Federal Home Loan Bank of Atlanta Announces Q2 Operating Highlights
Monday, August 3rd, 2020
Federal Home Loan Bank of Atlanta (the Bank) today released preliminary unaudited financial highlights for the quarter ended June 30, 2020. All numbers reported below for the second 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 August 7, 2020.
Net income for the second quarter of 2020 was $56 million, a decrease of $37 million compared to net income of $93 million for the second quarter of 2019. The decrease in net income was primarily due to changes in interest rates, as well as a decrease in advance balances.
Conditions in the financial markets deteriorated during 2020 primarily due to 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. During this period, market interest rates declined significantly. The decrease in market interest rates impacted the Bank’s net income during the second quarter of 2020 resulting in narrower spreads on interest-earning assets including increased losses from derivative and hedging activities. The additional market liquidity from the Federal Reserve’s actions resulted in lower demand from the Bank’s members for advances, which also impacted net income during the second quarter.
Total assets as of June 30, 2020 were $126.6 billion, a decrease of $23.3 billion, or 15.5 percent, from December 31, 2019. Advances outstanding were $67.2 billion as of June 30, 2020, a decrease of $29.9 billion, or 30.8 percent, from December 31, 2019. The decrease in advances was the result of decreased demand for liquidity from the Bank’s members as a result of market conditions. Given the uncertainty in the market and the impact to the U.S. economy from the COVID-19 pandemic, the Bank expects that advance demand will continue at reduced levels, which could impact net income in 2020. Retained earnings were $2.2 billion as of June 30, 2020, an increase of $47 million, or 2.15 percent, from December 31, 2019. Capital stock was $3.7 billion as of June 30, 2020, a decrease of $1.3 billion, or 26.2 percent, from December 31, 2019.
The Bank's second quarter 2020 performance resulted in an annualized return on average equity (ROE) of 3.01 percent as compared to 5.12 percent for the second quarter of 2019. The ROE spread to average three-month London Interbank Offered Rate (LIBOR) decreased to 241 basis points for the second quarter of 2020, as compared to 261 basis points for the second quarter of 2019. The Bank is currently planning for the eventual replacement of the LIBOR benchmark interest rate, including the possibility of the Secured Overnight Financing Rate (SOFR) as the dominant replacement. For comparative purposes, the Bank’s ROE spread to average SOFR for the second quarter of 2020 was 296 basis points. As of June 30, 2020, the Bank was in compliance with its regulatory capital requirements.
