Federal Home Loan Bank of Atlanta Quarterly Report Released - Here’s What You Should Know

Federal Home Loan Bank of Atlanta
Quarterly Financial Summary for the Period Ended June 30, 2025

Key Financial Metrics

• Total Assets: $146.4 billion as of June 30, 2025, slightly down from $147.1 billion at December 31, 2024.
• Total Advances: $90.9 billion (62.1% of assets), up 5.9% from $85.8 billion at year-end 2024.
• Investment Securities: $33.8 billion, up 11.9% from $30.2 billion.
• Total Liabilities: $138.1 billion, down 0.75%.
• Total Capital: $8.3 billion, up 4.1% from year-end.
• Net Income: $284 million for the first six months of 2025, down 23.5% from $371 million in the same period of 2024.
• Net Interest Income: $419 million YTD, down from $495 million YTD last year (–15.4%).
• Return on Average Equity: 6.43% for the quarter (down from 8.12% in Q2 2024), and 6.62% YTD (8.67% prior year).
• Dividend Payouts: $196 million paid in first half 2025 (annualized rate 6.97%), down from $225 million (7.35%) in first half 2024.
• Regulatory Capital Ratio: 5.65% (well above required 4%), with actual regulatory capital of $8.27 billion.

Results of Operations

• Net interest income declined, primarily due to decreases in both interest rates and average advance balances (average advances: $103.1 billion Q2 2025, $100.1 billion for six months, both up from 2024 averages).
• Noninterest income was $10 million YTD 2025 (flat vs. 2024).
• Noninterest expense rose to $113 million (from $94 million), driven by a $16 million increase in voluntary housing/community investment expense.
• Affordable Housing Program (AHP) assessment totaled $32 million, down from $41 million in 2024.
• Net yield on interest-earning assets: 0.54% (Q2), down from 0.61% a year ago.

Balance Sheet and Liquidity

• Investments in available-for-sale and held-to-maturity securities increased by $3.6 billion (notably, U.S. Treasury obligations up $1.6 billion; mortgage-backed securities up $2.0 billion).
• Other investments (e.g., federal funds sold, securities purchased under agreements to resell) fell by $9.4 billion, reflecting liquidity management in response to advance demand and market conditions.
• Consolidated obligations (funding liabilities): $134.4 billion, with $18.9 billion in discount notes (– 41.3% from year-end) and $115.5 billion in bonds (+11.4%).
• Liquidity remains robust; regulatory and internal liquidity rules met. The Bank’s principal funding source remains consolidated obligations; $1,232.1 billion aggregate par value outstanding at the FHLBank System.

Credit Risk

• Advances are over-collateralized: $91.0 billion in outstanding advances supported by $414.6 billion in collateral (59.5% first mortgage, 19.3% securities, 21.2% other real-estate).
• Borrower Credit Ratings: Vast majority of advances to institutions in the highest rating (271 borrowers, $77.4 billion).
• No credit losses have ever occurred on advances.
• Investments primarily AAA/AA-rated. Unsecured credit exposures largely limited to highly rated foreign financial institutions and U.S. government/agency securities.
• Derivative Counterparty Exposure: Well controlled, all counterparties investment-grade, with active collateral and netting management. Net unsecured derivative exposure was $378 million (assets) and $3 million (liabilities).

Risk Management

• Interest Rate Risk: The bank actively manages IR risk primarily via interest-rate swaps converting fixed-rate assets/liabilities to variable rates.
• Effective Duration Gap as of June 30, 2025, was near neutral (0.07 years at current rates).
• Market Value of Equity was resilient across interest rate shock scenarios, ranging from $7.7 billion to $8.2 billion.
• Sensitivity to Interest Rates: Changes remain moderate, supported by derivative strategies.
• Volatility in regulatory environment: FHFA issued new liquidity and risk management guidelines in Q2 2025 and Moody’s downgraded the U.S. sovereign rating in May 2025, potentially impacting future funding costs.

Management Discussion and Outlook

• Net income has declined due to lower interest rates and higher funding costs, narrowing yield spreads and ROE.
• The Bank’s advance balances rebounded in Q2 after lowering in late 2024, driving growth in core assets.
• Expense discipline continues, though voluntary community investment spending nearly doubled YoY.
• The Bank has ample capital and liquidity to meet all obligations and member demand.
• Management is monitoring regulatory changes and market volatility (for example, the impact of Moody’s downgrade and FHFA’s new guidelines).
• Top two members (Truist Bank and Bank of America) collectively accounted for 32.3% of total regulatory capital stock and 39.3% of advances.

Key Risks for Investors

1. Interest Rate and Spread Risk: Ongoing lower interest rates reduced net interest income and return on equity (ROE dropped to 6.43%), and sustained low rates or increased funding costs may further pressure margins.

2. Credit Concentration Risk: Significant portions of advances and regulatory capital stock are concentrated with two large members (Truist and Bank of America).

3. Liquidity and Funding Markets: Despite strong liquidity, any significant change in the FHLBank System’s ability to fund in the capital markets (e.g., further sovereign rating downgrades or regulatory actions) could affect cost and access.

4. Regulatory/Legislative Environment: New or revised guidance from the Federal Housing Finance Agency in Q2 2025 may require process and capital framework changes.

5. Operational Risk: Rapid changes in advance demand or market liquidity could stress operational capabilities, highlighted by a $9.4 billion drop in other investments and a $13.3 billion reduction in discount note liabilities during the period.

6. Counterparty/Investment Risk: Credit exposures are largely high-grade and collateralized, but a sharp deterioration in financial markets could impact securities valuations; YTD 2025 saw $13 million in accumulated other comprehensive loss due to fair value changes in AFS securities.

Overall, the Bank remains well-capitalized, highly liquid, and operationally stable, but faces continued margin compression and regulatory challenges that may impact future performance. Investors should continue to monitor changes in the interest rate environment, member concentrations, regulatory developments, and the health of the broader funding markets.

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