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Financial Statements:
Federal Reserve Bank of Atlanta

As of and for the Years Ended
December 31, 2017 and 2016 and
Independent Auditors’ Report

Federal Reserve Bank of Atlanta
Contents

Page
Management’s Report on Internal Control over Financial Reporting

1

Independent Auditors’ Report

2-3

Abbreviations

4

Financial Statements:
Statements of Condition as of December 31, 2017 and December 31, 2016

5

Statements of Operations for the years ended December 31, 2017 and December 31, 2016

6

Statements of Changes in Capital for the years ended December 31, 2017 and December 31, 2016

7

Notes to Financial Statements

8-38

2

FEDERAL
RESERVE
BANK
of ATLANTA
March 8, 2018

To the Board of Directors of the Federal Reserve Bank of Atlanta:

1000 Peachtree Street N.E.
Atlanta, Georgia 30309-4470
404.498.8500
www.frbatlanta.org

The management of the Federal Reserve Bank of Atlanta (Bank) is responsible for the preparation and fair
presentation of the Statements of Condition as of December 31, 2017 and 2016, and the Statements of
Operations, and Statements of Changes in Capital for the years then ended (the financial statements). The
financial statements have been prepared in conformity with the accounting principles, policies, and practices
established by the Board of Governors of the Federal Reserve System as set forth in the Financial Accounting
Manual for Federal Reserve Banks (FAM), and, as such, include some amounts that are based on management
judgments and estimates. To our knowledge, the financial statements are, in all material respects, fairly
presented in conformity with the accounting principles, policies and practices documented in the FAM and
include all disclosures necessary for such fair presentation.
The management of the Bank is responsible for establishing and maintaining effective internal control over
financial reporting as it relates to the financial statements. The Bank's internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with the FAM. The Bank's internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Bank's
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with FAM, and that the Bank's receipts and expenditures are being made
only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Bank's assets
that could have a material effect on its financial statements.
Even effective internal control, no matter how well designed, has inherent limitations, including the possibility
of human error, and therefore can provide only reasonable assurance with respect to the preparation of reliable
financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The management of the Bank assessed its internal control over financial reporting based upon the criteria
established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, we believe that the Bank maintained
effective internal control over financial reporting.
Federal Reserve Bank of Atlanta

Raphael W. Bostlo
President and Chief Executive Officer

Marie C. Gooding
First Vice President and Chief Operating Officer

W. Brian Bowling
Senior Vice President and Chief Financial Officer

KPMG LLP
Suite 2000
303 Peachtree Street, N.E.
Atlanta, GA 30308-3210

Independent Auditors’ Report

To the Board of Governors of the Federal Reserve System
and the Board of Directors of the Federal Reserve Bank of Atlanta:
We have audited the accompanying statements of condition of the Federal Reserve Bank of Atlanta (“FRB
Atlanta”) as of December 31, 2017 and 2016, and the related statements of operations and changes in capital
for the years then ended. We also have audited the FRB Atlanta’s internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The FRB Atlanta’s management is
responsible for these financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on these financial statements and an opinion on the FRB Atlanta’s internal control over financial reporting
based on our audits.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting
Oversight Board (United States) and in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
The FRB Atlanta’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with the accounting principles established by the Board of Governors of the Federal
Reserve System (the “Board”) as described in Note 3 of the financial statements and as set forth in the
Financial Accounting Manual for Federal Reserve Banks (“FAM”). The FRB Atlanta’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the FRB
Atlanta; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with the FAM, and that receipts and expenditures of the FRB Atlanta are
being made only in accordance with authorizations of management and directors of the FRB Atlanta; and (3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the FRB Atlanta’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

KPMG LLP is a Delaware limited liability partnership and the U.S. member
firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity.

As described in Note 3 to the financial statements, the FRB Atlanta has prepared these financial statements in
conformity with the accounting principles established by the Board, as set forth in the FAM, which is a basis of
accounting other than U.S. generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the FRB Atlanta as of December 31, 2017 and 2016, and the results of its operations for the years
then ended, on the basis of accounting described in Note 3. Also, in our opinion, the FRB Atlanta maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Atlanta, Georgia
March 8, 2018

Federal Reserve Bank of Atlanta

Abbreviations
ACH
ASC
ASU
BEP
Budget Act
Bureau
FAM
FASB
FOMC
FRBNY
GAAP
GSE
IMF
MAPD
MBS
OEB
SDR
SERP
SOMA
TBA
TDF

Automated clearinghouse
Accounting Standards Codification
Accounting Standards Update
Benefit Equalization Retirement Plan
Bipartisan Budget Act of 2018
Bureau of Consumer Financial Protection
Financial Accounting Manual for Federal Reserve Banks
Financial Accounting Standards Board
Federal Open Market Committee
Federal Reserve Bank of New York
Accounting principles generally accepted in the United States of America
Government-sponsored enterprise
International Monetary Fund
Medicare Advantage and Prescription Drug
Mortgage-backed securities
Office of Employee Benefits of the Federal Reserve System
Special drawing rights
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks
System Open Market Account
To be announced
Term Deposit Facility

4

Federal Reserve Bank of Atlanta

Statements of Condition
As of December 31, 2017 and December 31, 2016
(in millions)
2017
ASSETS
Gold certificates
Special drawing rights certificates
Coin
Loans
Note 4
System Open Market Account:
Note 5
Treasury securities, net (of which $1,651 and $1,410 is lent as of December 31, 2017 and
2016, respectively)
Government-sponsored enterprise debt securities, net (of which $2 is lent as of December
31, 2016)
Federal agency and government-sponsored enterprise mortgage-backed securities, net
Foreign currency denominated investments, net
Central bank liquidity swaps
Accrued interest receivable
Other assets
Bank premises and equipment, net
Note 6
Items in process of collection
Interdistrict settlement account
Other assets
Total assets
LIABILITIES AND CAPITAL
Federal Reserve notes outstanding, net
System Open Market Account:
Securities sold under agreements to repurchase
Other liabilities
Deposits:
Depository institutions
Other deposits
Interest payable to depository institutions and others
Accrued benefit costs
Deferred credit items
Accrued remittances to the Treasury
Other liabilities
Total liabilities

$

1,520
654
198
26

2016
$

1,541
654
186
2

149,851

143,697

$

280
106,996
1,243
704
1,456
1
226
81
32,445
83
295,764

$

932
100,465
1,080
309
1,433
230
118
35,779
71
286,497

$

220,248

$

200,483

Note 5

Notes 8 and 9

Capital paid-in
Surplus (including accumulated other comprehensive loss of $11 and $9 at December 31,
2017 and 2016, respectively)
Total capital
Total liabilities and capital

$

33,197
33

40,589
57

38,462
9
16
209
1,001
173
24
293,372

41,735
9
8
201
921
115
20
284,138

1,814

1,776

578
2,392
295,764

583
2,359
286,497

$

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

5

Federal Reserve Bank of Atlanta

Statements of Operations
For the years ended December 31, 2017 and December 31, 2016
(in millions)
2017
INTEREST INCOME
System Open Market Account:
Treasury securities, net
Government-sponsored enterprise debt securities, net
Federal agency and government-sponsored enterprise mortgage-backed securities, net
Foreign currency denominated investments, net
Central bank liquidity swaps
Total interest income
INTEREST EXPENSE
System Open Market Account:
Securities sold under agreements to repurchase
Deposits:
Depository institutions and others
Total interest expense
Net interest income
NON-INTEREST INCOME
System Open Market Account:
Treasury securities gains (losses), net
Federal agency and government-sponsored enterprise mortgage-backed securities gains, net
Foreign currency translation gains (losses), net
Other
Income from services
Compensation received for service costs provided
Reimbursable services to government agencies
Other
Total non-interest income

Note 5
$

Change in prior service costs related to benefit plans
Change in actuarial gains (losses) related to benefit plans
Total other comprehensive (loss) income
Comprehensive income

3,730
24
2,836
(1)
1
6,590

$

3,579
54
2,596
6,229

Note 5
196

63

432
628
5,962

220
283
5,946

2
109
2
237
1
24
6
381

(1)
1
(4)
2
243
1
25
6
273

263
22
12
77
104

250
21
11
113
71

150
33
661

145
33
644

5,682
5,634
48

5,575
5,509
66

(4)
2
(2)
46

16
(9)
7
73

Note 5

OPERATING EXPENSES
Salaries and benefits
Occupancy
Equipment
Compensation paid for service costs incurred
Other
Assessments:
Board of Governors operating expenses and currency costs
Bureau of Consumer Financial Protection
Total operating expenses
Net income before providing for remittances to the Treasury
Earnings remittances to the Treasury
Net income after providing for remittances to the Treasury

2016

Note 3o

Note 9
Note 9
$

$

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

6

Federal Reserve Bank of Atlanta

Statements of Changes in Capital
For the years ended December 31, 2017 and December 31, 2016
(in millions, except share data)

Net income
retained

Capital paid-in
Balance at December 31, 2015
(32,769,423 shares)
Net change in capital stock issued
(2,746,922 shares)
Comprehensive income:
Net income
Other comprehensive income
Dividends on capital stock
Net change in capital
Balance at December 31, 2016
(35,516,345 shares)
Net change in capital stock issued
(761,060 shares)
Comprehensive income:
Net income
Other comprehensive loss
Dividends on capital stock
Net change in capital
Balance at December 31, 2017
(36,277,405 shares)

$

$

$

1,639

Surplus
Accumulated
other
comprehensive
loss

$

571

$

Total surplus

(16)

$

Total capital

555

$

2,194

137

-

-

-

137

137

66
(45)
21

7
7

66
7
(45)
28

66
7
(45)
165

1,776

$

592

$

(9)

$

583

$

2,359

38

-

-

-

38

38

48
(51)
(3)

(2)
(2)

48
(2)
(51)
(5)

48
(2)
(51)
33

1,814

$

589

$

(11)

$

578

$

2,392

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

7

Federal Reserve Bank of Atlanta
Notes to Financial Statements
(1) STRUCTURE
The Federal Reserve Bank of Atlanta (Bank) is part of the Federal Reserve System (System) and is one of the 12
Federal Reserve Banks (Reserve Banks) created by Congress under the Federal Reserve Act of 1913 (Federal
Reserve Act), which established the central bank of the United States. The Reserve Banks are chartered by the
federal government and possess a unique set of governmental, corporate, and central bank characteristics. The
Bank serves the Sixth Federal Reserve District, which includes Georgia, Florida, Alabama, and portions of
Louisiana, Tennessee, and Mississippi.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of
directors. The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve
Banks. Each board is composed of nine members serving three-year terms: three directors, including those
designated as chairman and deputy chairman, are appointed by the Board of Governors of the Federal Reserve
System (Board of Governors) to represent the public, and six directors are elected by member banks. Banks that
are members of the System include all nationally-chartered banks and any state-chartered banks that apply and are
approved for membership. Member banks are divided into three classes according to size. Member banks in each
class elect one director representing member banks and one director representing the public. In any election of
directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank stock it holds.
In addition to the 12 Reserve Banks, the System also consists, in part, of the Board of Governors and the Federal
Open Market Committee (FOMC). The Board of Governors, an independent federal agency, is charged by the
Federal Reserve Act with a number of specific duties, including general supervision over the Reserve Banks. The
FOMC is composed of members of the Board of Governors, the president of the Federal Reserve Bank of New
York (FRBNY), and, on a rotating basis, four other Reserve Bank presidents.
(2) OPERATIONS AND SERVICES
The Reserve Banks perform a variety of services and operations. These functions include participating in
formulating and conducting monetary policy; participating in the payment system, including transfers of funds,
automated clearinghouse (ACH) operations, and check collection; distributing coin and currency; performing
fiscal agency functions for the U.S. Department of the Treasury (Treasury), certain federal agencies, and other
entities; serving as the federal government’s bank; providing short-term loans to depository institutions; providing
loans to participants in programs or facilities with broad-based eligibility in unusual and exigent circumstances;
serving consumers and communities by providing educational materials and information regarding financial
consumer protection rights and laws and information on community development programs and activities; and
supervising bank holding companies, state member banks, savings and loan holding companies, U.S. offices of
foreign banking organizations, edge and agreement corporations, and certain financial market utilities that have
been designated as systemically important. Certain services are provided to foreign official and international
account holders, primarily by the FRBNY.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations and
oversees these operations. The FOMC has selected the FRBNY to execute open market transactions for the
System Open Market Account (SOMA) as provided in its annual authorization. The FOMC authorizes and directs
the FRBNY to conduct operations in domestic markets, including the direct purchase and sale of Treasury
securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed
securities (MBS); the purchase of these securities under agreements to resell; and the sale of these securities under
agreements to repurchase. The FRBNY holds the resulting securities and agreements in a portfolio known as the
SOMA. The FRBNY is authorized and directed to lend the Treasury securities and GSE debt securities that are
held in the SOMA.

8

Federal Reserve Bank of Atlanta
Notes to Financial Statements
To be prepared to meet the needs specified by the FOMC to carry out the System’s central bank responsibilities,
the FOMC authorized and directed the FRBNY to execute standalone spot and forward foreign exchange
transactions in the resultant foreign currencies, to hold balances in those currencies, and to invest such foreign
currency holdings, while maintaining adequate liquidity. The FRBNY holds these securities and agreements in the
SOMA. The FOMC also authorized and directed the FRBNY to maintain reciprocal currency arrangements with
the Bank of Canada and the Bank of Mexico in the maximum amounts of $2 billion and $3 billion, respectively,
and at the request of the Treasury to conduct swap transactions with the United States Exchange Stabilization
Fund in the maximum amount of $5 billion, also known as warehousing.
Because of the global character of bank funding markets, the System has, at times, coordinated with other central
banks to provide liquidity. The FOMC authorized and directed the FRBNY to maintain standing U.S. dollar
liquidity swap arrangements and standing foreign currency liquidity swap arrangements with the Bank of Canada,
the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. The FRBNY
holds amounts outstanding under these liquidity swap lines in the SOMA. These liquidity swap lines, which were
originally established as temporary arrangements, were converted to standing arrangements on October 31, 2013,
and are subject to annual review and approval by the FOMC.
The FOMC has authorized and directed the FRBNY to conduct small-value exercises periodically for the purpose
of testing operational readiness.
Although the Reserve Banks are separate legal entities, they collaborate on the delivery of certain services to
achieve greater efficiency and effectiveness. This collaboration takes the form of centralized operations and
product or function offices that have responsibility for the delivery of certain services on behalf of the Reserve
Banks. Various operational and management models are used and are supported by service agreements among the
Reserve Banks. In some cases, costs incurred by a Reserve Bank for services provided to other Reserve Banks are
not shared; in other cases, the Reserve Banks are reimbursed for costs incurred in providing services to other
Reserve Banks. Major services provided by the Bank on behalf of the System for which the costs were not
reimbursed by the other Reserve Banks include the Retail Payments Office and Central Billing Services.
(3) SIGNIFICANT ACCOUNTING POLICIES
Accounting principles for entities with the unique powers and responsibilities of the nation’s central bank have
not been formulated by accounting standard-setting bodies. The Board of Governors has developed specialized
accounting principles and practices that it considers to be appropriate for the nature and function of a central bank.
These accounting principles and practices are documented in the Financial Accounting Manual for Federal
Reserve Banks (FAM), which is issued by the Board of Governors. The Reserve Banks are required to adopt and
apply accounting policies and practices that are consistent with the FAM. The financial statements and associated
disclosures have been prepared in accordance with the FAM.
Due to the unique nature of the Bank’s powers and responsibilities as part of the nation’s central bank and given
the System’s unique responsibility to conduct monetary policy, the Board has adopted accounting principles and
practices in the FAM that differ from accounting principles generally accepted in the United States of America
(GAAP). The more significant differences are the presentation of all SOMA securities holdings at amortized cost,
adjusted for credit impairment, if any, and the recording of all SOMA securities on a settlement-date basis.
Amortized cost, rather than the fair value presentation, more appropriately reflects the financial position
associated with the Bank’s securities holdings given the System’s unique responsibility to conduct monetary
policy. Although the application of fair value measurements to the securities holdings may result in values
substantially greater or less than their carrying values, these unrealized changes in value have no direct effect on
the quantity of reserves available to the banking system or on the ability of the Reserve Banks, as the central
bank, to meet their financial obligations and responsibilities. Both the domestic and foreign components of the

9

Federal Reserve Bank of Atlanta
Notes to Financial Statements
SOMA portfolio may involve transactions that result in gains or losses when holdings are sold before maturity.
Decisions regarding securities and foreign currency transactions, including their purchase and sale, are primarily
motivated by monetary policy and financial stability objectives rather than profit. Accordingly, fair values,
earnings, and gains or losses resulting from the sale of such securities and currencies are incidental to open market
operations and do not motivate decisions related to policy or open market activities. Accounting for these
securities on a settlement-date basis, rather than the trade-date basis required by GAAP, better reflects the timing
of the transaction’s effect on the quantity of reserves in the banking system.
In addition, the Bank does not present a Statement of Cash Flows as required by GAAP because the liquidity and
cash position of the Bank are not a primary concern given the Reserve Bank’s unique powers and responsibilities
as a central bank. Other information regarding the Bank’s activities is provided in, or may be derived from, the
Statements of Condition, Operations, and Changes in Capital, and the accompanying notes to the financial
statements. Other than those described above, the accounting policies described in FAM are generally consistent
with those in GAAP and the references to GAAP in the notes to the financial statements highlight those areas
where FAM is consistent with GAAP.
Preparing the financial statements in conformity with the FAM requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
Significant accounts and accounting policies are explained below.
a. Consolidation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) established the
Bureau of Consumer Financial Protection (Bureau) as an independent bureau within the System that has
supervisory authority over some institutions previously supervised by the Reserve Banks in connection with those
institutions’ compliance with consumer protection statutes. Section 1017 of the Dodd-Frank Act provides that the
financial statements of the Bureau are not to be consolidated with those of the Board of Governors or the System.
The Board of Governors funds the Bureau through assessments on the Reserve Banks as required by the DoddFrank Act. The Reserve Banks reviewed the law and evaluated the design of and their relationship to the Bureau
and determined that it should not be consolidated in the Bank’s financial statements.
b. Gold and Special Drawing Rights Certificates
The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks. Upon authorization,
the Reserve Banks acquire gold certificates by crediting equivalent amounts in dollars to the account established
for the Treasury. The gold certificates held by the Reserve Banks are required to be backed by the gold owned by
the Treasury. The Treasury may reacquire the gold certificates at any time, and the Reserve Banks must deliver
them to the Treasury. At such time, the Treasury’s account is charged, and the Reserve Banks’ gold certificate
accounts are reduced. The value of gold for purposes of backing the gold certificates is set by law at $42 2/9 per
fine troy ounce. Gold certificates are recorded by the Reserve Banks at original cost. The Board of Governors
allocates the gold certificates among the Reserve Banks once a year based on each Reserve Bank’s average
Federal Reserve notes outstanding during the preceding 12 months.
Special drawing rights (SDR) are issued by the International Monetary Fund (IMF) to its members in proportion
to each member’s quota in the IMF at the time of issuance. SDRs serve as a supplement to international monetary
reserves and may be transferred from one national monetary authority to another. Under the law providing for
U.S. participation in the SDR system, the Secretary of the Treasury is authorized to issue SDR certificates to the
Reserve Banks. When SDR certificates are issued to the Reserve Banks, equivalent amounts in U.S. dollars are
credited to the account established for the Treasury and the Reserve Banks’ SDR certificate accounts are

10

Federal Reserve Bank of Atlanta
Notes to Financial Statements
increased. The Reserve Banks are required to purchase SDR certificates, at the direction of the Treasury, for the
purpose of financing SDR acquisitions or for financing exchange-stabilization operations. At the time SDR
certificate transactions occur, the Board of Governors allocates the SDR certificates among the Reserve Banks
based upon each Reserve Bank’s Federal Reserve notes outstanding at the end of the preceding calendar year.
SDR certificates are recorded by the Reserve Banks at original cost.
c. Coin
The amount reported as coin in the Statements of Condition represents the face value of all United States coin
held by the Bank. The Bank buys coin at face value from the U.S. Mint in order to fill depository institution
orders.
d. Loans
Loans to depository institutions are reported at their outstanding principal balances and interest income is
recognized on an accrual basis.
Loans are impaired when current information and events indicate that it is probable that the Bank will not receive
the principal and interest that are due in accordance with the contractual terms of the loan agreement. Impaired
loans are evaluated to determine whether an allowance for loan loss is required. The Bank has developed
procedures for assessing the adequacy of any allowance for loan losses using all available information to identify
incurred losses. This assessment includes monitoring information obtained from banking supervisors, borrowers,
and other sources to assess the credit condition of the borrowers and, as appropriate, evaluating collateral values.
Generally, the Bank would discontinue recognizing interest income on impaired loans until the borrower’s
repayment performance demonstrates principal and interest would be received in accordance with the terms of the
loan agreement. If the Bank discontinues recording interest on an impaired loan, cash payments are first applied to
principal until the loan balance is reduced to zero; subsequent payments are applied as recoveries of amounts
previously deemed uncollectible, if any, and then as interest income.
e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase,
and Securities Lending
The FRBNY may engage in purchases of securities under agreements to resell (repurchase agreements) with
primary dealers. Transactions under these repurchase agreements are typically settled through a tri-party
arrangement. In the United States, there are currently two commercial custodial banks that provide these services.
In a tri-party arrangement, a commercial custodial bank manages the collateral clearing, settlement, pricing, and
pledging, and provides cash and securities custodial services for and on behalf of the FRBNY and counterparty.
The collateral pledged must exceed the principal amount of the transaction by a margin determined by the
FRBNY for each class and maturity of acceptable collateral. Collateral designated by the FRBNY as acceptable
under repurchase agreements primarily includes Treasury securities (including Treasury Inflation-Protected
Securities, Separate Trading of Registered Interest and Principal of Securities Treasury securities, and Treasury
Floating Rate Notes); direct obligations of several federal and GSE-related agencies, including Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home Loan Banks; and passthrough federal agency and GSE MBS. The repurchase agreements are accounted for as financing transactions
with the associated interest income recognized over the life of the transaction. These repurchase agreements are
reported at their contractual amounts as “System Open Market Account: Securities purchased under agreements to
resell” and the related accrued interest receivable is reported as a component of “System Open Market Account:
Accrued interest receivable” in the Statements of Condition. Interest income is reported as a component of
“System Open Market Account: Securities purchased under agreements to resell” in the Statements of Operations.
The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase agreements)
with primary dealers and with a set of expanded counterparties that includes banks, savings associations, GSEs,
and domestic money market funds. Transactions under these reverse repurchase agreements are designed to have

11

Federal Reserve Bank of Atlanta
Notes to Financial Statements
a margin of zero and are settled through a tri-party arrangement, similar to repurchase agreements. Reverse
repurchase agreements may also be executed with foreign official and international account holders as part of a
service offering. Reverse repurchase agreements are collateralized by a pledge of an amount of Treasury
securities, GSE debt securities, or federal agency and GSE MBS that are held in the SOMA. Reverse repurchase
agreements are accounted for as financing transactions, and the associated interest expense is recognized over the
life of the transaction. These reverse repurchase agreements are reported at their contractual amounts as “System
Open Market Account: Securities sold under agreements to repurchase” and the related accrued interest payable is
reported as a component of “System Open Market Account: Other liabilities” in the Statements of Condition.
Interest expense is reported as a component of “System Open Market Account: Securities sold under agreements
to repurchase” in the Statements of Operations.
Treasury securities and GSE debt securities held in the SOMA may be lent to primary dealers, typically overnight,
to facilitate the effective functioning of the domestic securities markets. The amortized cost basis of securities lent
continues to be reported as “System Open Market Account: Treasury securities, net” and “System Open Market
Account: Government-sponsored enterprise debt securities, net,” as appropriate, in the Statements of Condition.
Securities lending transactions are fully collateralized by Treasury securities based on the fair values of the
securities lent increased by a margin determined by the FRBNY. The FRBNY charges the primary dealer a fee for
borrowing securities, and these fees are reported as a component of “Non-interest income: System Open Market
Account: Other” in the Statements of Operations.
Activity related to repurchase agreements, reverse repurchase agreements, and securities lending is allocated to
each of the Reserve Banks on a percentage basis derived from an annual settlement of the interdistrict settlement
account that occurs in the second quarter of each year.
f.

Treasury Securities, Government-Sponsored Enterprise Debt Securities, Federal Agency and
Government-Sponsored Enterprise Mortgage-Backed Securities, and Foreign Currency Denominated
Investments
Interest income on Treasury securities, GSE debt securities, and foreign currency denominated investments
included in the SOMA is recorded when earned and includes amortization of premiums and accretion of
discounts. The Board of Governors approved, effective January 1, 2017, accounting for Treasury securities, GSE
debt securities, and foreign government debt instruments held in the SOMA using the effective interest method.
Previously, the cost bases of these securities were adjusted for amortization of premiums or accretion of discounts
on a straight-line basis. This change was applied prospectively and did not have a material effect on the Bank’s
financial statements for the year ended December 31, 2017.
Interest income on federal agency and GSE MBS is accrued using the effective interest method and includes
amortization of premiums, accretion of discounts, and gains or losses associated with principal paydowns.
Premiums and discounts related to federal agency and GSE MBS are amortized or accreted over the term of the
security to stated maturity, and the amortization of premiums and accretion of discounts are accelerated when
principal payments are received.
Gains and losses resulting from sales of securities are determined by specific issue based on average cost.
Treasury securities, GSE debt securities, and federal agency and GSE MBS are reported net of premiums and
discounts in the Statements of Condition and interest income on those securities is reported net of the amortization
of premiums and accretion of discounts in the Statements of Operations.
In addition to outright purchases of federal agency and GSE MBS that are held in the SOMA, the FRBNY enters
into dollar roll transactions (dollar rolls), which primarily involve an initial transaction to purchase or sell “to be
announced” (TBA) MBS for delivery in the current month combined with a simultaneous agreement to sell or
purchase TBA MBS on a specified future date. During the years ended December 31, 2017 and 2016, the FRBNY

12

Federal Reserve Bank of Atlanta
Notes to Financial Statements
executed dollar rolls to facilitate settlement of outstanding purchases of federal agency and GSE MBS. The
FRBNY accounts for dollar rolls as individual purchases and sales, on a settlement-date basis. Accounting for
these transactions as purchases and sales, rather than as financing transactions, is appropriate because the
purchase or sale component of the MBS TBA dollar roll is paired off or assigned prior to settlement and, as a
result, there is no transfer and return of securities. Net gains resulting from MBS transactions are reported as a
component of “Non-interest income: System Open Market Account: Federal agency and government-sponsored
enterprise mortgage-backed securities gains, net” in the Statements of Operations.
Foreign currency denominated investments, which can include foreign currency deposits, repurchase agreements,
and government debt instruments, are revalued daily at current foreign currency market exchange rates in order to
report these assets in U.S. dollars. Any negative interest associated with these foreign currency denominated
investments is included as a component of “Interest income: System Open Market Account: Foreign currency
denominated investments, net” in the Statements of Operations. Foreign currency translation gains and losses that
result from the daily revaluation of foreign currency denominated investments are reported as “Non-interest
income: System Open Market Account: Foreign currency translation gains (losses), net” in the Statements of
Operations.
Because the FRBNY enters into commitments to buy Treasury securities, federal agency and GSE MBS, and
foreign government debt instruments and records the related securities on a settlement-date basis in accordance
with the FAM, the related outstanding commitments are not reflected in the Statements of Condition.
Activity related to Treasury securities, GSE debt securities, and federal agency and GSE MBS, including the
premiums, discounts, and realized gains and losses, is allocated to each Reserve Bank on a percentage basis
derived from an annual settlement of the interdistrict settlement account that occurs in the second quarter of each
year. Activity related to foreign currency denominated investments, including the premiums, discounts, and
realized and unrealized gains and losses, is allocated to each Reserve Bank on a percentage basis, adjusted
annually in the second quarter of each year, calculated as the ratio of each Reserve Bank’s capital and surplus to
the Reserve Banks’ aggregate capital and surplus at the preceding December 31.
g. Central Bank Liquidity Swaps
Central bank liquidity swaps, which are transacted between the FRBNY and a foreign central bank, can be
structured as either U.S. dollar or foreign currency liquidity swap arrangements.
Central bank liquidity swaps activity, including the related income and expense, is allocated to each Reserve Bank
on a percentage basis, adjusted annually in the second quarter of each year, calculated as the ratio of each Reserve
Bank’s capital and surplus to the Reserve Banks’ aggregate capital and surplus at the preceding December 31.
U.S. dollar liquidity swaps
At the initiation of each U.S. dollar liquidity swap transaction, the foreign central bank transfers a specified
amount of its currency to a restricted account for the FRBNY in exchange for U.S. dollars at the prevailing market
exchange rate. Concurrent with this transaction, the FRBNY and the foreign central bank agree to a second
transaction that obligates the foreign central bank to return the U.S. dollars and the FRBNY to return the foreign
currency on a specified future date at the same exchange rate as the initial transaction. The Bank’s allocated
portion of the foreign currency amounts that the FRBNY acquires are reported as “System Open Market Account:
Central bank liquidity swaps” in the Statements of Condition. Because the swap transaction will be unwound at
the same U.S. dollar amount and exchange rate that were used in the initial transaction, the recorded value of the
foreign currency amounts is not affected by changes in the market exchange rate.
The foreign central bank compensates the FRBNY based on the amount outstanding and the rate under the swap
agreement. The Bank’s allocated portion of the amount of compensation received during the term of the swap

13

Federal Reserve Bank of Atlanta
Notes to Financial Statements
transaction is reported as “Interest income: System Open Market Account: Central bank liquidity swaps” in the
Statements of Operations.
Foreign currency liquidity swaps
Foreign currency liquidity swap transactions involve the transfer by the FRBNY, at the prevailing market
exchange rate, of a specified amount of U.S. dollars to an account for the foreign central bank in exchange for its
currency. The foreign currency amounts that the FRBNY receives are recorded as a liability.
h. Bank Premises, Equipment, and Software
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets, which range from 2 to 50 years. Major alterations,
renovations, and improvements are capitalized at cost as additions to the asset accounts and are depreciated over
the remaining useful life of the asset or, if appropriate, over the unique useful life of the alteration, renovation, or
improvement. Maintenance, repairs, and minor replacements are charged to operating expense in the year
incurred. Reserve Banks may transfer assets to other Reserve Banks or may lease property of other Reserve
Banks.
Costs incurred to acquire software are capitalized based on the purchase price. Costs incurred during the
application development stage to develop internal-use software are capitalized based on the cost of direct services
and materials associated with designing, coding, installing, and testing the software. Capitalized software costs
are amortized on a straight-line basis over the estimated useful lives of the software applications, which generally
range from two to five years. Maintenance costs and minor replacements related to software are charged to
operating expense in the year incurred.
Capitalized assets, including software, buildings, leasehold improvements, furniture, and equipment, are impaired
and an adjustment is recorded when events or changes in circumstances indicate that the carrying amount of assets
or asset groups is not recoverable and significantly exceeds the assets’ fair value.
i. Interdistrict Settlement Account
Each Reserve Bank aggregates the payments due to or from other Reserve Banks. These payments result from
transactions between the Reserve Banks and transactions that involve depository institution accounts held by
other Reserve Banks, such as Fedwire funds and securities transfers and check and ACH transactions. The
cumulative net amount due to or from the other Reserve Banks is reflected in the “Interdistrict settlement
account” in the Statements of Condition.
An annual settlement of the interdistrict settlement account occurs in the second quarter of each year. As a result
of the annual settlement, the balance in each Bank’s interdistrict settlement account is adjusted by an amount
equal to the average balance in the account during the previous twelve-month period ended March 31. An equal
and offsetting adjustment is made to each Bank’s allocated portion of SOMA assets and liabilities.
j. Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as issued
to a specific Reserve Bank, must be fully collateralized. All of the Bank’s assets are eligible to be pledged as
collateral. The collateral value is equal to the book value of the collateral tendered with the exception of
securities, for which the collateral value is equal to the par value of the securities tendered. The par value of
reverse repurchase agreements is deducted from the eligible collateral value.
The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately
collateralize outstanding Federal Reserve notes. To satisfy the obligation to provide sufficient collateral for
outstanding Federal Reserve notes, the Reserve Banks have entered into an agreement that provides for certain

14

Federal Reserve Bank of Atlanta
Notes to Financial Statements
assets of the Reserve Banks to be jointly pledged as collateral for the Federal Reserve notes issued to all Reserve
Banks. In the event that this collateral is insufficient, the Federal Reserve Act provides that Federal Reserve notes
become a first and paramount lien on all the assets of the Reserve Banks. Finally, Federal Reserve notes are
obligations of the United States government.
“Federal Reserve notes outstanding, net” in the Statements of Condition represents the Bank’s Federal Reserve
notes outstanding, reduced by the Bank’s currency holdings of $24,170 million and $24,868 million at December
31, 2017 and 2016, respectively.
At December 31, 2017 and 2016, all Federal Reserve notes outstanding, net, were fully collateralized. At
December 31, 2017, all gold certificates, all SDR certificates, and $1,554 billion of domestic securities held in the
SOMA were pledged as collateral. At December 31, 2017, no investments denominated in foreign currencies
were pledged as collateral.
k. Deposits
Depository Institutions
Depository institutions’ deposits represent the reserve and service-related balances in the accounts that depository
institutions hold at the Bank. Required reserve balances are those that a depository institution must hold to satisfy
its reserve requirement. Reserve requirements are the amount of funds that a depository institution must hold in
reserve against specified deposit liabilities. Excess reserves are those held by the depository institutions in excess
of their required reserve balances. The interest rates paid on required reserve balances and excess balances are
determined by the Board of Governors, based on an FOMC-established target range for the federal funds rate.
Interest expense on depository institutions’ deposits is accrued daily at the appropriate rate. Interest payable is
reported as a component of “Interest payable to depository institutions and others” in the Statements of Condition.
The Term Deposit Facility (TDF) consists of deposits with specific maturities held by eligible institutions at the
Reserve Banks. The Reserve Banks pay interest on these deposits at interest rates determined by auction. Interest
expense on depository institutions’ deposits is accrued daily at the appropriate rate. Interest payable is reported as
a component of “Interest payable to depository institutions and others” in the Statements of Condition. There were
no deposits held by the Bank under the TDF at December 31, 2017 and 2016.
Other
Other deposits include the Bank’s allocated portion of foreign central bank and foreign government deposits held
at the FRBNY. Other deposits also include cash collateral held by the Bank.
l. Items in Process of Collection and Deferred Credit Items
Items in process of collection primarily represents amounts attributable to checks that have been deposited for
collection and that, as of the balance sheet date, have not yet been presented to the paying bank. Deferred credit
items represents the counterpart liability to items in process of collection. The amounts in this account arise from
deferring credit for deposited items until the amounts are collected.
m. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in an
amount equal to 6 percent of the capital and surplus of the member bank. These shares are nonvoting, with a par
value of $100, and may not be transferred or hypothecated. As a member bank’s capital and surplus changes, its
holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the subscription is paid in, and the
remainder is subject to call. A member bank is liable for Reserve Bank liabilities up to twice the par value of
stock subscribed by it.

15

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The Federal Reserve Act requires each Reserve Bank to pay each member bank an annual dividend based on the
amount of the member bank’s paid-in capital stock and a rate determined by the member bank’s total consolidated
assets. Member banks with total consolidated assets in excess of a threshold established in the Federal Reserve
Act receive a dividend equal to the smaller of 6 percent or the rate equal to the high yield of the 10-year Treasury
note auctioned at the last auction held prior to the payment of the dividend. Member banks with total consolidated
assets equal to or less than the threshold receive a dividend of 6 percent. The threshold for total consolidated
assets was $10.1 billion and $10.0 billion for the years ended December 31, 2017 and 2016, respectively. This
threshold is adjusted annually based on the Gross Domestic Product Price Index, which is published by the Bureau
of Economic Analysis. The dividend is paid semiannually and is cumulative.
n. Surplus
The Federal Reserve Act limits aggregate Reserve Bank surplus to $10 billion, which is allocated among the
Reserve Banks based on the ratio of each Bank’s capital paid-in to total Reserve Bank capital paid-in as of
December 31 of each year. The amount reported as surplus by the Bank as of December 31, 2017 and 2016
represents the Bank’s allocated portion of surplus.
Accumulated other comprehensive loss is reported as a component of “Surplus” in the Statements of Condition
and the Statements of Changes in Capital. Additional information regarding the classifications of accumulated
other comprehensive income is provided in Notes 9 and 10.
o. Earnings Remittances to the Treasury
The Federal Reserve Act requires that any amounts of the surplus funds of the Reserve Banks that exceed, or
would exceed, the aggregate surplus limitation of $10 billion shall be transferred to the Board of Governors for
transfer to the Treasury. The Bank remits excess earnings to the Treasury after providing for the cost of
operations, payment of dividends, and reservation of an amount necessary to maintain surplus at the Bank’s
allocated portion of the $10 billion aggregate surplus limitation. Remittances to the Treasury are made on a
weekly basis. The amount of the remittances to the Treasury is reported as “Earnings remittances to the Treasury”
in the Statements of Operations. The amount due to the Treasury is reported as “Accrued remittances to the
Treasury” in the Statements of Condition. See Note 11 for additional information on earnings remittances to the
Treasury.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and
maintaining surplus at an amount equal to the Bank’s allocated portion of the $10 billion aggregate surplus
limitation, remittances to the Treasury are suspended. This decrease in earnings remittances to the Treasury
results in a deferred asset that represents the amount of net earnings a Reserve Bank will need to realize before
remittances to the Treasury resume.
p. Income and Costs Related to Treasury Services
When directed by the Secretary of the Treasury, the Bank is required by the Federal Reserve Act to serve as fiscal
agent and depositary of the United States Government. By statute, the Treasury has appropriations to pay for these
services. During the years ended December 31, 2017 and 2016, the Bank was reimbursed for all services provided
to the Treasury as its fiscal agent.
q. Income from Services, Compensation Received for Service Costs Provided, and Compensation Paid for
Service Costs Incurred
The Bank has overall responsibility for managing the Reserve Banks’ provision of check and ACH services to
depository institutions and, as a result, reports total System revenue for these services as “Non-interest income:
Income from services” in its Statements of Operations. The Bank compensates the applicable Reserve Banks for
the costs incurred to provide these services and reports the resulting compensation paid as “Operating expenses:
Compensation paid for service costs incurred” in its Statements of Operations.

16

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The FRBNY has overall responsibility for managing the Reserve Banks’ provision of Fedwire funds and
securities services, and the Federal Reserve Bank of Chicago has overall responsibility for managing the Reserve
Banks’ provision of electronic access services to depository institutions. The Reserve Bank that has overall
responsibility for managing these services recognizes the related total System revenue in its Statements of
Operations. The Bank is compensated for costs incurred to provide these services by the Reserve Banks
responsible for managing these services and reports this compensation as “Non-interest income: Compensation
received for service costs provided” in its Statements of Operations.
r. Assessments
The Board of Governors assesses the Reserve Banks to fund its operations and the operations of the Bureau.
These assessments are allocated to each Reserve Bank based on each Reserve Bank’s capital and surplus
balances. The Board of Governors also assesses each Reserve Bank for expenses related to producing, issuing,
and retiring Federal Reserve notes based on each Reserve Bank’s share of the number of notes comprising the
System’s net liability for Federal Reserve notes on December 31 of the prior year.
The Dodd-Frank Act requires that, after the transfer of its responsibilities to the Bureau on July 21, 2011, the
Board of Governors fund the Bureau in an amount not to exceed a fixed percentage of the total operating expenses
of the System as reported in the Board of Governor’s 2009 annual report, which totaled $4.98 billion. After 2013,
the amount will be adjusted annually in accordance with the provisions of the Dodd-Frank Act. The percentage of
total operating expenses of the System for the years ended December 31, 2017 and 2016 was 12.98 percent
($646.2 million) and 12.68 percent ($631.7 million), respectively. The Bank’s assessment for Bureau funding is
reported as “Operating expenses: Assessments: Bureau of Consumer Financial Protection” in the Statements of
Operations.
s. Taxes
The Reserve Banks are exempt from federal, state, and local taxes, except for taxes on real property. The Bank’s
real property taxes were $4 million and $3 million for the years ended December 31, 2017 and 2016, respectively,
and are reported as a component of “Operating expenses: Occupancy” in the Statements of Operations.
t. Restructuring Charges
The Reserve Banks recognize restructuring charges for exit or disposal costs incurred as part of the closure of
business activities in a particular location, the relocation of business activities from one location to another, or a
fundamental reorganization that affects the nature of operations. Restructuring charges may include costs
associated with employee separations, contract terminations, and asset impairments. Expenses are recognized in
the period in which the Bank commits to a formalized restructuring plan or executes the specific actions
contemplated in the plan and all criteria for financial statement recognition have been met.
The Bank had no significant restructuring activities in 2017 and 2016.
u. Recently Issued Accounting Standards
Other than the significant differences described in Note 3, the accounting policies described in FAM are generally
consistent with those in GAAP. The following items represent recent GAAP accounting standards and describe
how FAM was or will be revised to be consistent with these standards.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers (Topic 606). This update was issued to create common
revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. The guidance is
applicable to all contracts for the transfer of goods or services regardless of industry or type of transaction. This
update requires recognition of revenue in a manner that reflects the consideration that the entity expects to receive
in return for the transfer of goods or services to customers. Subsequently, the FASB issued a number of related

17

Federal Reserve Bank of Atlanta
Notes to Financial Statements
ASUs including ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the
Effective Date; ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net); ASU 2016-10, Revenue from Contracts with
Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from
Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU
2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.
This revenue recognition accounting guidance is effective for the Bank for the year ending December 31, 2019,
although the Bank may elect to adopt the guidance earlier. The Bank is continuing to evaluate the effect of this
new guidance on its financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update
eliminate the requirement to disclose methods and significant assumptions used to estimate the fair value for
financial instruments measured at amortized cost on the balance sheet. This update is effective for the Bank for
the year ending December 31, 2019 and is not expected to have a material effect on the Bank’s financial
statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update revises the model to assess
how a lease should be classified and provides guidance for lessees, requiring lessees to present right-of-use assets
and lease liabilities on the balance sheet. The update is effective for the Bank for the year ending December 31,
2020, although earlier adoption is permitted. The Bank is continuing to evaluate the effect of this new guidance
on its financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. This update revises the methodology for assessing
expected credit losses and requires consideration of reasonable and supportable information to inform credit loss
estimates. The update is effective for the Bank for the year ending December 31, 2021, although earlier adoption
is permitted. The Bank is continuing to evaluate the effect of this new guidance on its financial statements.
In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. This update
covers a wide range of topics in the accounting standard codification and addresses differences between original
guidance and the codification. It provides clarification of certain guidance including reference corrections and
makes minor improvements to accounting standards. This update was effective for the Bank for the year ended
December 31, 2016 and did not have an impact on the Bank’s financial statements.
In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost. This update requires an employer to disaggregate the service cost
component from the other components of net benefit cost. It also provides explicit guidance on how to present
the service cost component and the other components of net benefit cost in the income statement and allows only
the service cost component of net benefit cost to be eligible for capitalization. This update is effective for the
Bank for the year ending December 31, 2019, and the Bank is continuing to evaluate the effect of this new
guidance on its financial statements.
(4) LOANS
Loans to Depository Institutions
The Bank offers primary, secondary, and seasonal loans to eligible borrowers (depository institutions that
maintain reservable transaction accounts or nonpersonal time deposits and have established discount window
borrowing privileges). Each program has its own interest rate and interest is accrued using the applicable interest
rate established at least every 14 days by the Bank’s board of directors, subject to review and determination by the

18

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Board of Governors. Primary and secondary loans are extended on a short-term basis, typically overnight,
whereas seasonal loans may be extended for a period of up to nine months.
Primary, secondary, and seasonal loans are collateralized to the satisfaction of the Bank to reduce credit risk.
Assets eligible to collateralize these loans include consumer, business, and real estate loans; Treasury securities;
GSE debt securities; foreign sovereign debt; municipal, corporate, and state and local government obligations;
asset-backed securities; corporate bonds; commercial paper; and bank-issued assets, such as certificates of
deposit, bank notes, and deposit notes. Collateral is assigned a lending value that is deemed appropriate by the
Bank, which is typically fair value reduced by a margin. Loans to depository institutions are monitored daily to
ensure that borrowers continue to meet eligibility requirements for these programs. If a borrower no longer
qualifies for these programs, the Bank will generally request full repayment of the outstanding loan or, for
primary or seasonal loans, may convert the loan to a secondary credit loan. Collateral levels are reviewed daily
against outstanding obligations, and borrowers that no longer have sufficient collateral to support outstanding
loans are required to provide additional collateral or to make partial or full repayment.
Loans to depository institutions were $26 million and $2 million as of December 31, 2017 and 2016, respectively,
with a remaining maturity within 15 days.
At December 31, 2017 and 2016, the Bank did not have any loans that were impaired, restructured, past due, or on
non-accrual status, and no allowance for loan losses was required. There were no impaired loans during the years
ended December 31, 2017 and 2016. Interest income attributable to loans to depository institutions was
immaterial during the years ended December 31, 2017 and 2016.
(5) SYSTEM OPEN MARKET ACCOUNT
a. Domestic Securities Holdings
The FRBNY executes domestic open market operations and, on behalf of the Reserve Banks, holds the resulting
securities in the SOMA.
Pursuant to FOMC directives, during the year ended December 31, 2016 and through September 30, 2017, the
FRBNY continued to reinvest all principal payments from the SOMA’s holdings of GSE debt securities and
federal agency and GSE MBS in federal agency and GSE MBS and to roll over maturing Treasury securities at
auction. In October 2017, the FOMC initiated a balance sheet normalization program intended to reduce gradually
the SOMA holdings by decreasing reinvestment of the principal payments received from securities held in the
SOMA through the implementation of monthly caps. Effective from October 2017 and through December 2017,
the FOMC directed the FRBNY to roll over principal payments from the SOMA holdings of Treasury securities
maturing during each calendar month that exceeded a $6 billion cap, and to reinvest in federal agency and GSE
MBS the amount of principal payments from the SOMA holdings of GSE debt securities and federal agency and
GSE MBS received during each calendar month that exceeded a $4 billion cap. According to the balance sheet
normalization plan, the FOMC anticipates that it will increase the monthly cap on Treasury redemptions in steps
of $6 billion at three-month intervals over 12 months until it reaches $30 billion per month, and that it will
increase the monthly cap on GSE debt securities and federal agency and GSE MBS paydowns in steps of $4
billion at three-month intervals over 12 months until it reaches $20 billion per month. The FOMC also anticipates
that the caps will remain in place once they reach their respective maximums so that the SOMA holdings will
continue to decline in a gradual and predictable manner until the FOMC judges that the SOMA is holding no
more securities than necessary to implement monetary policy efficiently and effectively. The Bank’s allocated
share of activity related to domestic open market operations was 5.886 percent and 5.597 percent at December 31,
2017 and 2016, respectively.

19

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The Bank’s allocated share of Treasury securities, GSE debt securities, and federal agency and GSE MBS, net,
excluding accrued interest, held in the SOMA at December 31, 2017 and 2016 was as follows (in millions):
2017
Unamortized
premiums

Par
Treasury securities
Notes
Bonds
Total Treasury securities

$
$

95,631
48,833
144,464

GSE debt securities

$

Federal agency and GSE MBS

$

$

Total amortized
cost

Unaccreted
discounts
$

$

569
5,626
6,195

259

$

21

$

103,890

$

3,129

$

$

(278)
(530)
(808)
(23)

$
$

95,922
53,929
149,851

$

280

$

106,996

2016
Unamortized
premiums

Par
Treasury securities
Notes
Bonds
Total Treasury securities

$

$

$

91,687
46,200
137,887

GSE debt securities

$

Federal agency and GSE MBS

$

Total amortized
cost

Unaccreted
discounts
$

$

827
5,805
6,632

906

$

26

$

97,464

$

3,023

$

$

(314)
(508)
(822)
(22)

$
$

92,200
51,497
143,697

$

932

$

100,465

There were no material transactions related to repurchase agreements during the years ended December 31, 2017
and 2016.

20

Federal Reserve Bank of Atlanta
Notes to Financial Statements
During the years ended December 31, 2017 and 2016, the FRBNY entered into reverse repurchase agreements as
part of its monetary policy activities. These operations have been undertaken as necessary to maintain the federal
funds rate in a target range. In addition, reverse repurchase agreements are entered into as part of a service
offering to foreign official and international account holders. Financial information related to reverse repurchase
agreements allocated to the Bank and held in the SOMA for the years ended December 31, 2017 and 2016 was as
follows (in millions):
Allocated to the Bank
2017

Total SOMA

2016

2017

2016

Primary dealers and expanded counterparties:
Contract amount outstanding, end of year

$

Average daily amount outstanding, during the year
Maximum balance outstanding, during the year

18,813

$

26,213

$

319,595

$

468,355

8,449

5,921

145,959

105,648

26,213

26,725

468,355

474,592

Securities pledged (par value), end of year

17,817

24,839

302,690

443,799

Securities pledged (fair value), end of year

18,839

26,265

320,048

469,282

Foreign official and international accounts:
Contract amount outstanding, end of year

$

14,384

$

14,376

$

244,363

$

256,855

Average daily amount outstanding, during the year

14,016

13,559

241,581

241,848

Maximum balance outstanding, during the year

15,278

14,834

264,290

265,041

Securities pledged (par value), end of year

14,166

13,960

240,660

249,417

Securities pledged (fair value), end of year

14,387

14,378

244,417

256,897

Total contract amount outstanding, end of year

$

33,197

$

71

$

40,589

$

563,958

$

725,210

17

$

1,224

$

303

Supplemental information - interest expense:
Primary dealers and expanded counterparties
Foreign official and international accounts
Total interest expense - securities sold under
agreements to repurchase

$

46

125
$

196

$

63

2,141
$

3,365

819
$

1,122

Securities pledged as collateral, at December 31, 2017 and 2016, consisted solely of Treasury securities. The
contract amount outstanding as of December 31, 2017 of reverse repurchase agreements that were transacted with
primary dealers and expanded counterparties had a term of one business day and matured on January 2, 2018. The
contract amount outstanding as of December 31, 2017 of reverse repurchase agreements that were transacted with
foreign official and international account holders had a term of one business day and matured on January 2, 2018.

21

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The remaining maturity distribution of Treasury securities, GSE debt securities, federal agency and GSE MBS
bought outright, and reverse repurchase agreements that were allocated to the Bank at December 31, 2017 and
2016 was as follows (in millions):
Within 15
days
December 31, 2017:
Treasury securities
(par value)
GSE debt securities
(par value)
Federal agency and GSE

$

MBS (par value)1
Securities sold under
agreements to repurchase
(contract amount)
December 31, 2016:
Treasury securities
(par value)
GSE debt securities
(par value)
Federal agency and GSE
MBS (par value)1
Securities sold under
agreements to repurchase
(contract amount)
1

$

16 days to 90
days

1,213

$

6,337

91 days to 1
year

Over 1 year
to 5 years

$

$

18,567

Over 5 years
to 10 years

63,412

$

18,270

Over 10
years

$

Total

36,665

$

144,464

-

-

117

4

-

138

259

-

-

-

10

1,178

102,702

103,890

33,197

-

-

-

-

-

33,197

829

$

2,309

$

8,438

$

68,526

$

22,347

$

35,438

$

137,887

-

160

500

115

-

131

906

-

-

-

4

592

96,868

97,464

40,589

-

-

-

-

-

40,589

The par amount shown for federal agency and GSE MBS is the remaining principal balance of the securities.

Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted-average
life of these securities, which differs from the stated maturity primarily because it factors in scheduled payments
and prepayment assumptions, was approximately 6.9 and 7.2 years as of December 31, 2017 and 2016,
respectively.
The amortized cost and par value of Treasury securities and GSE debt securities that were loaned from the SOMA
under securities lending agreements allocated to the Bank and held in the SOMA at December 31, 2017 and 2016
were as follows (in millions):
Allocated to the Bank
2017
2016
Treasury securities (amortized cost)
Treasury securities (par value)

$

1,651

$

Total SOMA
2017
2016

1,410

$

28,053

$

25,195

1,589

1,382

26,990

24,698

GSE debt securities (amortized cost)

-

2

-

44

GSE debt securities (par value)

-

2

-

44

Securities pledged as collateral by the counterparties in the securities lending arrangements at December 31, 2017
and 2016 consisted solely of Treasury securities. The securities lending agreements outstanding as of December
31, 2017 had a term of one business day and matured on January 2, 2018.

22

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The FRBNY enters into commitments to buy and sell Treasury securities and records the related securities on a
settlement-date basis. As of December 31, 2017, the total purchase price of the Treasury securities under
outstanding commitments was $11,447 million of which $674 million was allocated to the Bank. These
commitments had contractual settlement dates extending through January 2, 2018.
The FRBNY enters into commitments to buy and sell federal agency and GSE MBS and records the related
securities on a settlement-date basis. As of December 31, 2017, the total purchase price of the federal agency and
GSE MBS under outstanding purchase commitments was $19,257 million, none of which was related to dollar
rolls. The total purchase price of outstanding purchase commitments allocated to the Bank was $1,134 million,
none of which was related to dollar rolls. These commitments, which had contractual settlement dates extending
through January 2018, are for the purchase of TBA MBS for which the number and identity of the pools that will
be delivered to fulfill the commitment are unknown at the time of the trade. As of December 31, 2017, there were
no outstanding sales commitments for federal agency and GSE MBS. MBS commitments are subject to varying
degrees of off-balance-sheet market risk and counterparty credit risk that result from their future settlement. The
FRBNY requires the posting of cash collateral for MBS commitments as part of its risk management practices
used to mitigate the counterparty credit risk.
Other assets consist primarily of cash and short-term investments related to the federal agency and GSE MBS
portfolio. Other liabilities, which are primarily related to federal agency and GSE MBS purchases and sales,
include the FRBNY’s obligation to return cash margin posted by counterparties as collateral under commitments
to purchase and sell federal agency and GSE MBS. In addition, other liabilities include obligations that arise from
the failure of a seller to deliver MBS to the FRBNY on the settlement date. Although the FRBNY has ownership
of and records its investments in the MBS as of the contractual settlement date, it is not obligated to make
payment until the securities are delivered, and the amount included in other liabilities represents the FRBNY’s
obligation to pay for the securities when delivered. The amount of other assets and other liabilities allocated to the
Bank and held in the SOMA at December 31, 2017 and 2016 was as follows (in millions):
Allocated to the Bank
2017
2016
Other assets:
MBS portfolio related cash and short
term investments
Other
Total other assets
Other liabilities:
Cash margin
Obligations from MBS transaction fails
Other
Total other liabilities

$
$
$

$

1
1

$

28
1
4
33

$

$

$

Total SOMA
2017
2016

-

$

55
1
1
57

$

$

$

13
13

$

481
14
63
558

$

$

$

7
1
8
983
9
20
1,012

Accrued interest receivable on domestic securities holdings held in the SOMA was $24,655 million and $25,517
million as of December 31, 2017 and 2016, respectively, of which $1,451 million and $1,428 million,
respectively, was allocated to the Bank. These amounts are reported as a component of “System Open Market
Account: Accrued interest receivable” in the Statements of Condition.

23

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE
MBS allocated to the Bank and held in the SOMA during the years ended December 31, 2017 and 2016, is
summarized as follows (in millions):
Allocated to the Bank

Notes
Balance at December 31, 2015

$

Purchases 1
Realized gains (losses), net 2
Principal payments and maturities
Amortization of premiums and accretion of discounts, net
Inflation adjustment on inflation-indexed securities
Annual reallocation adjustment 3
Balance at December 31, 2016

$

Purchases 1
Realized gains (losses), net 2
Principal payments and maturities
Amortization of premiums and accretion of discounts, net
Inflation adjustment on inflation-indexed securities
Annual reallocation adjustment 3
Balance at December 31, 2017

92,871

$

$

52,452

$ 145,323

$

778

11,488

(30)

(3)

(33)

(1)
(10,534)
(283)
32

(930)
(562)
80

(1)
(11,464)
(845)
112

(318)
51,497

(883)
$ 143,697

(565)
92,200

$

9,347

Sales 1

GSE debt
securities

Bonds

10,710

Sales 1

Total
Treasury
securities

923
(19)

(26)

(10,194)
(220)
41

2
(789)
(460)
107

2
(10,983)
(680)
148

4,755
95,922

$

2,668
53,929

$ 101,387

-

21,702

-

$

10,270

(7)

1,900

Federal
agency and
GSE MBS

(12)

(939)
(19)
-

(21,238)
(750)
-

(10)
932

(624)
$ 100,465

-

18,771

-

(20)

(686)
(6)
-

7,423
$ 149,851

$

(16,917)
(614)
-

40
280

5,311
$ 106,996

Year-ended December 31, 2016
Supplemental information - par value of transactions:
Purchases 4
Sales

$

10,723
(31)

$

778
(3)

$

11,501
(34)

$

-

$

20,916
(11)

$

9,371
(8)

$

930
(16)

$

10,301
(24)

$

-

$

18,207
(19)

Year-ended December 31, 2017
Supplemental information - par value of transactions:
Purchases 4
Sales
1

Purchases and sales may include payments and receipts related to principal, premiums, discounts, and inflation compensation adjustments to the basis of
inflation-indexed securities. The amount reported as sales includes the realized gains and losses on such transactions. Purchases and sales exclude MBS TBA
transactions that are settled on a net basis.
2
Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount.
3
Reflects the annual adjustment to the Bank's allocated portion of the related SOMA securities that results from the annual settlement of the interdistrict
settlement account, as discussed in Note 3i.
4
Includes inflation compensation.

24

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Total SOMA

Balance at December 31, 2015

Notes

Bonds

Total
Treasury
securities

$ 1,649,228

$ 931,448

$ 2,580,676

190,992

13,882

204,874

Purchases 1
Sales 1
Realized gains (losses), net 2
Principal payments and maturities
Amortization of premiums and accretion of discounts, net
Inflation adjustment on inflation-indexed securities
Balance at December 31, 2016

(534)

(62)

(596)

(22)
(187,843)
(5,049)
567
$ 1,647,339

7
(16,597)
(10,033)
1,438
$ 920,083

(15)
(204,440)
(15,082)
2,005
$ 2,567,422

Purchases 1

161,378

Sales 1
Realized gains (losses), net 2
Principal payments and maturities
Amortization of premiums and accretion of discounts, net
Inflation adjustment on inflation-indexed securities
Balance at December 31, 2017

15,849

GSE debt
securities

Federal
agency and
GSE MBS

33,748

$ 1,800,449

-

387,210

$

(16,764)
(336)
$ 16,648

177,227

-

(213)
6
(379,065)
(13,384)
$ 1,795,003
324,524

(124)

(326)

(450)

(2)
(175,933)
(3,796)
709
$ 1,629,571

30
(13,402)
(7,917)
1,845
$ 916,162

28
(189,335)
(11,713)
2,554
$ 2,545,733

(11,789)
(107)
$
4,752

(331)
2
(290,939)
(10,559)
$ 1,817,700

$

191,231
(555)

$

13,868
(45)

$

205,099
(600)

$

-

$ 373,197
(203)

$

161,796
(125)

$

15,976
(275)

$

177,772
(400)

$

-

$ 314,797
(320)

Year-ended December 31, 2016
Supplemental information - par value of transactions:
Purchases 3
Sales
Year-ended December 31, 2017
Supplemental information - par value of transactions:
Purchases 3
Sales
1

Purchases and sales may include payments and receipts related to principal, premiums, discounts, and inflation compensation adjustments to the basis of
inflation-indexed securities. The amount reported as sales includes the realized gains and losses on such transactions. Purchases and sales exclude MBS TBA
transactions that are settled on a net basis.
2
Realized gains (losses), net is the offset of the amount of realized gains and losses included in the reported sales amount.
3
Includes inflation compensation.

b. Foreign Currency Denominated Investments
The FRBNY conducts foreign currency operations and, on behalf of the Reserve Banks, holds the resulting
foreign currency denominated investments in the SOMA.
The FRBNY holds foreign currency deposits with foreign central banks and invests in foreign government debt
instruments of France, Germany, the Netherlands, and Japan. These foreign government debt instruments are
backed by the full faith and credit of the issuing foreign governments. In addition, the FRBNY may enter into
repurchase agreements to purchase government debt securities for which the accepted collateral is the debt
instruments issued by a foreign government.
At December 31, 2017 and 2016, there were no repurchase agreements outstanding and, consequently, no related
foreign securities held as collateral.
The Bank’s allocated share of activity related to foreign currency operations was 5.833 percent and 5.553 percent
at December 31, 2017 and 2016, respectively.

25

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Information about foreign currency denominated investments recorded at amortized cost and valued at foreign
currency market exchange rates allocated to the Bank and held in the SOMA at December 31, 2017 and 2016 was
as follows (in millions):
Allocated to Bank
2017
2016
Euro:
Foreign currency deposits
French government debt instruments
German government debt instruments
Dutch government debt instruments

$

Japanese yen:
Foreign currency deposits
Japanese government debt instruments
Total

354
180
131
95

394
89
1,243

$

$

Total SOMA
2017
2016
234
216
105
81

259
185
1,080

$

6,070
3,089
2,239
1,626

$

6,765
1,527
21,316

$

$

4,205
3,892
1,884
1,462

4,668
3,331
19,442

$

Net interest income earned on foreign currency denominated investments for the years ended December 31, 2017
and 2016 was immaterial for the Bank and held in the SOMA as follows (in millions):
Total SOMA
2017
2016
Net interest income:1
Euro
Japanese yen
Total net interest income

$
$

(19)
2
(17)

$
$

(11)
4
(7)

1

As a result of negative interest rates in certain foreign currency denominated investments held in the SOMA,
interest income on foreign currency denominated investments, net contains negative interest of $36 million and
$32 million for the years ended December 31, 2017 and 2016, respectively.

Accrued interest receivable on foreign currency denominated investments, net was $82 million and $79 million as
of December 31, 2017 and 2016, respectively, of which $5 million for each of the years ended December 31, 2017
and 2016 was allocated to the Bank. These amounts are reported as a component of “System Open Market
Account: Accrued interest receivable” in the Statements of Condition.
The remaining maturity distribution of foreign currency denominated investments that were allocated to the Bank
at December 31, 2017 and 2016 was as follows (in millions):
Within 15
days
December 31, 2017:
Euro
Japanese yen
Total
December 31, 2016:
Euro
Japanese yen
Total

$
$

$
$

359
395
754

236
269
505

16 days to 90
days
$
$

$
$

6
3
9

19
19
38

91 days to 1
year

Over 1 year
to 5 years

Over 5 years
to 10 years

$

$

$

$

$
$

72
15
87

65
74
139

$

$
$

183
70
253

176
82
258

$

$
$

140
140

140
140

Total
$
$

$
$

760
483
1,243

636
444
1,080

26

Federal Reserve Bank of Atlanta
Notes to Financial Statements
There were no foreign exchange contracts related to foreign currency operations outstanding as of December 31,
2017.
The FRBNY enters into commitments to buy foreign government debt instruments and records the related
securities on a settlement-date basis. As of December 31, 2017, there were no outstanding commitments to
purchase foreign government debt instruments. During 2017, there were purchases and maturities of foreign
government debt instruments of $576 million and $3,567 million, respectively, of which $34 million and $206
million, respectively, were allocated to the Bank. There were immaterial sales of foreign government debt
instruments in 2017.
In connection with its foreign currency activities, the FRBNY may enter into transactions that are subject to
varying degrees of off-balance-sheet market risk and counterparty credit risk that result from their future
settlement. The FRBNY controls these risks by obtaining credit approvals, establishing transaction limits,
receiving collateral in some cases, and performing monitoring procedures.
Foreign currency working balances held and foreign exchange contracts executed by the Bank to facilitate
international payments and currency transactions made on behalf of foreign central banks and U.S. official
institution customers were immaterial as of December 31, 2017 and 2016.
c. Central Bank Liquidity Swaps
U.S. Dollar Liquidity Swaps
The Bank’s allocated share of U.S. dollar liquidity swaps was 5.833 percent and 5.553 percent at December 31,
2017 and 2016, respectively.
The total foreign currency held in the SOMA under U.S. dollar liquidity swaps at December 31, 2017 and 2016
was $12,067 million and $5,563 million, respectively, of which $704 million and $309 million, respectively, was
allocated to the Bank.
The remaining maturity distribution of U.S. dollar liquidity swaps that were allocated to the Bank at December
31, 2017 and 2016 was as follows (in millions):

Euro
Japanese yen
Total

2017

2016

Within 15
days
$
695
9
$
704

Within 15
days
$
241
68
$
309

Foreign Currency Liquidity Swaps
At December 31, 2017 and 2016, there was no balance outstanding related to foreign currency liquidity swaps.
d. Fair Value of SOMA Assets and Liabilities
The fair value amounts below are presented solely for informational purposes and are not intended to comply with
the fair value disclosures required by FASB Accounting Standards Codification (ASC) Topic 820 (ASC 820),
Fair Value Measurement. Although the fair value of SOMA security holdings can be substantially greater than
or less than the recorded value at any point in time, these unrealized gains or losses have no effect on the ability of
the Reserve Banks, as the central bank, to meet their financial obligations and responsibilities. Because SOMA
securities are recorded at amortized cost, cumulative unrealized gains (losses) are not recognized in the

27

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Statements of Condition and the changes in cumulative unrealized gains (losses) are not recognized in the
Statements of Operations.
The fair value of the Treasury securities, GSE debt securities, federal agency and GSE MBS, and foreign
government debt instruments held in the SOMA is subject to market risk, arising from movements in market
variables such as interest rates and credit risk. The fair value of federal agency and GSE MBS is also affected by
the expected rate of prepayments of mortgage loans underlying the securities. The fair value of foreign
government debt instruments is also affected by currency risk. Based on evaluations performed as of December
31, 2017 and 2016, there are no credit impairments of SOMA securities holdings.
The following table presents the amortized cost, fair value, and cumulative unrealized gains (losses) on the
Treasury securities, GSE debt securities, and federal agency and GSE MBS allocated to the Bank and held in the
SOMA at December 31, 2017 and 2016 (in millions):
Allocated to the Bank
2016

2017

Amortized cost
Treasury securities:
Notes
$
95,922
Bonds
53,929
Total Treasury securities
149,851
GSE debt securities
280
Federal agency and GSE MBS
106,996
Total domestic SOMA portfolio securities holdings $
257,127
Memorandum - Commitments for:
Purchases of Treasury securities
Purchases of Federal agency and GSE MBS
Sales of Federal agency and GSE MBS

$

674
1,134
-

Fair value
$

$

$

Cumulative
unrealized
gains (losses),
net

95,626
59,362
154,988
317
106,538
261,843

$

675
1,135
-

$

$

(296)
5,433
5,137
37
(458)
4,716

1
1
-

Amortized cost
$

$

$

Fair value

92,200
51,497
143,697
932
100,465
245,094

$

654
2,003
-

$

$

Cumulative
unrealized
gains (losses),
net

92,742
55,056
147,798
976
100,044
248,818

$

656
2,014
-

$

542
3,559
4,101
44
(421)
3,724

$

2
11
-

Total SOMA
2017

Amortized cost
Treasury securities:
Notes
$
1,629,571
Bonds
916,162
Total Treasury securities
2,545,733
GSE debt securities
4,752
Federal agency and GSE MBS
1,817,700
Total domestic SOMA portfolio securities holdings $
4,368,185
Memorandum - Commitments for:
Purchases of Treasury securities
Purchases of Federal agency and GSE MBS
Sales of Federal agency and GSE MBS

$

11,447
19,257
-

Fair value
$

$

$

1,624,540
1,008,468
2,633,008
5,383
1,809,918
4,448,309

11,467
19,285
-

2016
Cumulative
unrealized
gains (losses),
net
$

$

$

(5,031)
92,306
87,275
631
(7,782)
80,124

20
28
-

Amortized cost
$

$

$

1,647,339
920,083
2,567,422
16,648
1,795,003
4,379,073

11,679
35,787
-

Fair value
$

$

$

1,657,026
983,680
2,640,706
17,442
1,787,484
4,445,632

11,719
35,974
-

Cumulative
unrealized
gains (losses),
net
$

$

9,687
63,597
73,284
794
(7,519)
66,559

$

40
187
-

The fair value of Treasury securities and GSE debt securities was determined using pricing services that provide
market consensus prices based on indicative quotes from various market participants. The fair value of federal
agency and GSE MBS was determined using a pricing service that utilizes a model-based approach that considers
observable inputs for similar securities.

28

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The cost bases of repurchase agreements, reverse repurchase agreements, central bank liquidity swaps, and other
investments held in the SOMA portfolio approximate fair value. Due to the short-term nature of these agreements
and the defined amount that will be received upon settlement, the cost basis is estimated to approximate fair
value.
At December 31, 2017 and 2016, the fair value of foreign currency denominated investments held in the SOMA
was $21,348 million and $19,510 million, respectively, of which $1,245 million and $1,083 million, respectively,
was allocated to the Bank. The fair value of foreign government debt instruments was determined using pricing
services that provide market consensus prices based on indicative quotes from various market participants. The
fair value of foreign currency deposits was determined by reference to market interest rates.
The following table provides additional information on the amortized cost and fair value of the federal agency and
GSE MBS portfolio held in the SOMA and allocated to the Bank at December 31, 2017 and 2016 (in millions):
2016

2017
Distribution of MBS
holdings by coupon rate
Allocated to the Bank:
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Total
Total SOMA:
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Total

Amortized cost

$

$

$

$

528
6,501
39,682
37,119
17,060
4,007
1,669
372
51
7
106,996

8,968
110,452
674,138
630,590
289,819
68,069
28,352
6,318
870
124
1,817,700

Fair value

$

$

$

$

514
6,379
38,905
37,099
17,180
4,232
1,769
397
55
8
106,538

8,739
108,371
660,939
630,245
291,868
71,896
30,048
6,739
939
134
1,809,918

Amortized cost

$

$

$

$

591
6,791
38,816
31,414
15,428
4,833
2,054
464
65
9
100,465

10,556
121,326
693,524
561,271
275,650
86,351
36,708
8,298
1,155
164
1,795,003

Fair value

$

$

$

$

573
6,640
37,867
31,371
15,665
5,156
2,192
500
70
10
100,044

10,243
118,641
676,572
560,510
279,877
92,111
39,159
8,939
1,253
179
1,787,484

29

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The following tables present the realized gains (losses) and the change in the cumulative unrealized gains (losses)
related to SOMA domestic securities holdings allocated to the Bank and held in the SOMA during the years
ended December 31, 2017 and 2016 (in millions):
Allocated to Bank
2016

2017
Change in
cumulative
unrealized gains

Realized gains
(losses), net
Treasury securities
GSE debt securities
Federal agency and GSE MBS
Total

1, 2

$

3, 4

(losses)
2
2

$

$

743
(10)
(50)
683

$

Realized gains

Change in
cumulative
unrealized gains

(losses), net 1, 2

(losses)3, 4

$

(1)
1
-

$

$

(1,198)
(35)
(959)
(2,192)

$

Total SOMA
2017

Treasury securities
GSE debt securities
Federal agency and GSE MBS
Total

2016

Realized gains

Change in
cumulative
unrealized gains

Realized gains

Change in
cumulative
unrealized gains

(losses), net 1, 2

(losses)3

(losses), net 1, 2

(losses)3

$

28
8

$

13,991
(163)
(263)

$

(15)
19

$

(21,949)
(623)
(17,326)

$

36

$

13,565

$

4

$

(39,898)

1

Realized gains (losses) for Treasury securities are reported in “Non-interest income: System Open Market Account: Treasury securities gains (losses), net”
in the Statements of Operations.
2
Realized gains for federal agency and GSE MBS are reported in “Non-interest income: System Open Market Account: Federal agency and governmentsponsored enterprise mortgage-backed securities gains, net” in the Statements of Operations.
3
Because SOMA securities are recorded at amortized cost, the change in the cumulative unrealized gains (losses) is not reported in the Statements of
Operations.
4
The amount reported as change in cumulative unrealized gains (losses) allocated to the Bank is affected by the annual adjustment to the Bank's allocated
portion of the related SOMA securities, as discussed in Note 3f.

The amount of change in cumulative unrealized gains (losses) position, net related to foreign currency
denominated investments was a loss of $36 million and a gain of $5 million for the years ended December 31,
2017 and 2016, respectively, of which $2 million and $297 thousand, respectively, were allocated to the Bank.
Realized gains, net related to foreign currency denominated investments was an immaterial amount for the year
ended December 31, 2017 and zero for the year ended December 31, 2016.
ASC 820 defines fair value 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. ASC 820 establishes a three-level fair
value hierarchy that distinguishes between assumptions developed using market data obtained from independent
sources (observable inputs) and the Bank’s assumptions developed using the best information available in the
circumstances (unobservable inputs). The three levels established by ASC 820 are described as follows:
•

Level 1 – Valuation is based on quoted prices for identical instruments traded in active markets.

30

Federal Reserve Bank of Atlanta
Notes to Financial Statements
•

Level 2 – Valuation is based on quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and model-based valuation techniques for
which all significant assumptions are observable in the market.

•

Level 3 – Valuation is based on model-based techniques that use significant inputs and assumptions not
observable in the market. These unobservable inputs and assumptions reflect the Bank’s estimates of
inputs and assumptions that market participants would use in pricing the assets and liabilities. Valuation
techniques include the use of option pricing models, discounted cash flow models, and similar techniques.

Treasury securities, GSE debt securities, federal agency and GSE MBS, and foreign government debt instruments
are classified as Level 2 within the ASC 820 hierarchy because the fair values are based on indicative quotes and
other observable inputs obtained from independent pricing services. The fair value hierarchy level of SOMA
financial assets is not necessarily an indication of the risk associated with those assets.
(6) BANK PREMISES, EQUIPMENT, AND SOFTWARE
Bank premises and equipment at December 31, 2017 and 2016 were as follows (in millions):
2017

2016

Bank premises and equipment:
Land and land improvements

$

Buildings
Building machinery and equipment

39

$

39

249

248

53

49

Construction in progress

2

1

Furniture and equipment

70

72

413

409

(187)

(179)

Subtotal
Accumulated depreciation
Bank premises and equipment, net

$

226

$

230

Depreciation expense, for the years ended December 31

$

14

$

14

31

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The Bank leases space to outside tenants with remaining lease terms ranging from one to five years. Rental
income from such leases was $3 million for each of the years ended December 31, 2017 and 2016, and is reported
as a component of “Non-interest income: Other” in the Statements of Operations. Future minimum lease
payments that the Bank will receive under non-cancelable lease agreements in existence at December 31, 2017,
are as follows (in millions):
2018

$

2.1

2019

1.5

2020

1.2

2021

1.0
0.2

2022
Total

$

6.0

The Bank had capitalized software assets, net of amortization, of $35 million and $26 million at December 31,
2017 and 2016, respectively. Amortization expense was $4 million and $9 million for the years ended December
31, 2017 and 2016, respectively. Capitalized software assets are reported as a component of “Other assets” in the
Statements of Condition and the related amortization is reported as a component of “Operating expenses: Other”
in the Statements of Operations.
(7) COMMITMENTS AND CONTINGENCIES
In conducting its operations, the Bank enters into contractual commitments, normally with fixed expiration dates
or termination provisions, at specific rates and for specific purposes.
At December 31, 2017, the Bank was obligated under non-cancelable leases for premises and equipment with
remaining terms ranging from one to approximately five years. These leases provide for increased lease payments
based upon increases in real estate taxes and operating costs.
Rental expense under operating leases for certain operating facilities and office equipment (including taxes,
insurance, and maintenance when included in rent) was $1 million for each of the years ended December 31, 2017
and 2016.
Future minimum lease payments under non-cancelable operating leases with remaining terms of one year or more,
at December 31, 2017, are as follows (in thousands):
Operating leases
2018

$

363

2019

319

2020

79

2021

22

2022

14

Future minimum lease payments

$

797

At December 31, 2017, there were no material unrecorded unconditional purchase commitments or obligations in
excess of one year.
Under the Insurance Agreement of the Reserve Banks, each of the Reserve Banks has agreed to bear, on a perincident basis, a share of certain losses in excess of 1 percent of the capital paid-in of the claiming Reserve Bank,

32

Federal Reserve Bank of Atlanta
Notes to Financial Statements
up to 50 percent of the total capital paid-in of all Reserve Banks. Losses are borne in the ratio of a Reserve Bank’s
capital paid-in to the total capital paid-in of all Reserve Banks at the beginning of the calendar year in which the
loss is shared. No claims were outstanding under the agreement at December 31, 2017 and 2016.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is
difficult to predict the ultimate outcome of these actions, in management’s opinion, based on discussions with
counsel, the legal actions and claims will be resolved without material adverse effect on the financial position or
results of operations of the Bank.
(8) RETIREMENT AND THRIFT PLANS
Retirement Plans
The Bank currently offers three defined benefit retirement plans to its employees, based on length of service and
level of compensation. Substantially all of the employees of the Reserve Banks, Board of Governors, and Office
of Employee Benefits of the Federal Reserve System (OEB) participate in the Retirement Plan for Employees of
the Federal Reserve System (System Plan).1 Under the Dodd-Frank Act, newly hired Bureau employees are
eligible to participate in the System Plan and, during the years ended December 31, 2017 and 2016, certain costs
associated with the System Plan were reimbursed by the Bureau. In addition, employees at certain compensation
levels participate in the Benefit Equalization Retirement Plan (BEP) and certain Reserve Bank officers participate
in the Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks (SERP).
The FRBNY, on behalf of the System, recognizes the net asset or net liability and costs associated with the
System Plan in its consolidated financial statements. The Bank reports the net cost related to the BEP and SERP
as a component of “Operating expenses: Salaries and benefits” in its Statements of Operations and reports the net
liability as a component of “Accrued benefit costs” in its Statements of Condition.
The Bank’s projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2017 and 2016, and for the years then ended, were immaterial.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The Bank matches 100 percent of the first 6 percent of employee contributions from the date
of hire and provides an automatic employer contribution of 1 percent of eligible pay. The Bank’s Thrift Plan
contributions totaled $11 million and $10 million for the years ended December 31, 2017 and 2016, respectively,
and are reported as a component of “Operating expenses: Salaries and benefits” in the Statements of Operations.
(9) POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Retirement Plans
In addition to the Bank’s retirement plans, employees who have met certain age and length-of-service
requirements are eligible for both medical and life insurance benefits during retirement.
The Bank and plan participants fund benefits payable under the medical and life insurance plans as due and the
plans have no assets.

1

The OEB was established by the System to administer selected System benefit plans.

33

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Following is a reconciliation of the beginning and ending balances of the benefit obligation for the years ended
December 31, 2017 and 2016 (in millions):

Accumulated postretirement benefit obligation at January 1
Service cost benefits earned during the period
Interest cost on accumulated benefit obligation

$

2017
174.1
7.8
6.8

$

2016
171.5
7.9
7.8

Net actuarial (gain) loss

(1.6)

9.7

Contributions by plan participants
Benefits paid
Medicare Part D subsidies
Plan amendments

2.5
(8.5)
-

2.5
(9.2)
0.4
(16.5)

Accumulated postretirement benefit obligation at December 31

$

181.1

$

174.1

At December 31, 2017 and 2016, the weighted-average discount rate assumptions used in developing the
postretirement benefit obligation were 3.59 percent and 4.07 percent, respectively.
Discount rates reflect yields available on high-quality corporate bonds that would generate the cash flows
necessary to pay the plan’s benefits when due. The System Plan discount rate assumption setting convention uses
an unrounded rate.
During 2016, the Reserve Banks adopted an amendment to their health benefits program that added a Medicare
Advantage and Prescription Drug (MAPD) plan to the program effective January 1, 2017. The MAPD plan is a
fully insured product that combines into one integrated benefit Medicare and Medicare Supplement coverages, as
well as prescription drug coverage. The plan amendment resulted in a decrease in the Bank’s accumulated
postretirement benefit obligation in the amount of $23.9 million as of December 31, 2016, with an equivalent
change in the prior service component of accumulated other comprehensive income. In addition to the MAPD
plan amendment, the Bank recorded a plan amendment in 2016 related to employees who transferred employment
from the Federal Reserve Bank of Minneapolis. This plan amendment resulted in an increase in the Bank’s
accumulated postretirement benefit obligation in the amount of $7.4 million as of December 31, 2016, with an
equivalent change in the prior service component of accumulated other comprehensive income. Together, these
two plan amendments resulted in a net decrease to the Bank’s accumulated postretirement benefit obligation of
$16.5 million as of December 31, 2016.

34

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Following is a reconciliation of the beginning and ending balance of the plan assets, and the unfunded
postretirement benefit obligation and accrued postretirement benefit costs for the years ended December 31, 2017
and 2016 (in millions):
2017

2016

Fair value of plan assets at January 1
Contributions by the employer
Contributions by plan participants
Benefits paid
Medicare Part D subsidies
Fair value of plan assets at December 31

$

6.0
2.5
(8.5)
-

Unfunded obligation and accrued postretirement benefit cost

$

181.1

$

174.1

$

13.5

$

17.1

$

$

6.3
2.5
(9.2)
0.4
-

$

Amounts included in accumulated other comprehensive loss are shown below:
Prior service cost
Net actuarial loss

(24.3)

Total accumulated other comprehensive loss

$

(10.8)

(25.9)
$

(8.8)

Accrued postretirement benefit costs are reported as a component of “Accrued benefit costs” in the Statements of
Condition.
For measurement purposes, the assumed health-care cost trend rates at December 31, 2017 and 2016 are provided
in the table below:
2017
Health-care cost trend rate assumed for next year

2016

6.20%

6.60%

4.75%

4.75%

2022

2022

Rate to which the cost trend rate is assumed to decline
(the ultimate trend rate)
Year that the rate reaches the ultimate trend rate

Assumed health-care cost trend rates have a significant effect on the amounts reported for health-care plans. A
one percentage point change in assumed health-care cost trend rates would have the following effects for the year
ended December 31, 2017 (in millions):
One percentage
point increase

One percentage
point decrease

Effect on aggregate of service and interest cost components
of net periodic postretirement benefit costs
Effect on accumulated postretirement benefit obligation

$

3.4
29.6

$

(2.7)
(24.0)

35

Federal Reserve Bank of Atlanta
Notes to Financial Statements
The following is a summary of the components of net periodic postretirement benefit expense for the years ended
December 31, 2017 and 2016 (in millions):
2017
Service cost-benefits earned during the period
Interest cost on accumulated benefit obligation
Amortization of prior service cost

$

2016

7.8
6.8
(3.6)

$

-

Amortization of net actuarial loss
Net periodic postretirement benefit expense

$

7.9
7.8
(0.3)
0.6

11.0

$

16.0

Estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic
postretirement benefit expense in 2018 are shown below:
Prior service cost

$

(3.6)

$

(2.9)

Net actuarial loss

0.7

Total

Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2017 and 2016, the weighted-average discount rate assumptions used to determine net periodic postretirement
benefit costs were 4.07 percent and 4.31 percent, respectively.
Net periodic postretirement benefit expense is reported as a component of “Operating expenses: Salaries and
benefits” in the Statements of Operations.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug
benefit under Medicare (Medicare Part D) and a federal subsidy to sponsors of retiree health-care benefit plans
that provide benefits that are at least actuarially equivalent to Medicare Part D. The benefits provided under the
Bank’s plan to certain participants are at least actuarially equivalent to the Medicare Part D prescription drug
benefit. The estimated effects of the subsidy are reflected in the actuarial loss in the accumulated postretirement
benefit obligation and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $93 thousand and $448 thousand in the years ended December 31,
2017 and 2016, respectively. Expected receipts in 2018, related to benefits paid in the year ended December 31,
2017, are $3 thousand.
Following is a summary of expected postretirement benefit payments (in millions):
Without subsidy
2018

$

6.7

With subsidy
$

6.7

2019

7.2

7.2

2020

7.6

7.6

2021

8.2

8.2

2022

8.6

8.6

51.5

2023 - 2027
Total

$

89.8

51.4
$

89.7

36

Federal Reserve Bank of Atlanta
Notes to Financial Statements
Postemployment Benefits
The Bank offers benefits to former qualifying or inactive employees. Postemployment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of medical, dental, and vision insurance;
survivor income; disability benefits; and self-insured workers’ compensation expenses. The accrued
postemployment benefit costs recognized by the Bank at December 31, 2017 and 2016 were $9 million and $11
million, respectively. This cost is included as a component of “Accrued benefit costs” in the Statements of
Condition. A net periodic postemployment benefit credit of $1 million and a net periodic postemployment benefit
expense of $1 million were included in 2017 and 2016 operating expenses, respectively, and are recorded as a
component of “Operating expenses: Salaries and benefits” in the Statements of Operations.
(10)

ACCUMULATED OTHER COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME

Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss as of
December 31, 2017 and 2016 (in millions):

Balance at January 1
Change in funded status of benefit plans:
Prior service costs arising during the year

2017

2016

Amount related
to
postretirement
benefits other
than retirement
plans

Amount related
to
postretirement
benefits other
than retirement
plans

$

(3.6)

Change in prior service costs related to benefit plans

(0.3)

-

Change in actuarial gain (loss) related to benefit plans
$

1

16.2

1.6

Amortization of net actuarial loss

(15.9)
16.5

1

(3.6)

Net actuarial gain (loss) arising during the year

1

$

-

Amortization of prior service cost

Change in funded status of benefit plans - other comprehensive (loss) income
Balance at December 31

(8.8)

(9.7)
1

0.6

1.6

(9.1)

(2.0)
(10.8)

7.1
(8.8)

$

1

Reclassification is reported as a component of “Operating expenses: Salaries and benefits” in the Statements of Operations.

Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 9.

37

Federal Reserve Bank of Atlanta
Notes to Financial Statements
(11)

RECONCILIATION OF TOTAL DISTRIBUTION OF COMPREHENSIVE INCOME

In accordance with the Federal Reserve Act, the Bank remits excess earnings to the Treasury after providing for
the cost of operations, payment of dividends, and reservation of an amount necessary to maintain surplus at the
Bank’s allocated portion of the $10 billion aggregate surplus limitation, which was $578 million and $583 million
for the years ending December 31, 2017 and 2016, respectively. The following table presents the distribution of
the Bank’s and System total comprehensive income for the years ended December 31, 2017 and 2016 (in
millions):
System total
2017
2016

Bank's portion
2017
2016
Net income before providing for remittances
to Treasury
Other comprehensive (loss) income
Comprehensive income - available for
distribution
Distribution of comprehensive income:
Transfer (from) to surplus
Dividends
Earnings remittances to the Treasury
Total distribution of comprehensive income

(12)

$

5,682
(2)

$

5,575
7

$ 80,692
651

$ 92,361
(183)

$

5,680

$

5,582

$ 81,343

$ 92,178

$

(5)
51
5,634
5,680

$

28
45
5,509
5,582

$

$

$

$

784
80,559
$ 81,343

711
91,467
$ 92,178

SUBSEQUENT EVENTS

The following subsequent event took place after the balance sheet date but was not present at the balance sheet
date. In accordance with FASB ASC Topic 855 Subsequent Events, the Bank’s 2017 financial statements were not
updated for the impact of this event.
Effective February 9, 2018, the Bipartisan Budget Act of 2018 (Budget Act) reduced the statutory limit on
aggregate Reserve Bank surplus from $10 billion to $7.5 billion, which required the Reserve Banks to make a
lump-sum payment to the Treasury in the amount of $2.5 billion. The payment was remitted to the Treasury on
February 22, 2018. The Bank’s share of this remittance was $144 million. Reserve Bank surplus is allocated
among Reserve Banks as described in Note 3n. After making the transfer required by the Budget Act, the Bank’s
allocated portion of the aggregate $7.5 billion surplus is $433 million.
There were no other subsequent events that required adjustments to or disclosures in the financial statements as of
December 31, 2017. Subsequent events were evaluated through March 8, 2018, which is the date that the financial
statements were available to be issued.

38