Federal Home Loan Bank of Atlanta (the Bank) today released preliminary unaudited financial highlights for the quarter ended September 30, 2020. All numbers reported below for the third quarter of 2020 are approximate until the Bank announces unaudited financial results in its Form 10-Q filing with the Securities and Exchange Commission (SEC), which is expected to be filed on or about November 6, 2020.
Net income for the third quarter of 2020 was $56 million, a decrease of $20 million compared to net income of $76 million for the third quarter of 2019. The decrease in net income was primarily due to changes in advance balances, as well as changes in interest rates.
Beginning in March of 2020 and continuing through the third quarter of 2020, conditions in the financial markets have been impacted by the global pandemic associated with COVID-19. In response to these market conditions, the Federal Open Market Committee lowered the target range for federal funds to 0.00 percent to 0.25 percent. Additionally, the Federal Reserve implemented a number of asset purchase programs to provide additional liquidity to the financial markets. The additional market liquidity from the Federal Reserve’s actions, as well as increased deposit levels, resulted in lower demand from the Bank’s members for advances, which impacted net income during the third quarter. During this period, market interest rates declined significantly and have remained at historically low levels. These low market interest rates also impacted the Bank’s net income during the third quarter of 2020 resulting in decreased income on interest-earning assets. The Bank expects that the current low market interest rate environment, as well as decreased advance demand, will continue into the foreseeable future, which is expected to reduce the Bank’s net income for 2020 and could decrease the Bank’s future net income.
Total assets as of September 30, 2020 were $112.2 billion, a decrease of $37.7 billion, or 25.2 percent, from December 31, 2019. Advances outstanding were $58.8 billion as of September 30, 2020, a decrease of $38.4 billion, or 39.5 percent, from December 31, 2019, as a result of decreased demand for liquidity as discussed above. Retained earnings were $2.2 billion as of September 30, 2020, an increase of $45 million, or 2.10 percent, from December 31, 2019. Capital stock was $3.3 billion as of September 30, 2020, a decrease of $1.6 billion, or 33.0 percent, from December 31, 2019.
The Bank’s third quarter 2020 performance resulted in an annualized return on average equity (ROE) of 3.95 percent as compared to 4.24 percent for the third quarter of 2019. The ROE spread to average three-month London Interbank Offered Rate (LIBOR) increased to 370 basis points for the third quarter of 2020, as compared to 204 basis points for the third quarter of 2019. The Bank is currently planning for the eventual replacement of the LIBOR benchmark interest rate, including the probability of the Secured Overnight Financing Rate (SOFR) as the dominant replacement. For comparative purposes, the Bank’s ROE spread to average SOFR for the third quarter of 2020 was 386 basis points. As of September 30, 2020, the Bank was in compliance with its regulatory capital requirements.
Operational Status
The Bank continues to operate in Phase 2 of its return to work plan, pursuant to which approximately 25 percent of employees are currently working on-site. At this time, the Bank cannot predict when its full employee base will return to work in its offices or the potential impact of the COVID-19 pandemic to its members, counterparties, vendors, and other third parties upon which the Bank relies to conduct business. 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 its members. 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.
Federal Home Loan Bank of Atlanta
Financial Highlights
(Preliminary and unaudited)
(Dollars in millions)
| Statements of Condition | As of September 30, 2020 | As of December 31, 2019 | |||||
| Advances | $ | 58,802 | 97,167 | ||||
| Investments | 48,255 | 50,617 | |||||
| Mortgage loans held for portfolio, net | 242 | 296 | |||||
| Total assets | 112,165 | 149,857 | |||||
| Consolidated obligations, net | 104,377 | 140,637 | |||||
| Total capital stock | 3,341 | 4,988 | |||||
| Retained earnings | 2,198 | 2,153 | |||||
| Accumulated other comprehensive (loss) income | (17 | ) | 22 | ||||
| Total capital | 5,522 | 7,163 | |||||
| Capital-to-assets ratio (GAAP) | 4.92 | % | 4.78 | % | |||
| Capital-to-assets ratio (Regulatory) | 4.94 | % | 4.77 | % | |||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| Operating Results and Performance Ratios | 2020 | 2019 |
2020 | 2019 |
||||||||||||
| Net interest income | $ | 89 | $ | 118 | $ | 264 | $ | 394 | ||||||||
| Net impairment losses recognized in earnings | — | (4 | ) | — | (7 | ) | ||||||||||
| Standby letters of credit fees | 4 | 5 | 16 | 18 | ||||||||||||
| Other income | 5 | 4 | 92 | 5 | ||||||||||||
| Total noninterest expense | 35 | 39 | 127 | 110 | ||||||||||||
| Affordable Housing Program assessment | 7 | 8 | 25 | 30 | ||||||||||||
| Net income | 56 | 76 | 220 | 270 | ||||||||||||
| Return on average assets | 0.20 | % | 0.21 | % | 0.21 | % | 0.25 | % | ||||||||
| Return on average equity | 3.95 | % | 4.24 | % | 4.33 | % | 5.02 | % | ||||||||
The selected financial data above should be read in conjunction with the financial statements and notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Bank’s Third Quarter 2020 Form 10-Q expected to be filed on or about November 6, 2020 with the SEC.