 (23.39)
Total capital $ 4,741 100.00 $ 5,260 100.00 $ (519) (9.86)

Advances

Total advances decreased by 5.18 percent as of March 31, 2021, compared to December 31, 2020. In response to the deteriorating market conditions in early 2020, the Federal Reserve implemented a number of asset purchase programs to provide additional liquidity to the financial markets. The additional market liquidity from monetary and fiscal stimulus actions resulted in increased deposits at the Bank's members and lower demand for the Bank's advances. The Bank expects that advance demand will continue at reduced levels. A significant percentage of advances made during the first three months of 2021 were short-term advances.

As of March 31, 2021, 79.0 percent of the Bank's advances were fixed-rate, compared to 78.8 percent as of December 31, 2020. However, the Bank often simultaneously entered into derivatives with the issuance of advances to convert the rates on them, in effect, into short-term variable interest rates, primarily based on London Interbank Offered Rate (LIBOR) and SOFR. As of March 31, 2021 and December 31, 2020, 59.4 percent and 63.2 percent, respectively, of the Bank's fixed-rate advances were swapped, and 0.40 percent and 0.38 percent, respectively, of the Bank's variable-rate advances, which contained optionality, were swapped. The majority of the Bank's variable-rate advances were indexed to LIBOR and SOFR. Beginning June 30, 2020,
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the Bank ceased issuing LIBOR-based advances and entering into LIBOR-based derivatives with maturities/termination dates beyond December 31, 2021. The Bank also offers variable-rate advances that may be tied to other indices, such as the federal funds rate, prime rate, or constant maturity swap rates.

The following table presents the par value of outstanding advances by product characteristics (dollars in millions).
As of March 31, 2021 As of December 31, 2020
Amount Percent of Total Amount Percent of Total
Fixed rate (1)
$ 32,921 67.73 $ 33,816 66.77
Adjustable or variable-rate indexed 10,179 20.94 10,678 21.09
Convertible 4,748 9.77 5,316 10.50
Principal reducing credit 758 1.56 833 1.64
Total par value $ 48,606 100.00 $ 50,643 100.00
____________
(1)Includes convertible advances whose conversion options have expired.

Refer to Note 5-Advances to the Bank's interim financial statements for the concentration of the Bank's advances to its 10 largest borrowing institutions.

Investments

The following table presents more detailed information regarding investments held by the Bank (dollars in millions).
Increase (Decrease)
As of March 31, 2021 As of December 31, 2020 Amount Percent
Investment securities:
Government-sponsored enterprises debt obligations
$ 2,185 $ 2,307 $ (122) (5.29)
U.S. Treasury obligations
500 1,500 (1,000) (66.67)
State or local housing agency debt obligations
1 1 - -
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential
279 295 (16) (5.37)
Government-sponsored enterprises residential
6,631 7,283 (652) (8.95)
Government-sponsored enterprises commercial
9,893 10,580 (687) (6.49)
Total mortgage-backed securities 16,803 18,158 (1,355) (7.46)
Total investment securities 19,489 21,966 (2,477) (11.28)
Other investments:
Interest-bearing deposits (1)
690 1,644 (954) (58.04)
Securities purchased under agreements to resell
4,000 9,500 (5,500) (57.89)
Federal funds sold (2)
8,701 3,270 5,431 166.09
Total other investments 13,391 14,414 (1,023) (7.10)
Total investments $ 32,880 $ 36,380 $ (3,500) (9.62)
____________
(1)Interest-bearing deposits includes $431 million business money market account with Truist Bank one of the Bank's 10 largest borrowers, as of December 31, 2020.
(2)Federal funds sold includes $180 million with BankUnited, National Association, one of the Bank's 10 largest borrowers as of December 31, 2020.

The decrease in total investment securities was primarily due to the maturities and prepayments that occurred during the first quarter of 2021. The amount held in other investments will vary each day based on the Bank's liquidity needs as a result of advances demand, the earnings rates, and the availability of high quality counterparties in the federal funds market.

The Finance Agency regulations prohibit an FHLBank from purchasing MBS and asset-backed securities if its investment in such securities would exceed 300 percent of the FHLBank's previous month-end regulatory capital on the day it would purchase the securities. As of March 31, 2021 and December 31, 2020, these investments were 353 percent and 344 percent of the Bank's regulatory capital, respectively. These investments exceeded the 300 percent level due to a decrease in regulatory capital that resulted from a decrease in advances as of March 31, 2021 and December 31, 2020. The Bank was in compliance with this regulatory requirement at the time of its MBS purchases and was not required to sell any previously purchased MBS. However, the Bank is precluded from purchasing additional MBS until its MBS to regulatory capital declines below 300 percent.

Mortgage Loans Held for Portfolio

The decrease in mortgage loans held for portfolio from December 31, 2020 to March 31, 2021 was primarily due to the maturity and prepayment of these assets during the period.
Members that sold mortgage loans to the Bank were located primarily in the southeastern United States; therefore, the Bank's conventional mortgage loan portfolio was concentrated in that region as of March 31, 2021 and December 31, 2020. The following table presents the percentage of unpaid principal balance of conventional residential mortgage loans held for portfolio for the five largest state concentrations.
As of March 31, 2021 As of December 31, 2020
Percent of Total Percent of Total
Florida 23.03 22.98
South Carolina 22.20 21.74
Georgia 10.82 10.33
Virginia 10.73 10.68
North Carolina 8.53 8.33
All other 24.69 25.94
Total 100.00 100.00

Consolidated Obligations

The Bank funds its assets primarily through the issuance of consolidated obligation bonds and consolidated obligation discount notes. The decrease in consolidated obligations from December 31, 2020 to March 31, 2021 was primarily a result of a decrease in advances outstanding and reduced liquidity needs during the period. Consolidated obligation issuances financed 91.0 percent of the $86.1 billion in total assets as of March 31, 2021, remaining relatively stable compared to the financing ratio of 91.8 percent as of December 31, 2020.
The Bank often simultaneously enters into derivatives with the issuance of fixed-rate consolidated obligation bonds to convert the interest rates, in effect, into short-term variable interest rates, primarily based on LIBOR and SOFR. As of March 31, 2021 and December 31, 2020, 64.6 percent and 23.1 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 March 31, 2021 and December 31, 2020. None of the Bank's fixed-rate consolidated obligation discount notes were swapped as of March 31, 2021 and 4.42 percent of the Bank's fixed-rate consolidated obligation discount notes were swapped as of December 31, 2020. Beginning June 30, 2020, the Bank ceased issuing LIBOR-based consolidated obligation bonds and entering into LIBOR-based derivatives with maturities/termination dates beyond December 31, 2021.

Deposits

The Bank offers demand and overnight deposit programs to members and qualifying non-members primarily as a liquidity management service. In addition, a member that services mortgage loans may deposit funds in the Bank that are collected in connection with the mortgage loans, pending disbursement of those funds to the owners of the mortgage loans. For demand deposits, the Bank pays interest at the overnight rate. Most of these deposits represent member liquidity investments, which members may withdraw on demand. Therefore, the total account balance of the Bank's deposits may fluctuate significantly. As a matter of prudence, the Bank typically invests deposit funds in liquid short-term assets. Member loan demand, deposit flows, and liquidity management strategies influence the amount and volatility of deposit balances carried with the Bank.
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Capital
The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank was in compliance with these regulatory capital rules and requirements as shown in Note 8-Capital and Mandatorily Redeemable Capital Stock to the Bank's interim financial statements.
Finance Agency regulations establish criteria for four capital classifications, based on the amount and type of capital held by an FHLBank, as follows:
Adequately Capitalized - FHLBank meets or exceeds both risk-based and minimum capital requirements;
Undercapitalized - FHLBank does not meet one or both of its risk-based or minimum capital requirements;
Significantly Undercapitalized - FHLBank has less than 75 percent of one or both of its risk-based or minimum capital requirements; and
Critically Undercapitalized - FHLBank total capital is two percent or less of total assets.

Under the regulations, the Director of the Finance Agency (Director) will make a capital classification for each FHLBank at least quarterly and notify the FHLBank in writing of any proposed action and provide an opportunity for the FHLBank to submit information relevant to such action. The Director is permitted to make discretionary classifications. An FHLBank must provide written notice to the Finance Agency within 10 days of any event or development that has caused or is likely to cause its permanent or total capital to fall below the level required to maintain its most recent capital classification or reclassification. In the event that an FHLBank is not adequately capitalized, the regulations delineate the types of prompt corrective actions that the Director may order, including submission of a capital restoration plan by the FHLBank and restrictions on its dividends, stock redemptions, executive compensation, new business activities, or any other actions the Director determines will ensure safe and sound operations and capital compliance by the FHLBank. On March 24, 2021 the Bank received notification from the Director that, based on December 31, 2020 data, the Bank meets the definition of 'adequately capitalized.'

The Finance Agency issued an Advisory Bulletin providing for each FHLBank to maintain a ratio of at least two percent of capital stock to total assets, measured on a daily average basis at month end. As of March 31, 2021, the Bank was in compliance with this ratio.

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



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Results of Operations

The following is a discussion and analysis of the Bank's results of operations for the first quarter of 2021 and 2020.

Net Income

The following table presents the Bank's significant income items for the first quarter of 2021 and 2020, and provides information regarding the changes during those periods (dollars in millions). These items are discussed in more detail below.
For the Three Months Ended March 31, Increase (Decrease)
2021 2020 Amount Percent
Net interest income $ 79 $ 85 $ (6) (6.89)
Noninterest income 4 93 (89) (95.95)
Noninterest expense 36 58 (22) (38.36)
Affordable Housing Program assessment
4 12 (8) (60.53)
Net income $ 43 $ 108 $ (65) (60.52)

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.

As discussed above, net interest income includes components of hedging activity. When hedging relationships qualify for hedge accounting, the interest components of the hedging derivatives will be reflected in interest income or expense. Fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized in interest income or interest expense. When a hedging relationship is discontinued, the cumulative fair value adjustment on the hedged item will be amortized into interest income or expense over the remaining life of the asset or liability. The impact of hedging on net interest income was a decrease of $61 million and $38 million for the first quarter of 2021 and 2020, respectively.

The decrease in net interest income for the first quarter of 2021, compared to the same period in 2020, was primarily due to a decrease in advances and other interest-earning assets, partially offset by a decrease in interest rates which impacted interest-bearing liabilities more than interest-earning assets.

The following tables present spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the first quarter of 2021 and 2020 (dollars in millions). The interest-rate spread is affected by the inclusion or exclusion of net interest income or expense associated with the Bank's derivatives. For example, as discussed above, when derivatives qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is included in net interest income and in the calculation of interest-rate spread. When derivatives do not qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is excluded from net interest income and from the calculation of interest-rate spread and is recorded in 'Noninterest income' as 'Net gains (losses) on derivatives and hedging activities.' Amortization associated with hedging-related basis adjustments is also reflected in net interest income, which affects interest-rate spread.
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The Bank's interest-rate spread was 34 basis points for the first quarter of 2021, compared to 16 basis points for the same period in 2020. The increase in the Bank's interest rate spread for the first quarter of 2021, compared to the same period in 2020, was primarily due to decreases in interest rates that impacted the expense from interest-bearing liabilities more than the income from interest-earning assets.
For the Three Months Ended March 31,
2021 2020
Average Balance Interest Yield/
Rate
(%)
Average Balance Interest Yield/
Rate
(%)
Assets
Interest-bearing deposits(1)
$ 1,951 $ 1 0.13 $ 4,409 $ 15 1.38
Securities purchased under agreements to resell
7,804 1 0.07 7,135 27 1.53
Federal funds sold 8,659 2 0.08 13,039 40 1.23
Investment securities (2)
20,283 35 0.70 26,235 138 2.12
Advances 51,038 87 0.70 100,375 419 1.68
Mortgage loans (3)
208 3 5.32 289 4 5.07
Total interest-earning assets 89,943 129 0.58 151,482 643 1.71
Allowance for credit losses on mortgage loans
(1) (1)
Other assets 1,256 1,363
Total assets $ 91,198 $ 152,844
Liabilities and Capital
Interest-bearing deposits (4)
$ 2,307 - - $ 1,691 5 1.08
Consolidated obligations, net:
Discount notes 21,847 5 0.10 57,422 211 1.48
Bonds 61,107 45 0.30 85,527 342 1.61
Other borrowings - - 2.25 2 - 5.58
Total interest-bearing liabilities 85,261 50 0.24 144,642 558 1.55
Other liabilities 776 923
Total capital 5,161 7,279
Total liabilities and capital $ 91,198 $ 152,844
Net interest income and net yield on interest-earning assets
$ 79 0.36 $ 85 0.23
Interest-rate spread 0.34 0.16
Average interest-earning assets to interest-bearing liabilities
105.49 104.73
____________
(1)Includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.
(2)Includes trading securities at fair value and available-for-sale securities at amortized cost.
(3)Nonperforming mortgage loans are included in average balances used to determine average rate.
(4)Includes amounts recognized for the right to return cash collateral received under master netting agreements with derivative counterparties.

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Net interest income for the periods presented was affected by changes in average balances (volume changes) and changes in average rates (rate changes) of interest-earning assets and interest-bearing liabilities. The following table presents the extent to which volume changes and rate changes affected the Bank's interest income and interest expense (in millions). As presented in the table below, the overall change in net interest income during the first quarter of 2021, compared to the same period in 2020, was primarily related to changes in average balances, partially offset by changes in interest rates which impacted interest-bearing liabilities more than the income from interest-earning assets.
For the Three Months Ended March 31,
2021 vs. 2020
Volume (1)
Rate (1)
Increase (Decrease)
Increase (decrease) in interest income:
Interest-bearing deposits $ (5) $ (9) $ (14)
Securities purchased under agreements to resell 2 (28) (26)
Federal funds sold (10) (28) (38)
Investment securities (26) (77) (103)
Advances (151) (181) (332)
Mortgage loans (1) - (1)
Total (191) (323) (514)
Increase (decrease) in interest expense:
Interest-bearing deposits 1 (6) (5)
Consolidated obligations, net:
Discount notes (82) (124) (206)
Bonds (77) (220) (297)
Total (158) (350) (508)
(Decrease) increase in net interest income $ (33) $ 27 $ (6)
____________
(1)Volume change is calculated as the change in volume multiplied by the previous rate, while rate change is calculated as the change in rate multiplied by the previous volume. The rate/volume change, calculated as the change in rate multiplied by the change in volume, is allocated between volume change and rate change at the ratio each component bears to the absolute value of its total.
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Derivatives and Hedging Activity

The following tables present the net effect of derivatives and hedging activity on the Bank's results of operations (in millions).
For the Three Months Ended March 31, 2021
Advances Investments Consolidated
Obligation
Bonds
Total
Net interest income:
Amortization or accretion of active hedging relationships
$ (45) $ - $ - $ (45)
Net changes in fair value hedges
70 - 1 71
Net interest settlements on derivatives (1)
(94) - 10 (84)
Other (2)
(3) - - (3)
Total effect on net interest income $ (72) $ - $ 11 $ (61)
Net losses on derivatives:
Gains on derivatives not receiving hedge accounting including net interest settlements $ 1 $ 1 $ - $ 2
Net losses on trading securities (3)
- (1) - (1)
Total effect on noninterest income $ 1 $ - $ - $ 1
____________
(1)Represents interest income or expense on derivatives included in net interest income.
(2)Amount in 'Other' includes the price alignment amount on derivatives for which variation margin is characterized as daily settled contract.
(3)Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative 'assigned;' therefore, this line item may not agree to the income statement.


For the Three Months Ended March 31, 2020
Advances Investments Consolidated
Obligation
Bonds
Consolidated Obligation Discount Notes Total
Net interest income:
Amortization or accretion of active hedging relationships
$ (11) $ - $ - $ - $ (11)
Net changes in fair value hedges
(9) - 7 (16) (18)
Net interest settlements on derivatives (1)
(30) - 7 12 (11)
Other (2)
2 - - - 2
Total effect on net interest income $ (48) $ - $ 14 $ (4) $ (38)
Net losses on derivatives:
Losses on derivatives not receiving hedge accounting including net interest settlements $ (2) $ (4) $ - $ - $ (6)
Net gains on trading securities (3)
- 3 - - 3
Total effect on noninterest income $ (2) $ (1) $ - $ - $ (3)
____________
(1)Represents interest income or expense on derivatives included in net interest income.
(2)Amount in 'Other' includes the price alignment amount on derivatives for which variation margin is characterized as daily settled contract.
(3)Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative 'assigned;' therefore, this line item may not agree to the income statement.


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Noninterest Income (Loss)

The following table presents the components of noninterest income (dollars in millions).
For the Three Months Ended March 31, Increase (Decrease)
2021 2020 Amount Percent
Net (losses) gains on trading securities $ (1) $ 5 $ (6) (116.55)
Net realized gains from sale of investment securities
- 85 (85) (100.00)
Net gains (losses) on derivatives and hedging activities 1 (6) 7 119.19
Standby letters of credit fees 4 7 (3) (50.03)
Other - 2 (2) (112.76)
Total noninterest income
$ 4 $ 93 $ (89) (95.95)

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

Noninterest Expense and Affordable Housing Program (AHP) Assessment

The decrease in total noninterest expense for the first quarter of 2021, compared to the same period in 2020, was primarily due to the Bank making an additional $20 million retirement plan contribution during January of 2020, which was recorded in compensation and benefits expense.

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

Liquidity and Capital Resources
Liquidity is necessary to satisfy members' borrowing needs on a timely basis, repay maturing and called consolidated obligations, and meet other obligations and operating requirements. Many members rely on the Bank as a source of standby liquidity, so the Bank attempts to be in a position to meet member funding needs on a timely basis. The Bank is required to maintain liquidity in accordance with the FHLBank Act, Finance Agency regulations, and policies established by the Bank's management and board of directors. In addition, the Finance Agency, at times, has issued guidance and expectations to the FHLBanks related to liquidity.
Liquidity Reserves for Deposits.Finance Agency regulations require the Bank to hold a total amount of cash, obligations of the U.S., and advances with maturities of less than five years, in an amount not less than the amount of total member deposits. The Bank has complied with this requirement during the first quarter of 2021.
Operational Liquidity. In order to ensure adequate operational liquidity (generally, the ready cash and borrowing capacity available to meet the Bank's intra-day needs) each day, Bank policy establishes a daily liquidity target based upon member deposit levels and current day liability maturities and asset settlements. The Bank met this liquidity requirement throughout the first quarter of 2021.
Additional Liquidity Guidance. The Finance Agency issued an Advisory Bulletin on FHLBank liquidity (Liquidity Guidance AB) that communicates the Finance Agency's expectations with respect to the maintenance of sufficient liquidity to enable the Bank to provide advances and standby letters of credit for members during a sustained capital market disruption, assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days. The Finance Agency periodically issues supervisory letters that identify thresholds for measures of liquidity within the established ranges set forth in the Liquidity Guidance AB.
The Liquidity Guidance AB's measurements of liquidity include a cash flow scenario, on a daily basis, that projects forward the number of days for which the Bank should maintain positive cash balances assuming the renewal of all maturing advances and the maintenance of a liquidity reserve for outstanding letters of credit. The measurements of liquidity also include a funding gap measurement of the difference between assets and liabilities that are scheduled to mature during a specified period, expressed as a percentage of the Bank's total assets to reduce the liquidity risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding, which may increase debt rollover risk. The Liquidity Guidance AB permits an FHLBank to temporarily decrease its liquidity position, in a safe and sound manner, below the stated levels, as necessary for providing unanticipated extensions of advances to members or draws on letters of credit to beneficiaries.

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The Bank has met this liquidity requirement as directed by the Finance Agency throughout the first quarter of 2021.
Sources of Liquidity. The Bank's principal source of liquidity is consolidated obligation debt instruments. To provide additional liquidity, the Bank also may use other short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase, and loans from other FHLBanks. The Bank's consolidated obligations are not obligations of the United States and are not guaranteed by either the United States or any government agency, but have historically received the same credit rating as the government bond credit rating of the United States. As a result, the Bank generally has comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates. The Bank's income and liquidity would be adversely affected if it were not able to access the capital markets at competitive rates for an extended period.
As discussed elsewhere in this Report, the COVID-19 pandemic continued to impact the financial markets during the first quarter of 2021. The Bank maintained continual access to funding and adapted its debt issuance to meet the needs of its members throughout the first quarter of 2021. The Bank relies on access to the capital markets to meet its funding needs, and the Bank expects continued sufficient access to capital markets.
The Bank's short-term funding is generally driven by member demand and is achieved through the issuance of consolidated discount notes and short-term consolidated bonds. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferences and risk aversion, including the effects of money market fund reform, have often sought the Bank's short-term debt as an asset of choice.
The Bank is focused on maintaining an adequate liquidity balance and a funding balance between its financial assets and financial liabilities. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices. In managing and monitoring the amounts of assets that require refunding, the Bank considers contractual maturities of its financial assets, as well as certain assumptions regarding expected cash flows (i.e. estimated prepayments and scheduled amortizations). External factors including Bank member borrowing needs, supply and demand in the debt markets, and other factors may also affect the liquidity balances and the funding balance between financial assets and financial liabilities. See the notes to the Bank's interim financial statements for more information regarding contractual maturities of certain of the Bank's financial assets and liabilities.
Contingency plans are in place that prioritize the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance. Under the FHLBank Act, the Secretary of Treasury has the authority, at his discretion, to purchase consolidated obligations up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.

Off-balance Sheet Commitments

The Bank's primary off-balance sheet commitments are as follows:
the Bank's joint and several liability for all FHLBank consolidated obligations; and
the Bank's outstanding commitments arising from standby letters of credit.
Should an FHLBank be unable to satisfy its payment obligation under a consolidated obligation for which it is the primary obligor, any of the other FHLBanks, including the Bank, could be called upon to repay all or any part of such payment obligation, as determined or approved by the Finance Agency. As of March 31, 2021 and December 31, 2020, none of the other FHLBanks defaulted on their consolidated obligations; the Finance Agency was not required to allocate any obligation among the FHLBanks; and no amount of the joint and several obligation was fixed. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks' consolidated obligations as of March 31, 2021 and December 31, 2020. As of March 31, 2021, the FHLBanks had $696.4 billion in aggregate par value of consolidated obligations issued and outstanding, $78.4 billion of which was attributable to the Bank. No FHLBank has ever defaulted on its principal or interest payments under any consolidated obligation, and the Bank has never been required to make payments under any consolidated obligation as a result of the failure of another FHLBank to meet its obligations.
The Bank generally requires standby letters of credit to contain language permitting the Bank, upon annual renewal dates and prior notice to the beneficiary, to choose not to renew the standby letter of credit, which effectively terminates the standby letter of credit prior to its scheduled final expiration date. Based on the creditworthiness of the member applicant and appropriate additional fees, the Bank may issue standby letters of credit that have terms of longer than one year without annual renewals or that have no stated maturity and are subject to renewal on an annual basis.
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Commitments to extend credit, including standby letters of credit, are agreements to lend. The Bank issues a standby letter of credit on behalf of a member in exchange for a fee. A member may use these standby letters of credit to facilitate a financing arrangement. Management regularly reviews its standby letter of credit pricing in light of several factors, including the Bank's potential liquidity needs related to draws on its standby letters of credit. Based on management's credit analyses and collateral requirements, the Bank does not deem it necessary to have an allowance for credit losses for these unfunded standby letters of credit as of March 31, 2021.
Refer to Note 12-Commitments and Contingencies to the Bank's interim financial statements for more information about the Bank's outstanding standby letters of credit.

Contractual Obligations

As of March 31, 2021, there have been no material changes outside the ordinary course of business in the Bank's contractual obligations as reported in the Bank's Form 10-K.

Legislative and Regulatory Developments

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

LIBOR Transition

United Kingdom's Financial Conduct Authority (FCA) Announcement. In July 2017, the FCA, which regulates LIBOR, announced that after 2021 it will no longer persuade or compel banks to submit rates for the calculation of LIBOR. On March 5, 2021, the FCA further announced that LIBOR will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month U.S. dollar LIBOR, and immediately after June 30, 2023, in the case of the remaining U.S. dollar LIBOR settings. Although the FCA does not expect LIBOR to become unrepresentative before the applicable cessation date and intends to consult on requiring the administrator of LIBOR to continue publishing LIBOR of certain currencies and tenors on a non-representative, synthetic basis for a period after the applicable cessation date, there is no assurance that LIBOR, of any particular currency or tenor, will continue to be published or be representative through any particular date. The FCA's announcements constitutes an index cessation event under the ISDA 2020 IBOR Fallbacks Protocol and Supplement to the 2006 ISDA Definitions and as a result, the fallbacks spread adjustment for each tenor is fixed as of the date of the announcement.

The Bank does not expect this announcement to have a material effect on the Bank's financial condition or results of operations. For a discussion of the potential impact of the LIBOR transition, refer to 'Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management- Transition of LIBOR to an Alternative Reference Rate'

COVID-19 Developments

CARES Act. To address the COVID-19 pandemic and its economic impact, since March 2020 Congress passed a number of laws making available several trillion dollars in economic relief and resources. The CARES Act was signed into law on March 27, 2020. The $2.2 trillion package was the largest stimulus bill in U.S. history. The CARES Act was in addition to previous relief legislation passed by Congress in March 2020. The legislation provided, among other things, the following:
• Assistance to businesses, states, and municipalities.
• A loan program for small businesses, non-profits and physician practices that can be forgiven through employee retention incentives.
• The Treasury Secretary authority to make loans or loan guarantees to states, municipalities, and eligible businesses and loosens some regulations imposed through the Dodd-Frank Act.
• Direct payments to eligible taxpayers and their families.
• Expansion of eligibility for unemployment insurance and payment amounts.
• Mortgage forbearance provisions and a foreclosure moratorium.

American Rescue Plan Act of 2021. On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which provided an additional $1.9 trillion dollars for COVID-19 pandemic relief. Among other appropriations, the legislation allocated $7.25 billion in additional funds to support the PPP loan program. Also, as part of the legislation, eligibility for PPP was expanded to include certain nonprofits and digital news services. Since the legislation did not expand
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the PPP application deadline beyond March 31, 2021, the PPP Extension Act of 2021 was signed into law on March 30, 2021, which extended the application deadline to May 31, 2021.

Federal Reserve Board Extends Paycheck Protection Program Liquidity Facility. On March 8, 2021, the Federal Reserve Board issued a press release announcing it will extend the Paycheck Protection Program Liquidity Facility ('PPPLF'), which was set to expire on March 31, 2021 to June 30, 2021. The Commercial Paper Funding Facility, Money Market Mutual Fund Liquidity Facility, and the Primary Dealer Credit Facility expired on March 31, 2021 since such facilities had not received significant usage. The PPPLF provides collateralized PPP loan liquidity to eligible Federal Reserve member financial institutions in order to facilitate PPP loan originations at such financial institutions.

Finance Agency Extension of Loan Origination Flexibilities. On March 31, 2020, the Finance Agency announced authorization of loan processing flexibilities for Fannie Mae and Freddie Mac customers. Origination flexibilities included allowing desktop appraisals on new construction loans; allowing flexibility on demonstrating construction has been completed; allowing flexibility for borrowers to provide certain documentation; and expanding the use of power of attorney and remote online notarizations. On March 11, 2021, the Finance Agency extended previously authorized COVID-related loan flexibilities to April 30, 2021; all such flexibilities were set to expire on March 31, 2021. The flexibilities extended to April 30, 2021 include alternative appraisals on purchase and rate term refinance loans; alternative methods for documenting income and verifying employment before loan closing; and expanding the use of power of attorney to assist with loan closings. On April 21, 2021, the Finance Agency announced that some temporary loan origination flexibilities have been extended until May 31, 2021, which includes flexibilities for alternative appraisals on purchase and rate-term refinance loans. Temporary flexibilities related to employment verification, condominium project reviews, and expanded power of attorney are being allowed to expire on April 30, 2021.

While some provisions of the CARES Act have expired, others have been extended by regulatory and legislative action. Additional phases of the CARES Act, American Rescue Plan Act of 2021, or other COVID-19 pandemic relief legislation may be enacted by Congress. The Bank continues to evaluate the potential impact of such legislation on our business, including its continued impact to the U.S. economy; impacts to mortgages held or serviced by our members and that the Bank accepts as collateral.

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

Risk Management

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

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

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

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

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Transition of LIBOR to an Alternative Reference Rate

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

Certain of the Bank's assets and liabilities, and certain collateral pledged to the Bank, are indexed to LIBOR, with exposure extending past December 31, 2021 and June 30, 2023. The Bank is currently evaluating and planning for the eventual replacement of the LIBOR benchmark interest rate, including the probability of SOFR as the dominant replacement in the capital markets. In general, the transition away from LIBOR may result in increased market risk, credit risk, operational risk and business risk for the Bank. The Bank has adopted a LIBOR transition plan, which outlines the Bank's transition activities, including LIBOR exposure evaluation, risk management, legal, operational, systems and operations, shareholder and external communication and education, and other aspects of planning. The Bank has a LIBOR Steering Committee, which oversees the Bank's transition away from LIBOR in accordance with the strategies and requirements put forth by senior management and regulatory guidance, providing periodic reports to the Bank's executive management committee and board of directors.

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

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

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As of March 31, 2021
Due/Terminates in Due/Terminates in Due/Terminates through Due/Terminates
2021 2022 June 30, 2023 thereafter Total
Assets with LIBOR exposure
Advance by redemption term (principal amount)(1)
$ 4,951 $ 907 $ 5 $ 830 $ 6,693
Investment securities by contractual maturity (principal amount)
Non-mortgage-backed securities 100 435 - 465 1,000
Mortgage-backed securities 19 10 402 14,016 14,447
Total investment securities 119 445 402 14,481 15,447
LIBOR-indexed interest-rate swaps notional amount (receive leg)
Cleared 1,218 1,535 660 4,937 8,350
Uncleared 83 126 28 3,298 3,535
Total interest-rate swaps 1,301 1,661 688 8,235 11,885
Total principal/notional amount $ 6,371 $ 3,013 $ 1,095 $ 23,546 $ 34,025
Liabilities with LIBOR exposure
Consolidated bonds by contractual maturity (principal amount) $ 4,750 $ - $ - $ - $ 4,750
LIBOR-indexed interest-rate swaps notional amount (pay leg)
Cleared 369 142 71 50 632
Uncleared 173 28 25 15 241
Total interest-rate swaps 542 170 96 65 873
Total principal/notional amount $ 5,292 $ 170 $ 96 $ 65 $ 5,623
____________
(1)Includes all fixed-rate advances that have cap/floor optionality and excludes convertible advances.
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As of December 31, 2020
Due/Terminates in Due/Terminates in Due/Terminates through Due/Terminates
2021 2022 June 30, 2023 thereafter Total
Assets with LIBOR exposure
Advance by redemption term (principal amount)(1)
$ 5,349 $ 907 $ 5 $ 830 $ 7,091
Investment securities by contractual maturity (principal amount)
Non-mortgage-backed securities 160 435 - 465 1,060
Mortgage-backed securities 19 15 448 15,148 15,630
Total investment securities 179 450 448 15,613 16,690
LIBOR-indexed interest-rate swaps notional amount (receive leg)
Cleared 1,647 2,110 945 5,198 9,900
Uncleared 99 135 28 3,767 4,029
Total interest-rate swaps 1,746 2,245 973 8,965 13,929
Total principal/notional amount $ 7,274 $ 3,602 $ 1,426 $ 25,408 $ 37,710
Liabilities with LIBOR exposure
Consolidated bonds by contractual maturity (principal amount) $ 10,575 $ - $ - $ - $ 10,575
LIBOR-indexed interest-rate swaps notional amount (pay leg)
Cleared 520 142 71 50 783
Uncleared 173 28 25 60 286
Total interest-rate swaps 693 170 96 110 1,069
Total principal/notional amount $ 11,268 $ 170 $ 96 $ 110 $ 11,644
____________
(1) Includes all fixed-rate advances that have cap/floor optionality and excludes convertible advances.
In addition to LIBOR-indexed interest-rate swaps included in the above tables, the Bank has interest-rate caps and floors with LIBOR exposure as of March 31, 2021 and December 31, 2020. The following table presents the notional amount of caps and floors with LIBOR exposure as of March 31, 2021 and December 31, 2020 (in millions).

As of March 31, 2021 As of December 31, 2020
Terminates in 2021 $ 3,000 $ 3,000
Terminates after June 30, 2023 4,000 4,000
Total (1)
$ 7,000 $ 7,000
____________
(1)The estimated net fair value of these interest-rate caps and floors was less than $1 million as of March 31, 2021 and December 31, 2020.

With respect to LIBOR-linked collateral that is pledged by members to secure their advances, the Bank has adopted a transition plan for such collateral. The elements of the plan include:
Readiness to modify haircuts promptly for affected LIBOR collateral in response to changing market conditions;
Implementation of a monitoring process for liquidity of LIBOR collateral; and
Implementation of a communication process to inform shareholders of any changes to valuation or haircuts for LIBOR collateral.


Credit Risk

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

Secured advances to member financial institutions account for the largest category of Bank assets; thus, advances are a major source of the Bank's credit risk exposure. The Bank uses a risk-focused approach to credit and collateral underwriting. The Bank attempts to reduce credit risk on advances by monitoring the financial condition of borrowers and the quality and value of the assets that borrowers pledge as eligible collateral.
The Bank determines credit risk ratings for its members by evaluating each institution's overall financial health, taking into account the quality of assets, earnings, and capital position. The Bank assigns each borrower that is an insured depository institution a credit risk rating from 101 to 104 by utilizing an internal model (101 being the least amount of credit risk and 104 the greatest amount of credit risk). The Bank assigns each borrower that is an insurance company a credit risk rating from 101 to 104 by utilizing an external model. The Bank assigns each borrower that is not an insured depository institution or an insurance company (including housing associates, community development financial institutions, and corporate credit unions) a credit risk rating from 101 to 104 based on a risk matrix developed for each entity type.
In general, borrowers with the greatest amount of credit risk may have more restrictions on the types of collateral they may use to secure advances, may be required to maintain higher collateral maintenance levels and deliver loan collateral, may be restricted from obtaining further advances, and may face more stringent collateral reporting requirements. At times, based upon the Bank's assessment of a borrower and its collateral, the Bank may place more restrictive requirements on a borrower than those generally applicable to borrowers with the same rating. Management and the board also monitor the Bank's concentration in secured credit and standby letters of credit exposure to individual borrowers.
The following table presents the number of borrowers and the par value of advances outstanding to borrowers with the specified ratings as of the specified dates (dollars in millions).
As of March 31, 2021 As of December 31, 2020
Rating Number of Borrowers Par Value of Outstanding Advances Number of Borrowers Par Value of Outstanding Advances
101 292 $ 46,570 298 $ 37,713
102 19 1,733 32 12,849
103 2 11 3 35
104 4 292 3 46
Total 317 $ 48,606 336 $ 50,643

The Bank establishes a credit limit for each borrower. The credit limit is not a committed line of credit, but rather an indication of the borrower's general borrowing capacity with the Bank. The Bank determines the credit limit in its sole and absolute discretion by evaluating a wide variety of factors that indicate the borrower's overall creditworthiness. The credit limit is generally expressed as a percentage equal to the ratio of the borrower's total liabilities to the Bank (including the face amount of outstanding standby letters of credit, the par value of outstanding advances, and the total exposure of the Bank to the borrower under any derivative contract) to the borrower's total assets. Generally, borrowers are held to a credit limit of no more than 30 percent. However, the Bank's board of directors may approve a higher limit at its discretion, and such borrowers may be subject to certain additional collateral, reporting, and maintenance requirements. Five borrowers have been approved for a credit limit higher than 30 percent, and their total outstanding advance and standby letters of credit balance was $18.1 billion and $229 million, respectively, as of March 31, 2021.
The Bank obtains collateral on advances to protect against losses, but Finance Agency regulations permit the Bank to accept only certain types of collateral. Each borrower must maintain an amount of qualifying collateral that, when discounted to the lendable collateral value (LCV), is equal to at least 100 percent of the borrower's outstanding par value of all advances and other liabilities from the Bank. The LCV is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support. For each type of qualifying collateral, the Bank discounts the market value of the qualifying collateral to calculate the LCV. The Bank regularly reevaluates the appropriate level of discounting. The Bank had rights to collateral on a borrower-by-borrower basis with an estimated value equal to or greater than its outstanding extension of credit as of March 31, 2021 and December 31, 2020. The following table presents information about the types of collateral held for the Bank's advances (dollars in millions).
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Total Par
Value of
Outstanding Advances
LCV of
Collateral
Pledged by Members
First Mortgage
Collateral (%)
Securities
Collateral (%)
Other Real Estate Related Collateral (%)
As of March 31, 2021 $ 48,606 $ 315,977 62.75 10.83 26.42
As of December 31, 2020 50,643 326,602 62.96 11.01 26.03
For purposes of determining each member's LCV, the Bank estimates the current market value of all residential first mortgage loans, commercial real estate loans, home equity loans, and lines of credit pledged as collateral based on information provided by the member on its loan portfolio or on individual loans through the regular collateral reporting process. The estimated market value is discounted to account for the (1) price volatility of loans, (2) model data uncertainty, and (3) estimated liquidation and servicing costs in the event of the member's default. Market values, and thus LCVs, change monthly. The use of this market-based valuation methodology allows the Bank to establish its collateral discounts with greater precision and to provide greater transparency with respect to the valuation of collateral pledged for advances and other credit products offered by the Bank.
The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor) other than the claims and rights of a party that (1) would be entitled to priority under otherwise applicable law; and (2) is an actual bona fide purchaser for value or is an actual secured party whose security interest is perfected in accordance with applicable state law.
Consistent with the provisions of the CARES Act, the Bank continues to accept loan collateral under forbearance agreements. The Bank monitors risks related to collateral under forbearance agreements, including any shareholders with forbearance concentrations.
In its history, the Bank has never experienced a credit loss on an advance. In consideration of this and the Bank's policies and practices detailed above, the Bank has not established an allowance for credit losses on advances as of March 31, 2021 and December 31, 2020.

Investments

The Bank is subject to credit risk on unsecured investments, such as interest-bearing deposits and federal funds sold. These investments are generally transacted with government agencies and large financial institutions that are considered to be of investment quality. The Finance Agency defines investment quality as a security with adequate financial backing, so that full and timely payment of principal and interest on such security is expected, and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security.
In addition to Finance Agency regulations, the Bank has established guidelines approved by its board of directors regarding unsecured extensions of credit, with respect to term limits and eligible counterparties.
Finance Agency regulations prohibit the Bank from investing in any of the following securities:
instruments, such as common stock, that represent an ownership interest in an entity, other than stock in small business investment companies, or certain investments targeted to low-income people or communities;
instruments issued by non-United States entities, other than those issued by United States branches and agency offices of foreign commercial banks;
debt instruments that are not of investment quality, other than certain investments targeted to low-income people or communities and instruments that the Bank determined became less than investment quality because of developments or events that occurred after purchase by the Bank;
whole mortgages or other whole loans, other than the following: (1) those acquired under the Bank's mortgage purchase programs; (2) certain investments targeted to low-income people or communities; (3) certain marketable direct obligations of state, local, or tribal government units or agencies that are of investment quality; (4) MBS or asset-backed securities that are backed by manufactured housing loans or home equity loans; and (5) certain foreign housing loans that are authorized under section 12(b) of the FHLBank Act;
interest-only or principal-only stripped MBS, collateralized mortgage obligations (CMOs), collateralized debt obligations, and real estate mortgage investment conduits (REMICs);
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residual-interest or interest-accrual classes of CMOs and REMICs;
fixed-rate or variable-rate MBS, CMOs, and REMICs that are at rates equal to their contractual cap on the trade date and that have average lives that vary by more than six years under an assumed instantaneous interest-rate change of 300 basis points; and
non-U.S. dollar denominated securities.

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

The Bank only enters into investments with U.S. counterparties or U.S. branch offices of foreign banks that have been approved by the Bank through its internal approval process, but the Bank may still have exposure to foreign entities if a counterparty's parent entity is located in another country. The following tables present the Bank's gross exposure, by instrument type, according to the location of the parent company of the counterparty (in millions).
As of March 31, 2021
Federal Funds Sold
Interest-bearing
Deposits
Net Derivative Exposure (1)
Total
Australia $ 845 $ - $ - $ 845
Canada 2,120 - - 2,120
Finland 1,320 - - 1,320
France 451 - - 451
Germany 1,040 - - 1,040
Netherlands 845 - - 845
Norway 1,240 - - 1,240
Sweden 840 - - 840
United States of America - 690 13 703
Total $ 8,701 $ 690 $ 13 $ 9,404
_________
(1) Amounts do not reflect collateral; see the table under Risk Management-Credit Risk-Derivatives below for a breakdown of the credit ratings of and the Bank's credit exposure to derivative counterparties, including net exposure after collateral.
As of December 31, 2020
Federal Funds Sold (1)
Interest-bearing
Deposits (2)
Net Derivative Exposure Total
Australia $ 970 $ - $ - $ 970
Canada 400 - - 400
Finland 250 - - 250
France 200 - - 200
Germany 970 - - 970
Sweden 300 - - 300
United States of America 180 1,644 - 1,824
Total $ 3,270 $ 1,644 $ - $ 4,914
____________
(1)Federal funds sold includes $180 million with BankUnited, National Association, one of the Bank's 10 largest borrowers as of December 31, 2020.
(2)Interest-bearing deposits includes a $431 million business money market account with Truist Bank one of the Bank's 10 largest borrowers, as of December 31, 2020.

The Bank experienced a decrease in unsecured credit exposure in its investment portfolio related to non-U.S. government and non-U.S. government agency counterparties from $4.9 billion as of December 31, 2020 to $9.4 billion as of March 31, 2021. The following three counterparties each represented greater than 10 percent and collectively represented 41.3 percent of the total unsecured credit exposure to non-U.S. government or non-U.S. government agencies counterparties: DnB Bank ASA,
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Nordea Bank Abp, and Royal Bank of Canada. As of March 31, 2021, total unsecured credit portfolio consisted primarily of federal funds sold with overnight maturities.

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

The following tables present information on the credit ratings of the Bank's investments held as of March 31, 2021 and December 31, 2020 (in millions), based on their credit ratings as of March 31, 2021 and December 31, 2020, respectively. The credit ratings reflect the lowest long-term credit ratings as reported by an NRSRO.
As of March 31, 2021
Carrying Value
Investment Grade
AAA AA A BBB Total
Investment securities:
Government-sponsored enterprises debt obligations
$ - $ 2,185 $ - $ - $ 2,185
U.S. Treasury obligations
- 500 - - 500
State or local housing agency debt obligations
- 1 - - 1
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential
- 279 - - 279
Government-sponsored enterprises residential
- 6,631 - - 6,631
Government-sponsored enterprises commercial
550 9,343 - - 9,893
Total mortgage-backed securities
550 16,253 - - 16,803
Total investment securities
550 18,939 - - 19,489
Other investments:
Interest-bearing deposits - 5 637 48 690
Securities purchased under agreements to resell
- - 4,000 - 4,000
Federal funds sold - 3,880 4,821 - 8,701
Total other investments - 3,885 9,458 48 13,391
Total investments $ 550 $ 22,824 $ 9,458 $ 48 $ 32,880
.
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As of December 31, 2020
Carrying Value
Investment Grade
AAA AA A BBB Total
Investment securities:
Government-sponsored enterprises debt obligations
$ - $ 2,307 $ - $ - $ 2,307
U.S. Treasury obligations
- 1,500 - - 1,500
State or local housing agency debt obligations
- 1 - - 1
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential
- 295 - - 295
Government-sponsored enterprises residential
- 7,283 - - 7,283
Government-sponsored enterprises commercial
551 10,029 - - 10,580
Total mortgage-backed securities
551 17,607 - - 18,158
Total investment securities 551 21,415 - - 21,966
Other investments:
Interest-bearing deposits - 5 1,591 48 1,644
Securities purchased under agreements to resell
- 1,000 4,500 4,000 9,500
Federal funds sold - 650 2,440 180 3,270
Total other investments - 1,655 8,531 4,228 14,414
Total investments $ 551 $ 23,070 $ 8,531 $ 4,228 $ 36,380

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term loans transacted with counterparties that the Bank considers to be of investment quality. The terms of these loans are structured such that if the fair value of the underlying securities decreases below the fair value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is recognized in earnings.

Held-to-maturity Securities

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

The Bank evaluates its held-to-maturity securities for impairment on a collective, or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. The Bank has not established an allowance for credit loss on any of its held-to-maturity securities as of March 31, 2021 because the securities: (1) were all highly-rated and/or had short remaining terms to maturity, (2) had not experienced, nor did the Bank expect, any payment default on the instruments, and (3) in the case of U.S., government-sponsored enterprises, or other agency obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero.

Derivatives

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

The Bank's over-the-counter derivative transactions may either be (1) uncleared derivatives, which are executed bilaterally with a counterparty; or (2) cleared derivatives, which are cleared through a clearing agent with a Clearinghouse. Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated, and the executing counterparty is replaced with the Clearinghouse as the counterparty.

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For uncleared derivatives, the Bank is subject to nonperformance by counterparties. The Bank generally requires collateral on uncleared derivative transactions. A counterparty must deliver collateral to the Bank if the total market value of the Bank's exposure to that counterparty rises above a specific trigger point. As a result, the Bank does not anticipate any credit losses on its uncleared derivatives as of March 31, 2021.

Certain of the Bank's uncleared derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is a deterioration in the Bank's credit rating. If the Bank's credit rating had been lowered from its current rating to the next lower rating, the Bank would have been required to deliver $2 million of collateral at fair value to its uncleared derivative counterparties as of March 31, 2021.

For cleared derivatives, the Bank is subject to credit risk due to nonperformance by the Clearinghouse and clearing agent. The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties, and collateral is posted daily for changes in the value of cleared derivatives through a clearing agent. This does introduce, however, a risk of concentration among the limited number of Clearinghouses and clearing agents. The Bank actively monitors Clearinghouses and clearing agents. An annual review of the Bank's Clearinghouses is performed, and the Bank also monitors its exposure to Clearinghouses on a monthly basis. The Bank currently utilized two approved Clearinghouses, CME Clearing and LCH Ltd. The Bank also monitors the clearing agents through its unsecured credit system, and the Bank subjects these clearing agents to the same limits as other bilateral derivative counterparties. The parent companies of the clearing agents are monitored through annual reviews, as well as through the Bank's daily monitoring tools, which include reviewing equity triggers, debt triggers, and credit default swap spread triggers. In addition, exposures to the clearing agents are monitored daily on a swap counterparty report. The Bank currently has the following three approved clearing agents: Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, and Goldman Sachs & Co. The Bank does not anticipate any credit losses on its cleared derivatives as of March 31, 2021.

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

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The following tables present information on the credit ratings of, and the Bank's credit exposure to, its derivative counterparties (in millions). The credit ratings reflect the lowest long-term credit rating by an NRSRO.
As of March 31, 2021
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged To (From) Counterparty Other Collateral Pledged To (From) Counterparty Net Credit Exposure to Counterparties
Non-member counterparties:
Asset positions with credit exposure:
Triple-B
$ 220 $ - $ - $ - $ -
Cleared derivatives
16,259 13 332 - 345
Liability positions with credit exposure:
Single-A 3,833 (182) 184 - 2
Cleared derivatives
1,511 - 24 - 24
Total derivative positions with non-member counterparties to which the Bank had credit exposure
21,823 (169) 540 - 371
Member institutions (1)
12 1 - (1) -
Total $ 21,835 $ (168) $ 540 $ (1) $ 371
____________
(1) Collateral held with respect to derivatives with member institutions where the Bank is acting as an intermediary represents the amount of eligible collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.
As of December 31, 2020
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged To (From) Counterparty Other Collateral Pledged To (From) Counterparty Net Credit Exposure to Counterparties
Non-member counterparties:
Asset positions with credit exposure:
Cleared derivatives
$ 393 $ - $ 3 $ - $ 3
Liability positions with credit exposure:
Double-A 10 (1) 1 - -
Single-A 4,061 (67) 70 - 3
Triple-B 2,643 (120) 120 - -
Cleared derivatives
20,429 (11) 395 - 384
Total derivative positions with non-member counterparties to which the Bank had credit exposure
27,536 (199) 589 - 390
Member institutions (1)
12 1 - (1) -
Total $ 27,548 $ (198) $ 589 $ (1) $ 390
____________
(1) Collateral held with respect to derivatives with member institutions where the Bank is acting as an intermediary represents the amount of eligible collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.

Mortgage Loan Programs

The Bank seeks to manage the credit risk associated with the Mortgage Purchase Program (MPP) and the Mortgage Partnership Finance®Program (MPF®Program or MPF) by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institutions.
The allowance for credit losses on MPF loans was $1 million as of March 31, 2021 and December 31, 2020.

Critical Accounting Policies and Estimates

A detailed description of the Bank's critical accounting policies and estimates is contained in the Bank's Form 10-K. There have been no material changes to these policies and estimates during the periods presented.
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Recently Issued But Not Yet Adopted Accounting Guidance

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

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

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

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The following table presents the notional amounts of derivative financial instruments (in millions). The category 'Fair value hedges' represents hedge strategies for which hedge accounting is achieved. The category 'Non-qualifying hedges' represents hedge strategies for which the derivatives are not in designated hedging relationships that formally meet the hedge accounting requirements under GAAP.
As of March 31, 2021 As of December 31, 2020
Hedged Item / Hedging Instrument Hedging Objective Hedge
Accounting
Designation
Notional Amount Notional Amount
Advances
Pay fixed, receive variable interest-rate swap (without options) Converts the advance's fixed rate to a variable-rate index. Fair value
hedges
$ 2,237 $ 2,306
Pay fixed, receive variable interest-rate swap (with options) Converts the advance's fixed rate to a variable-rate index and offsets option risk in the advance. Fair value
hedges
20,185 22,501
Pay-fixed with embedded features, receive-variable interest-rate swap (non-callable) Reduces interest-rate sensitivity and repricing gaps by converting the advance's fixed rate to a variable-rate index and/or offsets embedded option risk in the advance. Fair value hedges 508 558
Pay variable with embedded features, receive variable interest-rate swap (non-callable) Reduces interest-rate sensitivity and repricing gaps by converting the advance's variable rate to a different variable-rate index and/or offsets embedded option risk in the advance. Fair value hedges 41 41
Total 22,971 25,406
Investments
Pay fixed, receive variable interest-rate swap Converts the investment's fixed rate to a variable-rate index. Non-qualifying
hedges
- 56
Consolidated Obligation Bonds
Receive fixed, pay variable interest-rate swap (without options) Converts the bond's fixed rate to a variable-rate index. Fair value
hedges
1,350 1,395
Receive fixed, pay variable interest-rate swap (with options) Converts the bond's fixed rate to a variable-rate index and offsets option risk in the bond. Fair value
hedges
7,803 85
Total 9,153 1,480
Consolidated Obligation Discount Notes
Receive fixed, pay variable interest-rate swap Converts the discount note's fixed rate to a variable-rate index. Fair value
hedges
- 1,115
Balance Sheet
Pay fixed, receive variable interest-rate swap Converts the asset or liability fixed rate to a variable-rate index. Non-qualifying
hedges
20 20
Pay variable, receive variable interest rate swap Interest-rate swap not linked to specific assets, liabilities or forecasted transactions. Non-qualifying hedges 20 20
Interest-rate cap or floor Protects against changes in income of certain assets due to changes in interest rates. Non-qualifying hedges 7,000 7,000
Total 7,040 7,040
Intermediary Positions and Other
Pay fixed, receive variable interest-rate swap, and receive fixed, pay variable interest-rate swap To offset interest-rate swaps executed with members by executing interest-rate swaps with derivatives counterparties. Non-qualifying
hedges
25 25
Total notional amount $ 39,189 $ 35,122
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Interest-rate Risk Exposure Measurement

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

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

The following table presents the Bank's effective duration exposure measurements as calculated in accordance with Bank policy (in years).
As of March 31, 2021 As of December 31, 2020
Down 200 Basis
Points
(1)
Current Up 200 Basis Points
Down 200 Basis
Points
(1)
Current Up 200 Basis Points
Assets 0.62 0.50 0.50 0.67 0.52 0.48
Liabilities 0.37 0.36 0.27 0.34 0.30 0.27
Equity 4.32 2.79 4.59 5.32 4.10 3.99
Effective duration gap 0.25 0.14 0.23 0.33 0.22 0.21
___________
(1)The 'down 200 basis points' scenarios shown above are considered to be 'constrained shocks,' intended to prevent the possibility of negative interest rates when a designated low rate environment exists. The 'constrained shock' scenario may not represent current expectations.

The Bank also analyzes its interest-rate risk and market exposure by evaluating the theoretical market value of equity. The market value of equity represents the net result of the present value of future cash flows discounted to arrive at the theoretical market value of each balance sheet item. By using the discounted present value of future cash flows, the Bank is able to factor in the various maturities of assets and liabilities, similar to the effective duration analysis discussed above. The Bank determines the theoretical market value of assets and liabilities utilizing a pricing approach that is more fully described in Note 11-Estimated Fair Values to the Bank's interim financial statements. The difference between the market value of total assets and the market value of total liabilities is the market value of equity. A more volatile market value of equity under different shock scenarios tends to result in a higher effective duration of equity, indicating increased sensitivity to interest-rate changes.

The following table presents the Bank's market value of equity measurements as calculated in accordance with Bank policy (in millions).
As of March 31, 2021 As of December 31, 2020
Down 200 Basis
Points
(1)
Current Up 200 Basis Points
Down 200 Basis
Points
(1)
Current Up 200 Basis Points
Assets $ 86,120 $ 85,295 $ 84,476 $ 91,612 $ 90,868 $ 90,046
Liabilities 80,594 80,362 79,893 85,617 85,482 84,996
Equity 5,526 4,933 4,583 5,995 5,386 5,050
____________
(1)The 'down 200 basis points' scenarios shown above are considered to be 'constrained shocks,' intended to prevent the possibility of negative interest rates when a designated low rate environment exists. The 'constrained shock' scenario may not represent current expectations.


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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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

As of March 31, 2021, the Bank's management, with the participation of the Certifying Officers, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based on that evaluation, the Certifying Officers have concluded that the Bank's disclosure controls and procedures (as defined in Rules 13a-15(a) and 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed by the Bank in the reports that it files or submits under the Exchange Act (1) is accumulated and communicated to the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure; and (2) is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

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

Changes in Internal Control Over Financial Reporting

During the first quarter of 2021, there were no changes in the Bank's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank's internal control over financial reporting.

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PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

Not applicable.

Item 5. Other Information.

None.
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Item 6. Exhibits.The exhibits listed below are being filed with or incorporated by reference as a part of this Report:
Exhibit No. Description Form Exhibit Dated Filed
3.1 8-K 3.1 10/26/2012
3.2 8-K 3.2 10/31/2019
4.1 8-K 99.2 8/5/2011
31.1
Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of the Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +
101.INS XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
104 The cover page of this Quarterly Report 10-Q, formatted in inline XBRL.
+ Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
Federal Home Loan Bank of Atlanta
Date: May 7, 2021 By /s/ W. Wesley McMullan
Name: W. Wesley McMullan
Title: President and Chief Executive Officer
Date: May 7, 2021 By /s/ Haig H. Kazazian III
Name: Haig H. Kazazian III
Title: Senior Vice President and Chief Financial Officer


59