##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2007

OR



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

For the transition period from  to

Commission File No. 000-51406



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FEDERAL HOME LOAN BANK OF
SEATTLE

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Federally chartered corporation                                |  | 91-0852005                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1501 Fourth Avenue, Suite 1800, Seattle, WA                    |  | 98101-1693                          
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (206) 340-2300



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ̈No  x

The registrants stock is not publicly traded and is generally
only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, and subject to certain regulatory and statutory limits. As of July 31, 2007, the registrant had 3,620 shares of Class A stock and
22,226,451 shares of Class B stock outstanding.



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##### Table of Contents

FEDERAL HOME LOAN BANK OF SEATTLE

Form 10-Q for the quarterly period ended June 30, 2007

TABLE OF CONTENTS



|                              |  |                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                       |  | Page
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements:                                                                 |  |     
|                              |  |                                                                                      
|                              |  | Statements of Condition  As of June 30, 2007 and December 31, 2006                   |  | 3   
|                              |  |                                                                                      
|                              |  | Statements of Income  For the three and six months ended June 30, 2007 and 2006      |  | 4   
|                              |  |                                                                                      
|                              |  | Statements of Capital  For the six months ended June 30, 2007 and 2006               |  | 5   
|                              |  |                                                                                      
|                              |  | Statements of Cash Flows  For the six months ended June 30, 2007 and 2006            |  | 6   
|                              |  |                                                                                      
|                              |  | Condensed Notes to Financial Statements                                               |  | 8   
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 24  
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 45  
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 50  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 51  
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 51  
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 51  
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 51  
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 51  
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 51  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 52  
|                              | 
|SIGNATURES                    |  | 53                                                                                   



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Federal Home Loan Bank of Seattle

Statements of Condition



|                                                                                                            |  |                     |            |   |                         |   |            |  
|----------------------------------------------------------------------------------------------------------- |  | ------------------- | ---------- | - | ----------------------- | - | ---------- | -
|                                                                                                            |  | As of June 30, 2007 |            |   | As of December 31, 2006 |  
|(in thousands, except par value)                                                                            |  | (unaudited)         |            |   | (audited)               |  
|Assets                                                                                                      |  |                     |            |   |                         |   |            |  
|Cash and due from banks                                                                                     |  | $                   | 1,387      |   |                         | $ | 1,119      |  
|Interest-bearing deposits                                                                                   |  |                     | 3,307,000  |   |                         |   | 2,165,000  |  
|Securities purchased under agreements to resell                                                             |  |                     | 300,000    |   |                         |   |            |  
|Federal funds sold                                                                                          |  |                     | 7,420,000  |   |                         |   | 2,832,000  |  
|Held-to-maturity securities* (Other FHLBanks consolidated obligations: $3,024,967 and $4,224,959) (Note 2) |  |                     | 11,199,350 |   |                         |   | 13,687,909 |  
|Advances (Note 3)                                                                                           |  |                     | 28,141,074 |   |                         |   | 27,960,994 |  
|Mortgage loans held for portfolio (Note 4)                                                                  |  |                     | 5,993,386  |   |                         |   | 6,366,648  |  
|Accrued interest receivable (Other FHLBanks: $38,471 and $51,325)                                           |  |                     | 321,806    |   |                         |   | 323,342    |  
|Premises and equipment, net                                                                                 |  |                     | 11,357     |   |                         |   | 12,622     |  
|Derivative assets (Note 7)                                                                                  |  |                     | 186,203    |   |                         |   | 146,900    |  
|Other assets                                                                                                |  |                     | 20,828     |   |                         |   | 18,211     |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Total Assets                                                                                                |  | $                   | 56,902,391 |   |                         | $ | 53,514,745 |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Liabilities and Capital                                                                                     |  |                     |            |   |                         |   |            |  
|Liabilities                                                                                                 |  |                     |            |   |                         |   |            |  
|Deposits                                                                                                    |  | $                   | 1,047,716  |   |                         | $ | 1,003,960  |  
|Consolidated obligations, net (Note 5):                                                                     |  |                     |            |   |                         |   |            |  
|Discount notes                                                                                              |  |                     | 4,266,040  |   |                         |   | 1,495,861  |  
|Bonds                                                                                                       |  |                     | 48,565,713 |   |                         |   | 48,040,715 |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Total consolidated obligations, net                                                                         |  |                     | 52,831,753 |   |                         |   | 49,536,576 |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Accrued interest payable                                                                                    |  |                     | 604,685    |   |                         |   | 567,585    |  
|Affordable Housing Program (AHP)                                                                            |  |                     | 20,646     |   |                         |   | 22,759     |  
|Payable to REFCORP                                                                                          |  |                     | 3,650      |   |                         |   | 1,541      |  
|Derivative liabilities (Note 7)                                                                             |  |                     | 25,609     |   |                         |   | 46,846     |  
|Other liabilities                                                                                           |  |                     | 35,365     |   |                         |   | 34,952     |  
|Mandatorily redeemable Class B stock (Note 6)                                                               |  |                     | 82,345     |   |                         |   | 69,222     |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Total Liabilities                                                                                           |  |                     | 54,651,769 |   |                         |   | 51,283,441 |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Commitments and Contingencies (Note 10)                                                                     |  |                     |            |   |                         |   |            |  
|Capital                                                                                                     |  |                     |            |   |                         |   |            |  
|Capital Stock ($100 par value), putable, issued and outstanding (Note 6):                                   |  |                     |            |   |                         |   |            |  
|Class A stock: 5 shares                                                                                     |  |                     | 485        |   |                         |   |            |  
|Class B stock: 21,400 and 21,410 shares                                                                     |  |                     | 2,139,987  |   |                         |   | 2,140,997  |  
|Retained earnings                                                                                           |  |                     | 112,240    |   |                         |   | 92,397     |  
|Accumulated other comprehensive loss                                                                        |  |                     | (2,090     | ) |                         |   | (2,090     | )
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Total Capital                                                                                               |  |                     | 2,250,622  |   |                         |   | 2,231,304  |  
|                                                                                                            |  |                     |            |   |                         |   |            |  
|Total Liabilities and Capital                                                                               |  | $                   | 56,902,391 |   |                         | $ | 53,514,745 |  
|                                                                                                            |  |                     |            |   |                         |   |            |  

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|* | Fair values of held-to-maturity securities were $10,976,080 and $13,474,121 as June 30, 2007 and December 31,
2006.
|- | -------------------------------------------------------------------------------------------------------------------

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Income

(Unaudited)



|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|----------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | --------------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                        |  | For the Three Months Ended
June 30, |         |   | For the Six Months Ended June 30, |  
|                                                                        |  | 2007                                |         |   | 2006                              |   |         | 2007 |  |   | 2006      |  
|(in thousands)                                                          |  |                                     |         |   |                                   |   |         |      |  |   |           |  
|Interest Income                                                         |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Advances                                                                |  | $                                   | 349,966 |   |                                   | $ | 307,196 |      |  | $ | 707,558   |   |  | $ | 557,074   |  
|Prepayment fees on advances                                             |  |                                     | 1,024   |   |                                   |   | 78      |      |  |   | 2,167     |   |  |   | 422       |  
|Interest-bearing deposits                                               |  |                                     | 43,450  |   |                                   |   | 12,136  |      |  |   | 74,813    |   |  |   | 25,158    |  
|Securities purchased under agreements to resell                         |  |                                     | 6,086   |   |                                   |   | 1,630   |      |  |   | 12,899    |   |  |   | 6,371     |  
|Federal funds sold                                                      |  |                                     | 122,588 |   |                                   |   | 65,327  |      |  |   | 205,472   |   |  |   | 142,521   |  
|Held-to-maturity securities (Other FHLBanks consolidated obligations:  |  |                                     | 123,415 |   |                                   |   | 143,614 |      |  |   | 256,713   |   |  |   | 286,929   |  
|($29,053 and $44,407 for the three months ended June 30, 2007 and 2006) |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|($60,557 and $89,283 for the six months ended June 30, 2007 and 2006)   |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Mortgage loans held for portfolio                                       |  |                                     | 76,683  |   |                                   |   | 89,046  |      |  |   | 154,773   |   |  |   | 180,368   |  
|Loans to other FHLBanks                                                 |  |                                     | 12      |   |                                   |   | 18      |      |  |   | 13        |   |  |   | 18        |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Total interest income                                                   |  |                                     | 723,224 |   |                                   |   | 619,045 |      |  |   | 1,414,408 |   |  |   | 1,198,861 |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Interest Expense                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Consolidated obligations                                                |  |                                     | 674,859 |   |                                   |   | 595,504 |      |  |   | 1,327,191 |   |  |   | 1,143,524 |  
|Deposits                                                                |  |                                     | 12,181  |   |                                   |   | 7,497   |      |  |   | 22,481    |   |  |   | 15,326    |  
|Securities sold under agreements to repurchase                          |  |                                     | 4       |   |                                   |   | 2,361   |      |  |   | 8         |   |  |   | 6,059     |  
|Mandatorily redeemable Class B stock and other borrowings               |  |                                     | 168     |   |                                   |   | 33      |      |  |   | 258       |   |  |   | 44        |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Total interest expense                                                  |  |                                     | 687,212 |   |                                   |   | 605,395 |      |  |   | 1,349,938 |   |  |   | 1,164,953 |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Net Interest Income                                                     |  |                                     | 36,012  |   |                                   |   | 13,650  |      |  |   | 64,470    |   |  |   | 33,908    |  
|Other Income (Loss)                                                     |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Service fees                                                            |  |                                     | 410     |   |                                   |   | 426     |      |  |   | 814       |   |  |   | 883       |  
|Net loss from sale of held-to-maturity securities                       |  |                                     | (1,292  | ) |                                   |   | (1,622  | )    |  |   | (3,643    | ) |  |   | (1,622    | )
|Net (loss) gain on derivatives and hedging activities                   |  |                                     | (3,506  | ) |                                   |   | 662     |      |  |   | (4,693    | ) |  |   | 2,527     |  
|Net (loss) gain on early extinguishment of consolidated obligations     |  |                                     | (155    | ) |                                   |   | 1,745   |      |  |   | 172       |   |  |   | 1,745     |  
|Other loss, net                                                         |  |                                     | (143    | ) |                                   |   | (80     | )    |  |   | (118      | ) |  |   | (78       | )
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Total other income (loss)                                               |  |                                     | (4,686  | ) |                                   |   | 1,131   |      |  |   | (7,468    | ) |  |   | 3,455     |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Other Expense                                                           |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Operating expenses:                                                     |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Compensation and benefits                                               |  |                                     | 5,636   |   |                                   |   | 5,504   |      |  |   | 11,293    |   |  |   | 11,201    |  
|Other operating                                                         |  |                                     | 4,784   |   |                                   |   | 4,781   |      |  |   | 9,218     |   |  |   | 9,584     |  
|Federal Housing Finance Board                                           |  |                                     | 444     |   |                                   |   | 458     |      |  |   | 891       |   |  |   | 917       |  
|Office of Finance                                                       |  |                                     | 355     |   |                                   |   | 318     |      |  |   | 761       |   |  |   | 693       |  
|Other                                                                   |  |                                     | 218     |   |                                   |   | 352     |      |  |   | 534       |   |  |   | 711       |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Total other expense                                                     |  |                                     | 11,437  |   |                                   |   | 11,413  |      |  |   | 22,697    |   |  |   | 23,106    |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Income Before Assessments                                               |  |                                     | 19,889  |   |                                   |   | 3,368   |      |  |   | 34,305    |   |  |   | 14,257    |  
|Assessments                                                             |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|AHP                                                                     |  |                                     | 1,640   |   |                                   |   | 275     |      |  |   | 2,825     |   |  |   | 1,157     |  
|REFCORP                                                                 |  |                                     | 3,650   |   |                                   |   | 619     |      |  |   | 6,296     |   |  |   | 2,620     |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Total assessments                                                       |  |                                     | 5,290   |   |                                   |   | 894     |      |  |   | 9,121     |   |  |   | 3,777     |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  
|Net Income                                                              |  | $                                   | 14,599  |   |                                   | $ | 2,474   |      |  | $ | 25,184    |   |  | $ | 10,480    |  
|                                                                        |  |                                     |         |   |                                   |   |         |      |  |   |           |   |  |   |           |  

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Capital

(Unaudited)



|                                                              |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|------------------------------------------------------------- | ------ | ----------------------- | --------- | - | ----------------------- | ------ |  | -------------------------- | --------- |  | -------------------------- | --------- | - | ------------------------------------- | --------- | - | ---------------- | ------ | --------- | ------------ | --------- | ----- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------- | - |  | - | --------- | -
|For the Six Months Ended June 30, 2007 and 2006               |        | Class A Stock - Putable |           |   | Class B Stock - Putable |        |  | Class B(1) Stock - Putable |           |  | Class B(2) Stock - Putable |           |   | Accumulated OtherComprehensive Income |           |   | RetainedEarnings |        |           | TotalCapital |          
|                                                              | Shares |                         | Par Value |   |                         | Shares |  |                            | Par Value |  |                            | Shares    |   |                                       | Par Value |   |                  | Shares |           |              | Par Value |       |   |  |  
|(in thousands, except annualizeddividend rates)               |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   | 
|Balance as of December 31, 2005                               |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       | 20,197    |   |                  | $      | 2,019,731 |              |           | 1,128 |   |  | $ | 112,803 |   |  |   |        |   |  | $ | 68,759  |   |  | $ | 2,201,293 |  
|Issuance of stock                                             |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       | 50        |   |                  |        | 4,961     |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 4,961     |  
|Transfers                                                     |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       | (407      | ) |                  |        | (40,749   | )            |           | 407   |   |  |   | 40,749  |   |  |   |        |   |  |   |         |   |  |   |           |  
|Net shares classified as mandatorily redeemable Class B stock |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       | (16       | ) |                  |        | (1,582    | )            |           | (7    | ) |  |   | (740    | ) |  |   |        |   |  |   |         |   |  |   | (2,322    | )
|Net income                                                    |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | 10,480  |   |  |   | 10,480    |  
|                                                              |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of June 30, 2006                                   |        |                         |           | $ |                         |        |  |                            |           |  | $                          |           |   |                                       | 19,824    |   |                  | $      | 1,982,361 |              |           | 1,528 |   |  | $ | 152,812 |   |  |   |        |   |  | $ | 79,239  |   |  | $ | 2,214,412 |  
|                                                              |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of December 31, 2006                               |        |                         |           | $ |                         |        |  | 21,410                     |           |  | $                          | 2,140,997 |   |                                       |           |   |                  | $      |           |              |           |       |   |  | $ |         |   |  | $ | (2,090 | ) |  | $ | 92,397  |   |  | $ | 2,231,304 |  
|Issuance of stock                                             |        | 5                       |           |   | 490                     |        |  | 121                        |           |  |                            | 12,113    |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 12,603    |  
|Net shares classified as mandatorily redeemable Class B stock |        |                         |           |   |                         |        |  | (131                       | )         |  |                            | (13,123   | ) |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (13,123   | )
|Net income                                                    |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | 25,184  |   |  |   | 25,184    |  
|Redemption of Class A stock                                   |        |                         |           |   | (5                      | )      |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (5        | )
|Dividends on stock:                                           |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Class A stock (5.25%)                                         |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Cash                                                          |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | (4      | ) |  |   | (4        | )
|Class B stock (0.50%)                                         |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Cash                                                          |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | (5,337  | ) |  |   | (5,337    | )
|                                                              |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of June 30, 2007                                   |        | 5                       |           | $ | 485                     |        |  | 21,400                     |           |  | $                          | 2,139,987 |   |                                       |           |   |                  | $      |           |              |           |       |   |  | $ |         |   |  | $ | (2,090 | ) |  | $ | 112,240 |   |  | $ | 2,250,622 |  
|                                                              |        |                         |           |   |                         |        |  |                            |           |  |                            |           |   |                                       |           |   |                  |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  

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



5



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Cash Flows

(Unaudited)



|                                                                                                           |  |      |             |   |      |   |             |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|For the Six Months Ended June 30,                                                                          |  | 2007 |             |   | 2006 |  
|(in thousands)                                                                                             |  |      |             |   |      |  
|Operating Activities                                                                                       |  |      |             |   |      |   |             |  
|Net income                                                                                                 |  | $    | 25,184      |   |      | $ | 10,480      |  
|Adjustments to reconcile net income to net cash provided by operating activities:                          |  |      |             |   |      |   |             |  
|Depreciation and amortization:                                                                             |  |      |             |   |      |   |             |  
|Net premiums and discounts on consolidated obligations, investments, and mortgage loans held for portfolio |  |      | 50,959      |   |      |   | 17,428      |  
|Concessions on consolidated obligation bonds                                                               |  |      | 3,019       |   |      |   | 2,233       |  
|Premises and equipment                                                                                     |  |      | 1,477       |   |      |   | 1,533       |  
|Other                                                                                                      |  |      | (625        | ) |      |   |             |  
|Net realized loss from sale of held-to-maturity securities                                                 |  |      | 3,643       |   |      |   | 1,622       |  
|Net decrease (increase) in fair value adjustment on derivatives and hedging activities                     |  |      | 1,315       |   |      |   | (14,168     | )
|Gain on early extinguishment of debt                                                                       |  |      | (172        | ) |      |   | (1,745      | )
|Net loss on disposal of premises and equipment                                                             |  |      | 147         |   |      |   | 84          |  
|Decrease (increase) in accrued interest receivable                                                         |  |      | 1,536       |   |      |   | (16,201     | )
|Increase in net accrued interest on derivatives                                                            |  |      | (78,336     | ) |      |   | (38,035     | )
|Decrease (increase) in other assets                                                                        |  |      | 66          |   |      |   | (407        | )
|Decrease in AHP liability and discount on AHP advances                                                     |  |      | (2,147      | ) |      |   | (5,202      | )
|Increase in payable to REFCORP                                                                             |  |      | 2,108       |   |      |   | 3,566       |  
|Increase in accrued interest payable                                                                       |  |      | 36,976      |   |      |   | 23,772      |  
|Increase (decrease) in other liabilities                                                                   |  |      | 413         |   |      |   | (3,521      | )
|                                                                                                           |  |      |             |   |      |   |             |  
|Total adjustments                                                                                          |  |      | 20,379      |   |      |   | (29,041     | )
|                                                                                                           |  |      |             |   |      |   |             |  
|Net cash provided by (used in) operating activities                                                        |  |      | 45,563      |   |      |   | (18,561     | )
|                                                                                                           |  |      |             |   |      |   |             |  
|                                                                                                           |  |     
|Investing Activities                                                                                       |  |      |             |   |      |   |             |  
|Net (increase) decrease in interest-bearing deposits                                                       |  |      | (1,142,000  | ) |      |   | 265,290     |  
|Net (increase) decrease in securities purchased under agreements to resell                                 |  |      | (300,000    | ) |      |   | 850,000     |  
|Net (increase) decrease in federal funds sold                                                              |  |      | (4,588,000  | ) |      |   | 2,854,000   |  
|Proceeds from maturities of held-to-maturity securities                                                    |  |      | 2,391,923   |   |      |   | 1,100,082   |  
|Proceeds from sales of held-to-maturity securities                                                         |  |      | 1,246,357   |   |      |   | 248,378     |  
|Purchases of held-to-maturity securities                                                                   |  |      | (1,154,339  | ) |      |   | (877,156    | )
|Principal collected on advances                                                                            |  |      | 37,946,294  |   |      |   | 48,452,054  |  
|Advances made                                                                                              |  |      | (38,160,562 | ) |      |   | (54,025,187 | )
|Principal collections on mortgage loans held for portfolio                                                 |  |      | 369,598     |   |      |   | 443,186     |  
|Recoveries of mortgage loans held for portfolio                                                            |  |      |             |   |      |   | 24          |  
|Net increase in premises and equipment                                                                     |  |      | (359        | ) |      |   | (1,397      | )
|                                                                                                           |  |      |             |   |      |   |             |  
|Net cash used in investment activities                                                                     |  |      | (3,391,088  | ) |      |   | (690,726    | )
|                                                                                                           |  |      |             |   |      |   |             |  

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Cash Flows  (Continued)

(Unaudited)



|                                                               |  |      |              |   |      |   |              |  
|-------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ------------ | -
|For the Six Months Ended June 30,                              |  | 2007 |              |   | 2006 |  
|(in thousands)                                                 |  |      |              |   |      |  
|Financing Activities                                           |  |      |              |   |      |   |              |  
|Net decrease (increase) in deposits                            |  | $    | 43,756       |   |      | $ | (108,217     | )
|Net increase in securities sold under agreements to repurchase |  |      |              |   |      |   | (196,250     | )
|Net proceeds from issuance of consolidated obligations:        |  |      |              |   |      |   |              |  
|Discount notes                                                 |  |      | 188,480,514  |   |      |   | 179,948,320  |  
|Bonds                                                          |  |      | 20,467,872   |   |      |   | 6,075,906    |  
|Payments for maturing and retiring consolidated obligations:   |  |      |              |   |      |   |              |  
|Discount notes                                                 |  |      | (185,754,448 | ) |      |   | (180,310,828 | )
|Bonds                                                          |  |      | (19,899,281  | ) |      |   | (4,707,409   | )
|Proceeds from the sale of Class A stock                        |  |      | 490          |   |      |   |              |  
|Proceeds from the sale of Class B stock                        |  |      | 12,113       |   |      |   | 4,961        |  
|Repurchase of Class A stock                                    |  |      | (5           | ) |      |   |              |  
|Payments of interest on mandatorily redeemable Class B stock   |  |      | 123          |   |      |   |              |  
|Dividends paid                                                 |  |      | (5,341       | ) |      |   |              |  
|                                                               |  |      |              |   |      |   |              |  
|Net cash provided by financing activities                      |  |      | 3,345,793    |   |      |   | 706,483      |  
|                                                               |  |      |              |   |      |   |              |  
|Net increase (decrease) in cash and cash equivalents           |  |      | 268          |   |      |   | (2,804       | )
|Cash and cash equivalents at beginning of period               |  |      | 1,119        |   |      |   | 4,124        |  
|                                                               |  |      |              |   |      |   |              |  
|Cash and cash equivalents at end of period                     |  | $    | 1,387        |   |      | $ | 1,320        |  
|                                                               |  |      |              |   |      |   |              |  
|                                                               |  |     
|Supplemental Disclosures                                       |  |      |              |   |      |   |              |  
|Interest paid                                                  |  | $    | 1,312,839    |   |      | $ | 1,141,181    |  
|AHP payments                                                   |  |      | 4,938        |   |      |   | 6,359        |  
|REFCORP payments                                               |  |      | 2,638        |   |      |   | (946         | )
|Real estate owned                                              |  |      | 161          |   |      |   |              |  

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Condensed Notes to Financial Statements  (Unaudited)

Note 1. Summary of Significant Accounting Policies and Recently Issued Accounting Standards and Interpretations

General

 Basis of
Reporting These unaudited financial statements and condensed notes should be read in conjunction with the 2006 audited financial statements and related notes, or the 2006 Audited Financials, included in the 2006 annual report on Form 10-K
of the Federal Home Loan Bank of Seattle, or Seattle Bank. These unaudited financial statements and condensed notes have been prepared in conformity with accounting principles generally accepted in the United States, or U.S. GAAP, for interim
financial information. Certain financial information that is required in the annual financial statements may not be required for interim financial reporting purposes and has been condensed or omitted. Operating results for the six months ended
June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

 Use of Estimates  The preparation of financial statements in accordance with U.S. GAAP requires management to make assumptions and estimates. These assumptions and estimates affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Actual results could differ from these estimates.

 Segment Disclosure Our core business is traditional member finance, which includes making advances, providing letters of credit, accepting deposits, and providing securities safekeeping and other
services. Historically, we offered products and services through two operating segments, traditional member finance and the Mortgage Purchase Program, or MPP. The MPP segment consisted of mortgage loans held for portfolio as a result of purchases
from participating members. During the first quarter of 2005, we decided to exit the MPP. As a result of this decision, Seattle Bank management no longer manages the business using separate operating segments. As of June 30, 2007, our MPP
balance has declined 40.5% to $6.0 billion from $10.1 billion as of March 31, 2005.

Recently Issued Accounting Standards and
Interpretations

 SFAS 157. Fair Value Measurements  In September 2006, the Financial Accounting Standards Board,
or FASB, issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, or SFAS 157. In defining fair value, SFAS 157 retains the exchange price notion in earlier definitions of fair value. However, the definition
focuses on the price that would be received to sell an asset or paid to transfer a liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). SFAS 157 applies whenever other
accounting pronouncements require or permit fair value measurements. Accordingly, SFAS 157 does not expand the use of fair value in any new circumstances. SFAS 157 also establishes a fair value hierarchy that prioritizes the information used to
develop assumptions used to determine the exit price. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. SFAS 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 (January 1, 2008, for the Seattle Bank), and interim periods within those fiscal years. The Seattle Bank expects to adopt SFAS 157 on January 1, 2008. We have not yet determined the impact, if any, that
the implementation of SFAS 157 will have on our results of operations or financial condition.



8



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##### Table of Contents

 SFAS 159. Fair Value Option for Financial Assets and Financial Liabilities In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115,or SFAS 159, which permits us to choose to measure many
financial instruments and certain other items at fair value. The fair value option may be applied, with a few exceptions, on an instrument-by-instrument basis. The election is irrevocable unless a new election date occurs, and the election must be
applied to an entire financial instrument and not to only specified risks, specified cash flows, or portions of that financial instrument. Certain financial instruments, such as deposit liabilities, are not eligible for the fair value option. The
difference between the carrying amount and the fair value of eligible items for which the fair value option is elected at the effective date will be removed from the statement of condition and included in the cumulative effect adjustment. Those
differences may include, but are not limited to: (a) unamortized concession fees, premiums, and discounts; (b) allowance for loan losses; and (c) accrued interest, which would be reported as part of the fair value of the eligible
item. Additionally, available-for-sale and held-to-maturity securities held at the effective date are eligible for the fair value option at that date. If the fair value option is elected for any of those securities at the effective date, cumulative
unrealized gains and losses at that date will be included in the cumulative-effect adjustment. Upfront costs and fees related to items for which the fair value option is elected will be recognized into operating results as incurred rather than
deferred and amortized. SFAS 159 is effective for financial statements issued after November 15, 2007, and interim periods within those fiscal years. We expect to adopt SFAS 159 on January 1, 2008 consistent with our adoption of SFAS
157. We have not yet determined the impact, if any, that the implementation of SFAS 159 will have on our results of operations or financial condition.

FIN 39-1. Amendment of FASB Interpretation No. 39  On April 30, 2007, the FASB issued FASB Staff Position No. 39-1 to amend FASB Interpretation No. 39, Offsetting of Amounts
Related to Certain Contracts, or FIN 39-1. The amendment permits offsetting of fair value amounts recognized for multiple derivative instruments with fair value amounts recognized for the right to reclaim cash collateral or the obligation to
return cash collateral only if both the derivative and collateral transactions arise from the same master netting agreement involving the same counterparty. FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early
application permitted. The Seattle Bank expects to adopt FIN 39-1 on January 1, 2008. We are currently evaluating whether to implement the cash collateral netting option included in the amendment and do not expect implementation of FIN 39-1 to
have a material impact on our results of operations or financial condition.

Note 2. Held-To-Maturity Securities

For accounting policies and additional information concerning held-to-maturity securities, see Note 6 in our 2006 Audited Financials included in our 2006
annual report on Form 10-K.



9



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##### Table of Contents

 Major Security Types  The following table summarizes our held-to-maturity securities
as of June 30, 2007 and December 31, 2006.



|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|----------------------------------------- |  | -------------- | ---------- | ---------------------- | - | ----------------------- |  | - | --------------------- | - |  | - | ----------
|As of June 30, 2007                       |  | Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Estimated Fair Value 
|(in thousands)                            |  |                |            |                        |   |                         |  |   |                      
|Non-Mortgage-Backed Securities            |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Commercial paper                          |  | $              | 99,824     |                        | $ |                         |  | $ | (46                   | ) |  | $ | 99,778    
|Other U.S. agency obligations             |  |                | 109,599    |                        |   | 1,226                   |  |   | (7                    | ) |  |   | 110,818   
|Government-sponsored enterprises          |  |                | 1,185,893  |                        |   | 13,970                  |  |   | (21,805               | ) |  |   | 1,178,058 
|Other FHLBanks consolidated obligations  |  |                | 3,024,967  |                        |   |                         |  |   | (55,123               | ) |  |   | 2,969,844 
|State or local housing agency obligations |  |                | 10,228     |                        |   | 25                      |  |   |                       |   |  |   | 10,253    
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Subtotal                                  |  |                | 4,430,511  |                        |   | 15,221                  |  |   | (76,981               | ) |  |   | 4,368,751 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Mortgage-Backed Securities*               |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Government-sponsored enterprises          |  |                | 1,634,565  |                        |   | 113                     |  |   | (87,124               | ) |  |   | 1,547,554 
|Other U.S. agency obligations             |  |                | 6,177      |                        |   | 128                     |  |   |                       |   |  |   | 6,305     
|Other                                     |  |                | 5,128,097  |                        |   | 2,932                   |  |   | (77,559               | ) |  |   | 5,053,470 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Subtotal                                  |  |                | 6,768,839  |                        |   | 3,173                   |  |   | (164,683              | ) |  |   | 6,607,329 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Total                                     |  | $              | 11,199,350 |                        | $ | 18,394                  |  |   | $            (241,664 | ) |  | $ | 10,976,080
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           



|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|----------------------------------------- |  | -------------- | ---------- | ---------------------- | - | ----------------------- |  | - | --------------------- | - |  | - | ----------
|As of December 31, 2006                   |  | Amortized Cost |            | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Estimated Fair Value 
|(in thousands)                            |  |                |            |                        |   |                         |  |   |                      
|Non-Mortgage-Backed Securities            |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Other U.S. agency obligations             |  | $              | 146,298    |                        | $ | 3,073                   |  | $ |                       |   |  | $ | 149,371   
|Government-sponsored enterprises          |  |                | 2,691,238  |                        |   | 21,697                  |  |   | (33,725               | ) |  |   | 2,679,210 
|Other FHLBanks consolidated obligations  |  |                | 4,224,959  |                        |   |                         |  |   | (73,113               | ) |  |   | 4,151,846 
|State or local housing agency obligations |  |                | 12,067     |                        |   | 77                      |  |   |                       |   |  |   | 12,144    
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Subtotal                                  |  |                | 7,074,562  |                        |   | 24,847                  |  |   | (106,838              | ) |  |   | 6,992,571 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Mortgage-Backed Securities*               |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Government-sponsored enterprises          |  |                | 1,779,877  |                        |   | 689                     |  |   | (71,052               | ) |  |   | 1,709,514 
|Other U.S. agency obligations             |  |                | 6,963      |                        |   | 102                     |  |   |                       |   |  |   | 7,065     
|Other                                     |  |                | 4,826,507  |                        |   | 2,637                   |  |   | (64,173               | ) |  |   | 4,764,971 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Subtotal                                  |  |                | 6,613,347  |                        |   | 3,428                   |  |   | (135,225              | ) |  |   | 6,481,550 
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           
|Total                                     |  | $              | 13,687,909 |                        | $ | 28,275                  |  |   | $            (242,063 | ) |  | $ | 13,474,121
|                                          |  |                |            |                        |   |                         |  |   |                       |   |  |   |           

---

|* | The amortized cost of our mortgage-backed securities classified as held-to-maturity includes net discounts of $32.9
million and $35.7 million as of June 30, 2007 and December 31, 2006.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We generally execute interest-rate
exchange agreements with major broker-dealers under bilateral collateral agreements. As of June 30, 2007, we did not have any securities pledged as collateral to broker-dealers which they cannot sell or repledge.

As of June 30, 2007 and December 31, 2006, we held $304.2 million and $366.8 million of held-to-maturity securities purchased from members or
affiliates of members who own more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class B stock, or members with a representative serving on our Board of Directors. For additional information see Note 9.



10



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##### Table of Contents

 Other Federal Home Loan Banks Consolidated Obligations  The following table
details our consolidated obligations of other FHLBanks by primary obligor as of June 30, 2007 and December 31, 2006.



|                                         |  |                     |           |                         |   |                |  |                     |           |  |   |          
|---------------------------------------- |  | ------------------- | --------- | ----------------------- | - | -------------- |  | ------------------- | --------- |  | - | ---------
|                                         |  | As of June 30, 2007 |           | As of December 31, 2006
|Other FHLBanks Consolidated Obligations |  | Amortized Cost      |           | EstimatedFair Value     |   | Amortized Cost |  | EstimatedFair Value
|(in thousands)                           |  |                     |           |                         |   |                |  |                    
|FHLBank of Boston                        |  | $                   |           |                         | $ |                |  | $                   | 450,000   |  | $ | 449,419  
|FHLBank of Des Moines                    |  |                     | 1,879,967 |                         |   | 1,837,422      |  |                     | 1,879,959 |  |   | 1,830,756
|FHLBank of San Francisco                 |  |                     | 1,145,000 |                         |   | 1,132,422      |  |                     | 1,895,000 |  |   | 1,871,671
|                                         |  |                     |           |                         |   |                |  |                     |           |  |   |          
|Total                                    |  | $                   | 3,024,967 |                         | $ | 2,969,844      |  | $                   | 4,224,959 |  | $ | 4,151,846
|                                         |  |                     |           |                         |   |                |  |                     |           |  |   |          

 Temporary Impairment The following tables summarize our held-to-maturity
securities with gross unrealized losses, aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2007 and December 31, 2006.



|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|---------------------------------------- |  | ------------------- | --------- | --------------------- | ----------------- | --------------- | ------------------- | ----- | --------------------- | ----------- |  | ------------------- | ------------- | --------------------- |  | - | ----------- |  | - | ------------- | -
|                                         |  | Less than 12 months |           |                       | 12 months or more |                 |                     | Total |                      
|As of June 30, 2007                      |  | EstimatedFair Value |           | GrossUnrealizedLosses |                   |                 | EstimatedFair Value |       | GrossUnrealizedLosses |             |  | EstimatedFair Value |               | GrossUnrealizedLosses | 
|(in thousands)                           |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       | 
|Non-Mortgage-Backed Securities           |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Commercial paper                         |  | $                   | 99,778    |                       | $                 | (46             | )                   |       | $                     |             |  | $                   |               |                       |  | $ | 99,778      |  | $ | (46           | )
|Other U.S. agency obligations            |  |                     | 1,357     |                       |                   | (7              | )                   |       |                       |             |  |                     |               |                       |  |   | 1,357       |  |   | (7            | )
|Government-sponsored enterprises         |  |                     |           |                       |                   |                 |                     |       |                       | 776,276     |  |                     | (21,805       | )                     |  |   | 776,276     |  |   | (21,805       | )
|Other FHLBanks consolidated obligations |  |                     |           |                       |                   |                 |                     |       |                       | 2,969,844   |  |                     | (55,123       | )                     |  |   | 2,969,844   |  |   | (55,123       | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Subtotal                                 |  |                     | 101,135   |                       |                   | (53             | )                   |       |                       | 3,746,120   |  |                     | (76,928       | )                     |  |   | 3,847,255   |  |   | (76,981       | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Mortgage-Backed Securities               |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Government-sponsored enterprises         |  |                     | 68,682    |                       |                   | (325            | )                   |       |                       | 1,456,651   |  |                     | (86,799       | )                     |  |   | 1,525,333   |  |   | (87,124       | )
|Other                                    |  |                     | 927,362   |                       |                   | (2,815          | )                   |       |                       | 2,091,211   |  |                     | (74,744       | )                     |  |   | 3,018,573   |  |   | (77,559       | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Subtotal                                 |  |                     | 996,044   |                       |                   | (3,140          | )                   |       |                       | 3,547,862   |  |                     | (161,543      | )                     |  |   | 4,543,906   |  |   | (164,683      | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Total                                    |  | $                   | 1,097,179 |                       |                   | $        (3,193 | )                   |       | $                     | 7,293,982   |  |                     | $    (238,471 | )                     |  | $ | 8,391,161   |  |   | $    (241,664 | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|                                         |  |                     |          
|                                         |  | Less than 12 months |           |                       | 12 months or more |                 |                     | Total |                      
|As of December 31, 2006                  |  | EstimatedFair Value |           | GrossUnrealizedLosses |                   |                 | EstimatedFair Value |       | GrossUnrealizedLosses |             |  | EstimatedFair Value |               | GrossUnrealizedLosses | 
|(in thousands)                           |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       | 
|Non-Mortgage-Backed Securities           |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Government-sponsored enterprises         |  | $                   |           |                       | $                 |                 |                     |       | $                     | 2,269,882   |  | $                   | (33,725       | )                     |  | $ | 2,269,882   |  | $ | (33,725       | )
|Other FHLBanks consolidated obligations |  |                     |           |                       |                   |                 |                     |       |                       | 4,151,846   |  |                     | (73,113       | )                     |  |   | 4,151,846   |  |   | (73,113       | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Subtotal                                 |  |                     |           |                       |                   |                 |                     |       |                       | 6,421,728   |  |                     | (106,838      | )                     |  |   | 6,421,728   |  |   | (106,838      | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Mortgage-Backed Securities               |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Government-sponsored enterprises         |  |                     |           |                       |                   |                 |                     |       |                       | 1,601,347   |  |                     | (71,052       | )                     |  |   | 1,601,347   |  |   | (71,052       | )
|Other                                    |  |                     | 318,767   |                       |                   | (3,454          | )                   |       |                       | 2,432,972   |  |                     | (60,719       | )                     |  |   | 2,751,739   |  |   | (64,173       | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Subtotal                                 |  |                     | 318,767   |                       |                   | (3,454          | )                   |       |                       | 4,034,319   |  |                     | (131,771      | )                     |  |   | 4,353,086   |  |   | (135,225      | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  
|Total                                    |  | $                   | 318,767   |                       |                   | $(3,454         | )                   |       |                       | $10,456,047 |  |                     | $(238,609     | )                     |  |   | $10,774,814 |  |   | $(242,063     | )
|                                         |  |                     |           |                       |                   |                 |                     |       |                       |             |  |                     |               |                       |  |   |             |  |   |               |  



11



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##### Table of Contents

The gross unrealized losses on the held-to-maturity portfolio as of June 30, 2007 and
December 31, 2006 were related to declining market values as a result of overall increases in market interest rates. As June 30, 2007, 172 of our investment positions had gross unrealized losses totaling $241.7 million, with the total
estimated fair value of these positions being approximately 97.2% of their carrying value. Of these 172 positions, 127 positions had gross unrealized losses for at least 12 months. As of December 31, 2006, 149 of our investment positions had
gross unrealized losses totaling $242.1 million, with the total estimated fair value of these positions being approximately 97.8% of their carrying value. Of these 149 positions, 139 positions had gross unrealized losses for at least 12 months.

We reviewed our investment security holdings as of June 30, 2007 and December 31, 2006, and determined that all unrealized
losses reflected above were temporary, based in part on the creditworthiness of the issuers and the underlying collateral. Furthermore, we have both the ability and the intent to hold such securities until we recover the unrealized losses in fair
value.

 Redemption Terms  The amortized cost and estimated fair value of held-to-maturity securities by contractual
maturity as of June 30, 2007 and December 31, 2006 are shown below. Expected maturities of some securities and mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment fees.



|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|---------------------------------------------------------------------------------- |  | ------------------- | ---------- | ----------------------- | - | -------------- |  | -------------------- | ---------- |  | - | ----------
|                                                                                   |  | As of June 30, 2007 |            | As of December 31, 2006
|Term to Maturity                                                                   |  | Amortized Cost      |            | Estimated Fair Value    |   | Amortized Cost |  | Estimated Fair Value
|(in thousands)                                                                     |  |                     |            |                         |   |                |  |                     
|Non-Mortgage-Backed Securities, excluding Other FHLBanks Consolidated Obligations |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Due in one year or less                                                            |  | $                   | 400,497    |                         | $ | 399,011        |  | $                    | 1,817,899  |  | $ | 1,805,823 
|Due after one year through five years                                              |  |                     | 647,152    |                         |   | 630,117        |  |                      | 576,466    |  |   | 557,000   
|Due after five years through 10 years                                              |  |                     | 301,550    |                         |   | 312,854        |  |                      | 388,332    |  |   | 410,035   
|Due after 10 years                                                                 |  |                     | 56,345     |                         |   | 56,925         |  |                      | 66,906     |  |   | 67,867    
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Subtotal                                                                           |  |                     | 1,405,544  |                         |   | 1,398,907      |  |                      | 2,849,603  |  |   | 2,840,725 
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Other FHLBanks Consolidated Obligations                                           |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Due in one year or less                                                            |  |                     | 500,000    |                         |   | 499,312        |  |                      | 1,700,000  |  |   | 1,691,215 
|Due after one year through five years                                              |  |                     | 2,524,967  |                         |   | 2,470,532      |  |                      | 2,524,959  |  |   | 2,460,631 
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Subtotal                                                                           |  |                     | 3,024,967  |                         |   | 2,969,844      |  |                      | 4,224,959  |  |   | 4,151,846 
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Mortgage-Backed Securities                                                         |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Due after one year through five years                                              |  |                     | 1,674      |                         |   | 1,673          |  |                      | 2,120      |  |   | 2,161     
|Due after five years through 10 years                                              |  |                     | 57,945     |                         |   | 57,274         |  |                      | 29,267     |  |   | 28,927    
|Due after 10 years                                                                 |  |                     | 6,709,220  |                         |   | 6,548,382      |  |                      | 6,581,960  |  |   | 6,450,462 
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Subtotal                                                                           |  |                     | 6,768,839  |                         |   | 6,607,329      |  |                      | 6,613,347  |  |   | 6,481,550 
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           
|Total                                                                              |  | $                   | 11,199,350 |                         | $ | 10,976,080     |  | $                    | 13,687,909 |  | $ | 13,474,121
|                                                                                   |  |                     |            |                         |   |                |  |                      |            |  |   |           

 Losses on the Sale of Held-to-Maturity Securities  We recorded net realized
losses of $1.3 million and $3.6 million during the three and six months ended June 30, 2007 and $1.6 million on sales of held-to-maturity securities during the three months ended June 30, 2006. There was no comparable activity in the first three
months of 2006. The proceeds received of $1.2 billion and $1.0 billion on the sales of held-to-maturity securities in the first six months of 2007 and in 2006 were for securities that were within three and six months of maturity or had returned at
least 85% of the principal outstanding from the date of acquisition.



12



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##### Table of Contents

Note 3. Advances

For accounting policies and additional information concerning advances, see Note 7 in our 2006 Audited Financials included in our 2006 annual report on Form 10-K.

 Redemption Terms  We had advances outstanding, including Affordable Housing Program, or AHP, advances, at interest rates ranging from
1.78% to 8.62% as of June 30, 2007 and December 31, 2006. As of June 30, 2007 and December 31, 2006, AHP-advance interest rates ranged from 2.80% to 5.99%.

The following table summarizes the amount and weighted average interest rate of our advances by term to maturity.



|                                      |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|------------------------------------- |  | ------------------- | ---------- | ----------------------- | ----------------------------- | ---- | ------ | - | ---------- | ----------------------------- |  | ----
|                                      |  | As of June 30, 2007 |            | As of December 31, 2006
|Year of Maturity                      |  | Amount              |            |                         | WeightedAverageInterestRate % |      | Amount |   |            | WeightedAverageInterestRate %
|(in thousands, except interest rates) |  |                     |            |                         |                               |      |        |   |            |                              
|Due in one year or less               |  | $                   | 17,645,638 |                         |                               | 5.27 |        | $ | 16,139,522 |                               |  | 5.24
|Due in one year through two years     |  |                     | 4,601,522  |                         |                               | 5.19 |        |   | 6,425,043  |                               |  | 5.21
|Due in two years through three years  |  |                     | 1,572,008  |                         |                               | 4.86 |        |   | 1,238,398  |                               |  | 4.63
|Due in three years through four years |  |                     | 729,874    |                         |                               | 5.13 |        |   | 902,522    |                               |  | 5.09
|Due in four years through five years  |  |                     | 1,051,791  |                         |                               | 4.76 |        |   | 782,108    |                               |  | 4.97
|Thereafter                            |  |                     | 2,601,880  |                         |                               | 4.64 |        |   | 2,499,226  |                               |  | 4.62
|                                      |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|Total par value                       |  | $                   | 28,202,713 |                         |                               | 5.15 |        | $ | 27,986,819 |                               |  | 5.14
|                                      |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|Overdrawn demand deposit accounts     |  |                     | 865        |                         |                               |      |        |   | 2,361      |                               |  |     
|Discount on advances                  |  |                     | (6,277     | )                       |                               |      |        |   | (6,708     | )                             |  |     
|Commitment fees                       |  |                     | (956       | )                       |                               |      |        |   | (1,020     | )                             |  |     
|Discount on AHP advances              |  |                     | (251       | )                       |                               |      |        |   | (285       | )                             |  |     
|Derivatives hedging adjustments       |  |                     | (55,020    | )                       |                               |      |        |   | (20,173    | )                             |  |     
|                                      |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|Total                                 |  | $                   | 28,141,074 |                         |                               |      |        | $ | 27,960,994 |                               |  |     
|                                      |  |                     |            |                         |                               |      |        |   |            |                               |  |     

Generally, advances may only be prepaid by the member paying us a prepayment fee that makes us
financially indifferent to the prepayment. Prepayment fees received in connection with the restructure of an existing advance are included in discounts on advances. We offer callable advances to members, which the member may prepay on
certain call dates without incurring prepayment or termination fees. As of June 30, 2007 and December 31, 2006, we had no callable advances outstanding. We also make putable advances in which we have a right to terminate the advance at our
discretion. We had putable advances outstanding of $3.4 billion and $3.2 billion as of June 30, 2007 and December 31, 2006.

 Concentration Risk  Our credit risk from advances is concentrated among commercial banks and savings institutions. As of June 30, 2007 and December 31, 2006, we had advances of $15.9 billion outstanding to two
member institutions, Bank of America Oregon, N.A. and Washington Mutual Bank, F.S.B., representing 56.4% and 56.8% of total advances outstanding as of those dates. The income from advances to these member institutions totaled $385.1 million and
$274.7 million for the six months ended June 30, 2007 and 2006. We held sufficient collateral to cover the advances to these institutions, and, as a result, we do not expect to incur any credit losses on these advances. These same two members,
Bank of America Oregon, N.A. and Washington Mutual Bank, F.S.B., held more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class B stock as of June 30, 2007 and December 31, 2006. See Note 9 for
additional information. No other member institutions held advances in excess of 10% of our total advances outstanding as of June 30, 2007 and December 31, 2006.



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##### Table of Contents

 Interest-Rate Payment Terms  The following table summarizes advances by interest-rate
payment terms.



|                              |  |                    |            |                        |   |           
|----------------------------- |  | ------------------ | ---------- | ---------------------- | - | ----------
|Interest-Rate Payment Terms   |  | As ofJune 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)                |  |                    |            |                       
|Fixed rate                    |  | $                  | 12,215,562 |                        | $ | 15,663,821
|Variable rate                 |  |                    | 15,657,151 |                        |   | 12,182,998
|Floating-to-fixed convertible |  |                    | 330,000    |                        |   | 140,000   
|                              |  |                    |            |                        |   |           
|Total par value               |  | $                  | 28,202,713 |                        | $ | 27,986,819
|                              |  |                    |            |                        |   |           

Note 4. Mortgage Loans Held for Portfolio

For accounting policies and additional information concerning mortgage loans held for portfolio, see Note 10 in our 2006 Audited Financials included in
our 2006 annual report on Form 10-K.

As of June 30, 2007 and December 31, 2006, 86.5% and 88.8% of our outstanding mortgage
loans held for portfolio had been purchased from one participating member, Washington Mutual Bank, F.S.B. This member owned more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class B stock as of
June 30, 2007 and December 31, 2006. For more information, see Note 9.

The following table summarizes information on mortgage
loans held for portfolio.



|                                                  |  |                    |           |   |                        |   |           |  
|------------------------------------------------- |  | ------------------ | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loans Held for Portfolio                 |  | As ofJune 30, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands)                                    |  |                    |           |   |                        |  
|Fixed, medium-term*, single-family mortgage loans |  | $                  | 955,330   |   |                        | $ | 1,041,407 |  
|Fixed, long-term, single-family mortgage loans    |  |                    | 5,011,546 |   |                        |   | 5,295,225 |  
|                                                  |  |                    |           |   |                        |   |           |  
|Total loan principal                              |  |                    | 5,966,876 |   |                        |   | 6,336,632 |  
|Unamortized premiums                              |  |                    | 66,336    |   |                        |   | 73,110    |  
|Unamortized discounts                             |  |                    | (39,826   | ) |                        |   | (43,094   | )
|                                                  |  |                    |           |   |                        |   |           |  
|Total                                             |  | $                  | 5,993,386 |   |                        | $ | 6,366,648 |  
|                                                  |  |                    |           |   |                        |   |           |  

| | 
| | 

| | * | Medium-term is defined as a term of 15 years or less.
| | - | -----------------------------------------------------

The principal balance of mortgage loans held for portfolio as of June 30, 2007 and December 31, 2006 was comprised of government-insured
mortgage loans totaling $259.9 million and $292.1 million and conventional mortgage loans totaling $5.7 billion and $6.0 billion. See Note 8 for the estimated fair value of the mortgage loans held for portfolio as of June 30, 2007 and
December 31, 2006.

As of June 30, 2007, we had $33.4 million of mortgage loans delinquent 90 days or more, compared to $42.8
million as of December 31, 2006, and we had no mortgage loans on nonaccrual status as of either of such dates because of the credit enhancements available to us. Mortgage loans are considered impaired when, based on current information and
events, it is probable that we will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement. As of June 30, 2007 and December 31, 2006, we held no impaired mortgage
loans. Based on our analysis of the mortgage loan portfolio, we have determined that the credit enhancement provided by the members, including the lender risk account and supplemental mortgage insurance, is sufficient to absorb inherent credit
losses and that an allowance for credit loss is unnecessary.



14



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##### Table of Contents

As of June 30, 2007 and December 31, 2006, the Seattle Bank had 17 and 11 mortgage loans
totaling $3.1 million and $1.8 million in foreclosure. As of June 30, 2007 and December 31, 2006, the Seattle Banks other assets included $309,000 and $147,000 of real estate owned resulting from foreclosure of two and one mortgage
loans held by the Seattle Bank. The real estate, which is carried at the lower of market, less estimated selling costs, or carrying value, is currently being evaluated for disposal.

Note 5. Consolidated Obligations

For accounting policies and additional information concerning
consolidated obligations, see Note 13 in our 2006 Audited Financials included in our 2006 annual report on Form 10-K.


Interest-Rate Payment Terms  The following table summarizes the par value of consolidated obligation bonds outstanding by interest-rate payment terms.



|                            |  |                    |            |                        |   |           
|--------------------------- |  | ------------------ | ---------- | ---------------------- | - | ----------
|Interest-Rate Payment Terms |  | As ofJune 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)              |  |                    |            |                       
|Fixed                       |  | $                  | 47,904,660 |                        | $ | 46,756,090
|Step-up                     |  |                    | 40,000     |                        |   | 235,000   
|Variable                    |  |                    | 820,000    |                        |   | 1,230,000 
|Range                       |  |                    | 30,000     |                        |   |           
|                            |  |                    |            |                        |   |           
|Total par value             |  | $                  | 48,794,660 |                        | $ | 48,221,090
|                            |  |                    |            |                        |   |           

 Redemption Terms  The following table summarizes our participation in
consolidated obligation bonds outstanding by term to maturity.



|                                         |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|---------------------------------------- |  | ------------------- | ---------- | ----------------------- | ----------------------------- | ---- | ------ | - | ---------- | ----------------------------- |  | ----
|                                         |  | As of June 30, 2007 |            | As of December 31, 2006
|Term to Maturity                         |  | Amount              |            |                         | WeightedAverageInterestRate % |      | Amount |   |            | WeightedAverageInterestRate %
|(in thousands, except interest rates)    |  |                     |            |                         |                               |      |        |   |            |                              
|Due in one year or less                  |  | $                   | 18,157,125 |                         |                               | 4.85 |        | $ | 20,272,290 |                               |  | 4.87
|Due after one year through two years     |  |                     | 9,062,550  |                         |                               | 4.53 |        |   | 9,586,050  |                               |  | 4.38
|Due after two years through three years  |  |                     | 5,876,020  |                         |                               | 5.02 |        |   | 5,206,520  |                               |  | 4.87
|Due after three years through four years |  |                     | 3,070,475  |                         |                               | 4.92 |        |   | 2,453,300  |                               |  | 4.63
|Due after four years through five years  |  |                     | 3,242,290  |                         |                               | 5.39 |        |   | 1,586,865  |                               |  | 5.14
|Thereafter                               |  |                     | 9,386,200  |                         |                               | 5.36 |        |   | 9,116,065  |                               |  | 5.37
|                                         |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|Total par value                          |  |                     | 48,794,660 |                         |                               | 4.95 |        |   | 48,221,090 |                               |  | 4.87
|Premiums                                 |  |                     | 24,546     |                         |                               |      |        |   | 27,641     |                               |  |     
|Discounts                                |  |                     | (52,447    | )                       |                               |      |        |   | (74,809    | )                             |  |     
|Derivatives hedging adjustments          |  |                     | (201,046   | )                       |                               |      |        |   | (133,207   | )                             |  |     
|                                         |  |                     |            |                         |                               |      |        |   |            |                               |  |     
|Total                                    |  | $                   | 48,565,713 |                         |                               |      |        | $ | 48,040,715 |                               |  |     
|                                         |  |                     |            |                         |                               |      |        |   |            |                               |  |     

The amounts in the table above include consolidated obligation bonds obtained through transfers of
$1.5 billion par value from the FHLBank of Chicago and $50.0 million par value from the FHLBank of Pittsburgh, which transfers included $33.8 million and $32.1 million of associated original bond discount as of June 30, 2007 and
December 31, 2006.

Consolidated obligation bonds outstanding as of June 30, 2007 and December 31, 2006, include callable
bonds, which we may prepay on certain call dates without incurring prepayment or termination fees, totaling $25.6 billion and $24.5 billion. We continue to classify our debt as callable after the last call date has passed. Simultaneous with such a
debt issue, we may also enter into an interest-rate exchange agreement (in which we pay variable and receive fixed cash flows) with a call feature that mirrors the option embedded in the debt (e.g., a sold callable swap). The combined sold callable
swap and callable debt allows us to provide members with more economically priced, variable interest-rate funding.



15



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##### Table of Contents

The following table summarizes the par value of consolidated obligation bonds outstanding by callable and
putable terms.



|                            |  |                    |            |                        |   |           
|--------------------------- |  | ------------------ | ---------- | ---------------------- | - | ----------
|Callable and Putable Terms  |  | As ofJune 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)              |  |                    |            |                       
|Non-callable or non-putable |  | $                  | 22,785,310 |                        | $ | 23,300,375
|Callable                    |  |                    | 25,605,250 |                        |   | 24,516,615
|Putable                     |  |                    | 404,100    |                        |   | 404,100   
|                            |  |                    |            |                        |   |           
|Total par value             |  | $                  | 48,794,660 |                        | $ | 48,221,090
|                            |  |                    |            |                        |   |           

The following table summarizes the par value of consolidated obligation bonds outstanding by term
to maturity or next call date.



|                                         |  |                    |            |                        |   |           
|---------------------------------------- |  | ------------------ | ---------- | ---------------------- | - | ----------
|Term to Maturity or Next Call Date       |  | As ofJune 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)                           |  |                    |            |                       
|Due in one year or less                  |  | $                  | 34,888,375 |                        | $ | 35,279,905
|Due after one year through two years     |  |                    | 5,748,000  |                        |   | 4,711,000 
|Due after two years through three years  |  |                    | 2,003,020  |                        |   | 2,704,520 
|Due after three years through four years |  |                    | 1,000,475  |                        |   | 841,300   
|Due after four years through five years  |  |                    | 830,290    |                        |   | 529,865   
|Thereafter                               |  |                    | 4,324,500  |                        |   | 4,154,500 
|                                         |  |                    |            |                        |   |           
|Total par value                          |  | $                  | 48,794,660 |                        | $ | 48,221,090
|                                         |  |                    |            |                        |   |           

 Consolidated Obligation Discount Notes  Consolidated obligation discount
notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to one year. These notes are issued at less than their face amount and redeemed at par value when they mature.

The following table summarizes the par value, the net discounts, the concessions, the book value and the weighted average interest rate for our
consolidated discount notes.



|                                            |  |                    |           |   |                        |   |           |  
|------------------------------------------- |  | ------------------ | --------- | - | ---------------------- | - | --------- | -
|Book Value & Weighted Average Interest Rate |  | As ofJune 30, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands, except interest rates)       |  |                    |           |   |                        |  
|Par value                                   |  | $                  | 4,289,937 |   |                        | $ | 1,496,508 |  
|Discounts, net                              |  |                    | (23,843   | ) |                        |   | (643      | )
|Concessions                                 |  |                    | (54       | ) |                        |   | (4        | )
|                                            |  |                    |           |   |                        |   |           |  
|Book value                                  |  | $                  | 4,266,040 |   |                        | $ | 1,495,861 |  
|                                            |  |                    |           |   |                        |   |           |  
|Weighted Average Interest Rate              |  |                    | 4.97      | % |                        |   | 4.86      | %



16



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##### Table of Contents

Note 6. Capital

For accounting policies and additional information concerning capital, see Note 14 in our 2006 Audited Financials included in our 2006 annual report on Form 10-K.

 Capital Requirements  As of June 30, 2007 and December 31, 2006, we were in compliance with our capital rules and
requirements. In addition, for regulatory purposes, mandatorily redeemable stock, discussed further below, is considered permanent capital. The following table shows our regulatory capital requirements compared to our actual capital position.



|                                  |  |                     |           |   |                         |   |           |          |  |   |           |   |  |   |           |  
|--------------------------------- |  | ------------------- | --------- | - | ----------------------- | - | --------- | -------- |  | - | --------- | - |  | - | --------- | -
|                                  |  | As of June 30, 2007 |           |   | As of December 31, 2006 |  
|Regulatory Capital Requirements   |  | Required            |           |   | Actual                  |   |           | Required |  |   | Actual    |  
|(in thousands, except for ratios) |  |                     |           |   |                         |   |           |          |  |   |           |  
|Risk-based capital *              |  | $                   | 360,481   |   |                         | $ | 2,334,572 |          |  | $ | 325,782   |   |  | $ | 2,302,616 |  
|Total capital-to-assets ratio     |  |                     | 4.00      | % |                         |   | 4.10      | %        |  |   | 4.00      | % |  |   | 4.30      | %
|Total regulatory capital          |  |                     | 2,276,096 |   |                         |   | 2,335,057 |          |  |   | 2,140,590 |   |  |   | 2,302,616 |  
|Leverage ratio                    |  |                     | 5.00      | % |                         |   | 6.16      | %        |  |   | 5.00      | % |  |   | 6.45      | %
|Leverage capital                  |  |                     | 2,845,120 |   |                         |   | 3,502,343 |          |  |   | 2,675,737 |   |  |   | 3,453,922 |  

| | 
| | 

| | * | Excludes Class A stock
| | - | ----------------------

 Supervisory Capital Requirements  On January 11, 2007, the Finance Board terminated the agreement, which we refer to as the
Written Agreement, between the Seattle Bank and the Finance Board dated as of December 10, 2004. Subsequently, on January 26, 2007, our Board authorized us to lower our minimum capital-to-assets ratio from 4.25% to 4.05%. Previous to the
termination of the Written Agreement, we maintained a minimum supervisory capital-to-assets ratio of 4.25%, which was required under our business plan submitted to the Finance Board in April 2005, and accepted by the Finance Board in May 2005. We
were in compliance with the applicable supervisory capital requirements as required in 2007 and 2006.

 Dividends Generally, under our Capital Plan, our Board can declare and pay dividends, in either cash or capital stock, from retained earnings or current net earnings. However, in September 2006, the Board adopted a resolution limiting dividends on
Class A stock to cash, and on December 28, 2006, the Finance Board adopted a resolution limiting an FHLBank from issuing stock dividends, if, after the issuance of a stock dividend, the outstanding excess stock at the FHLBank would be
greater than 1.00% of its total assets. As of June 30, 2007 and December 31, 2006, we had excess stock of $901.7 million and $902.2 million or 1.58% and 1.69% of our total assets.

To meet Finance Board conditions for the acceptance of our business plan, our Board adopted a policy on May 18, 2005, suspending indefinitely the
declaration or payment of any Class B dividends and providing that any future dividend declaration or payment generally may be made only after prior approval of the Director of the Office of Supervision.

On December 8, 2006, the Director of the Office of Supervision granted us a waiver, at the request of our Board, to resume paying quarterly
dividends beginning with the fourth quarter of 2006. The waiver contained dividend limitations imposed by our Board as a condition to the Finance Boards acceptance in 2005 of our business plan. The dividend limitation identified in the waiver
generally provides that dividend payments may not exceed 50.0% of year-to-date GAAP net income. For additional information on the parameters of the dividend waiver, see Part II. Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  Capital Resources and Liquidity  Capital Resources  Capital Plan Amendments and Board Policies Regarding Seattle Bank Stock of our 2006 annual report on Form 10-K.

The dividend limitations will remain in effect until we receive written approval from the Director of the Office of Supervision removing such
limitations. There can be no assurance that our Board will declare dividends, if any, to the fullest extent permitted for any period.



17



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##### Table of Contents

In April 2007, pursuant to the waiver received from the Director of the Office of Supervision in December
2006, our Board declared dividends of $0.15 per share on our Class B stock and $1.29 per share on our Class A stock based upon the average amount of such stock held during the first quarter of 2007. The dividends were paid in May 2007.

 Mandatorily Redeemable Class B Stock  As of June 30, 2007 and December 31, 2006, we had $82.3 million and
$69.2 million in Class B stock subject to mandatory redemption with payment subject to a five-year waiting period from the time of the request with 21 and 16 members and former members. These amounts have been classified as mandatorily
redeemable Class B stock in the Statements of Condition.

 Capital Concentration  Two members, Washington Mutual
Bank, F.S.B. and Bank of America Oregon, N.A., held collectively 37.8% and 38.0% of our total outstanding Class A and Class B stock, including mandatorily redeemable Class B stock, as of June 30, 2007 and December 31, 2006. See Note 9
for additional information. No other member held more than 10% of our outstanding Class A and Class B stock and mandatorily redeemable Class B stock as of these dates.

Note 7. Derivatives and Hedging Activities

For accounting policies and additional information
concerning derivatives and hedging activities, see Note 16 in our 2006 Audited Financials included in our 2006 annual report on Form 10-K.

For the six months ended June 30, 2007 and 2006, we recorded a $4.7 million net loss and a $2.5 million net gain on derivatives and hedging activities in other income. The $4.7 million net loss for the six-month period ended
June 30, 2007 was comprised of a $3.8 million net loss on fair value hedges and a $916,000 net loss on economic hedges. The $2.5 million net gain for the six-month period ended June 30, 2006 was comprised of a $2.3 million net gain on fair
value hedges and a $243,000 net gain on economic hedges. We had no cash flow hedges, which are designated when hedging the exposure to variable cash flows of a forecasted transaction, during the six months ended June 30, 2007 and 2006.

The following table summarizes the outstanding notional amounts and estimated fair values of the derivatives outstanding as of
June 30, 2007 and December 31, 2006.



|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|---------------------------------------------------- |  | ------------------- | ---------- | -------------------- | ----------------------- | -------- | -------- |  | -------------------- | ---------- |  | - | -------- | -
|                                                     |  | As of June 30, 2007 |            |                      | As of December 31, 2006 |         
|Derivative Notional Amountsand Estimated Fair Values |  | Notional            |            | Estimated Fair Value |                         |          | Notional |  | Estimated Fair Value |           
|(in thousands)                                       |  |                     |            |                      |                         |          |          |  |                      |           
|Interest-rate swaps                                  |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Fair value                                           |  | $                   | 35,164,870 |                      | $                       | (137,348 | )        |  | $                    | 31,486,621 |  | $ | (120,698 | )
|Economic                                             |  |                     | 1,145,950  |                      |                         | (197     | )        |  |                      | 1,172,450  |  |   | 137      |  
|Interest-rate cap/floor                              |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Fair value                                           |  |                     | 140,000    |                      |                         | 980      |          |  |                      | 140,000    |  |   | 1,085    |  
|Economic                                             |  |                     | 450,000    |                      |                         | 591      |          |  |                      | 450,000    |  |   | 1,299    |  
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Total                                                |  | $                   | 36,900,820 |                      |                         | (135,974 | )        |  | $                    | 33,249,071 |  |   | (118,177 | )
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Accrued interest                                     |  |                     |            |                      |                         | 296,568  |          |  |                      |            |  |   | 218,231  |  
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Net derivative balances                              |  |                     |            |                      | $                       | 160,594  |          |  |                      |            |  | $ | 100,054  |  
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Derivative balances                                  |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Assets                                               |  |                     |            |                      | $                       | 186,203  |          |  |                      |            |  | $ | 146,900  |  
|Liabilities                                          |  |                     |            |                      |                         | (25,609  | )        |  |                      |            |  |   | (46,846  | )
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  
|Net derivative balances                              |  |                     |            |                      | $                       | 160,594  |          |  |                      |            |  | $ | 100,054  |  
|                                                     |  |                     |            |                      |                         |          |          |  |                      |            |  |   |          |  



18



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##### Table of Contents

The fair values of embedded derivatives presented on a combined basis with the related consolidated
obligation bonds consisted of $84,000 in unrealized net loss related to $370.0 million in consolidated obligation bonds outstanding as of June 30, 2007. This compares to $193,000 in unrealized net loss related to $530.0 million in consolidated
obligation bonds outstanding as of December 31, 2006.

Note 8. Estimated Fair Value

For accounting policies and additional information concerning estimated fair values, see Note 17 in our 2006 Audited Financials and Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies and Estimates included in our 2006 annual report on Form 10-K.

 Fair Value Summary Table  The following tables summarize the carrying value and estimated fair values of our financial instruments as of
June 30, 2007 and December 31, 2006.



|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|-------------------------------------------------- |  | -------------- | ----------- | - | ---------------------------- | - | -------- | -------------------- |  | - | ----------- | -
|As of June 30, 2007                                |  | Carrying Value |             |   | Net UnrealizedGains (Losses) |   |          | Estimated Fair Value | 
|(in thousands)                                     |  |                |             |   |                              |   |          |                      | 
|Financial Assets                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Cash and due from banks                            |  | $              | 1,387       |   |                              | $ |          |                      |  | $ | 1,387       |  
|Interest-bearing deposits                          |  |                | 3,307,000   |   |                              |   | 379      |                      |  |   | 3,307,379   |  
|Securities purchased under agreements to resell    |  |                | 300,000     |   |                              |   |          |                      |  |   | 300,000     |  
|Federal funds sold                                 |  |                | 7,420,000   |   |                              |   | (486     | )                    |  |   | 7,419,514   |  
|Held-to-maturity securities                        |  |                | 11,199,350  |   |                              |   | (223,270 | )                    |  |   | 10,976,080  |  
|Advances                                           |  |                | 28,141,074  |   |                              |   | 22,191   |                      |  |   | 28,163,265  |  
|Mortgage loans held for portfolio                  |  |                | 5,993,386   |   |                              |   | (335,781 | )                    |  |   | 5,657,605   |  
|Accrued interest receivable                        |  |                | 321,806     |   |                              |   |          |                      |  |   | 321,806     |  
|Derivative assets                                  |  |                | 186,203     |   |                              |   |          |                      |  |   | 186,203     |  
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Total Financial Assets                             |  | $              | 56,870,206  |   |                              |   |          |                      |  | $ | 56,333,239  |  
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|                                                   |  |                |            
|Financial Liabilities                              |  |                |             |   |                              |   |          |                      |  |   |             |  
|Deposits                                           |  | $              | (1,047,716  | ) |                              | $ | 11       |                      |  | $ | (1,047,705  | )
|Consolidated obligations:                          |  |                |             |   |                              |   |          |                      |  |   |             |  
|Discount notes                                     |  |                | (4,266,040  | ) |                              |   | 1,228    |                      |  |   | (4,264,812  | )
|Bonds                                              |  |                | (48,565,713 | ) |                              |   | 210,776  |                      |  |   | (48,354,937 | )
|Accrued interest payable                           |  |                | (604,685    | ) |                              |   |          |                      |  |   | (604,685    | )
|Derivative liabilities                             |  |                | (25,609     | ) |                              |   |          |                      |  |   | (25,609     | )
|Mandatorily redeemable Class B stock               |  |                | (82,345     | ) |                              |   |          |                      |  |   | (82,345     | )
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Total Financial Liabilities                        |  | $              | (54,592,108 | ) |                              |   |          |                      |  | $ | (54,380,093 | )
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|                                                   |  |                |            
|Other                                              |  |                |             |   |                              |   |          |                      |  |   |             |  
|Commitments to extend credit for advances          |  | $              | (956        | ) |                              | $ |          |                      |  | $ | (956        | )
|Commitments to issue consolidated obligation bonds |  |                |             |   |                              |   | (60      | )                    |  |   | (60         | )



19



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##### Table of Contents

|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|-------------------------------------------------- |  | -------------- | ----------- | - | ---------------------------- | - | -------- | -------------------- |  | - | ----------- | -
|As of December 31, 2006                            |  | Carrying Value |             |   | Net UnrealizedGains (Losses) |   |          | Estimated Fair Value | 
|(in thousands)                                     |  |                |             |   |                              |   |          |                      | 
|Financial Assets                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Cash and due from banks                            |  | $              | 1,119       |   |                              | $ |          |                      |  | $ | 1,119       |  
|Interest-bearing deposits                          |  |                | 2,165,000   |   |                              |   | (35      | )                    |  |   | 2,164,965   |  
|Federal funds sold                                 |  |                | 2,832,000   |   |                              |   | (12      | )                    |  |   | 2,831,988   |  
|Held-to-maturity securities                        |  |                | 13,687,909  |   |                              |   | (213,788 | )                    |  |   | 13,474,121  |  
|Advances                                           |  |                | 27,960,994  |   |                              |   | 41,687   |                      |  |   | 28,002,681  |  
|Mortgage loans held for portfolio                  |  |                | 6,366,648   |   |                              |   | (195,971 | )                    |  |   | 6,170,677   |  
|Accrued interest receivable                        |  |                | 323,342     |   |                              |   |          |                      |  |   | 323,342     |  
|Derivative assets                                  |  |                | 146,900     |   |                              |   |          |                      |  |   | 146,900     |  
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Total Financial Assets                             |  | $              | 53,483,912  |   |                              |   |          |                      |  | $ | 53,115,793  |  
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Financial Liabilities                              |  |                |             |   |                              |   |          |                      |  |   |             |  
|Deposits                                           |  | $              | (1,003,960  | ) |                              | $ | 12       |                      |  | $ | (1,003,948  | )
|Consolidated obligations:                          |  |                |             |   |                              |   |          |                      |  |   |             |  
|Discount notes                                     |  |                | (1,495,861  | ) |                              |   | 541      |                      |  |   | (1,495,320  | )
|Bonds                                              |  |                | (48,040,715 | ) |                              |   | 122,595  |                      |  |   | (47,918,120 | )
|Accrued interest payable                           |  |                | (567,585    | ) |                              |   |          |                      |  |   | (567,585    | )
|Derivative liabilities                             |  |                | (46,846     | ) |                              |   |          |                      |  |   | (46,846     | )
|Mandatorily redeemable Class B stock               |  |                | (69,222     | ) |                              |   |          |                      |  |   | (69,222     | )
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Total Financial Liabilities                        |  | $              | (51,224,189 | ) |                              |   |          |                      |  | $ | (51,101,041 | )
|                                                   |  |                |             |   |                              |   |          |                      |  |   |             |  
|Other                                              |  |                |             |   |                              |   |          |                      |  |   |             |  
|Commitments to extend credit for advances          |  | $              | (1,020      | ) |                              | $ |          |                      |  | $ | (1,020      | )
|Commitments to issue consolidated obligation bonds |  |                |             |   |                              |   | 296      |                      |  |   | 296         |  

Note 9. Transactions with Related Parties and other FHLBanks

 Transactions with Members  We are a cooperative whose members own our capital stock and may receive dividends on their investments in
our stock. In addition, certain former members that have outstanding transactions with us, such as advances, are also required to maintain their investment in our capital stock until the transactions mature or are paid off and the capital stock is
redeemed. Virtually all our advances are issued to members, and all mortgage loans held for portfolio were purchased from members. We also maintain demand deposit accounts for members, primarily to facilitate settlement activities that are directly
related to advances and mortgage loan purchases. Such transactions with members are entered into in the normal course of business. In instances where a member also has an officer or director who is a director of the Seattle Bank, transactions with
such a member are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as other similar transactions, although the Board of Directors has imposed certain restrictions on the repurchase of stock held by
members who have officers or directors on our board. For purposes of these financial statements, we define related parties as those members with Class A and Class B stock outstanding in excess of 10% of our total outstanding Class A and
Class B stock and mandatorily redeemable Class B stock.

In addition, we have investments in federal funds sold, interest-bearing deposits,
and mortgage-backed securities with members or their affiliates. All investments are transacted at market prices and mortgage-backed securities are purchased through securities brokers or dealers. In addition, in the past we entered into offsetting
interest-rate exchange agreements, acting as an intermediary between offsetting derivative transactions with members and other counterparties, although we discontinued offering this service as a standard product in mid-2004. These transactions were
also executed at market rates.

For member transactions related to:



| |  |  | concentration associated with advances, see Note 3;
| | - |  | ---------------------------------------------------



| |  |  | concentration associated with mortgage loans held for portfolio, see Note 4;
| | - |  | ----------------------------------------------------------------------------



| |  |  | concentration associated with capital stock, see Note 6; and
| | - |  | ------------------------------------------------------------



20



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##### Table of Contents

| |  |  | concentration of investments in held-to-maturity securities purchased from members or affiliates of certain members, see Note 2.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

The following tables set forth information with respect to the Seattle Banks outstanding transactions with members and their affiliates and former
members and their affiliates as of June 30, 2007 and December 31, 2006.



|                                     |  |                     |            |                        |   |           
|------------------------------------ |  | ------------------- | ---------- | ---------------------- | - | ----------
|Outstanding Transactions             |  | As of June 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)                       |  |                     |            |                       
|Assets                               |  |                     |            |                        |   |           
|Cash                                 |  | $                   | 197        |                        | $ | 356       
|Interest-bearing deposits            |  |                     | 314,000    |                        |   |           
|Federal funds sold                   |  |                     | 606,000    |                        |   |           
|Held-to-maturity securities          |  |                     | 1,904,844  |                        |   | 1,712,166 
|Advances *                           |  |                     | 28,077,887 |                        |   | 27,907,730
|Mortgage loans held for portfolio    |  |                     | 5,987,756  |                        |   | 6,361,091 
|Accrued interest receivable          |  |                     | 201,256    |                        |   | 208,659   
|Derivative assets                    |  |                     | 108,440    |                        |   | 66,346    
|                                     |  |                     |            |                        |   |           
|Total Assets                         |  | $                   | 37,200,380 |                        | $ | 36,256,348
|                                     |  |                     |            |                        |   |           
|Liabilities                          |  |                     |            |                        |   |           
|Deposits                             |  | $                   | 1,022,261  |                        | $ | 985,000   
|Mandatorily redeemable Class B stock |  |                     | 67,978     |                        |   | 59,269    
|Derivative liabilities               |  |                     | 19         |                        |   | 116       
|                                     |  |                     |            |                        |   |           
|Total liabilities                    |  | $                   | 1,090,258  |                        | $ | 1,044,385 
|                                     |  |                     |            |                        |   |           
|Other                                |  |                     |            |                        |   |           
|Notional amount of derivatives       |  | $                   | 13,760,589 |                        | $ | 10,154,274
|Letters of credit                    |  | $                   | 152,869    |                        | $ | 135,627   

| | 
| | 

| | * | Includes the effect of associated derivatives with members or their affiliates.
| | - | -------------------------------------------------------------------------------



|                                               |  |      |         |   |      |   |         |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|For the Six Months Ended June 30,              |  | 2007 |         |   | 2006 |  
|(in thousands)                                 |  |      |         |   |      |  
|Interest Income                                |  |      |         |   |      |   |         |  
|Advances *                                     |  | $    | 698,835 |   |      | $ | 545,593 |  
|Prepayment fees on advances                    |  |      | 2,167   |   |      |   | 422     |  
|Interest-bearing deposits                      |  |      | 1,103   |   |      |   | 4,149   |  
|Federal funds sold                             |  |      | 16,670  |   |      |   | 10,944  |  
|Held-to-maturity securities                    |  |      | 47,376  |   |      |   | 45,208  |  
|Mortgage loans held for portfolio              |  |      | 154,644 |   |      |   | 185,169 |  
|                                               |  |      |         |   |      |   |         |  
|Total interest income                          |  |      | 920,795 |   |      |   | 791,485 |  
|                                               |  |      |         |   |      |   |         |  
|Interest Expense                               |  |      |         |   |      |   |         |  
|Deposits                                       |  |      | 21,810  |   |      |   | 14,920  |  
|Consolidated obligations *                     |  |      | 6,032   |   |      |   | 3,410   |  
|Mandatorily redeemable Class B stock           |  |      | 241     |   |      |   |         |  
|                                               |  |      |         |   |      |   |         |  
|Total interest expense                         |  |      | 28,083  |   |      |   | 18,330  |  
|                                               |  |      |         |   |      |   |         |  
|Net Interest Income                            |  | $    | 892,712 |   |      | $ | 773,155 |  
|                                               |  |      |         |   |      |   |         |  
|Other Income (Loss)                            |  |      |         |   |      |   |         |  
|Service fees                                   |  |      | 814     |   |      |   | 883     |  
|Net loss on derivatives and hedging activities |  |      | (6,571  | ) |      |   | (637    | )
|Other income (loss)                            |  |      | (27     | ) |      |   | 81      |  
|                                               |  |      |         |   |      |   |         |  
|Total other income (loss)                      |  | $    | (5,784  | ) |      | $ | 327     |  
|                                               |  |      |         |   |      |   |         |  

| | 
| | 

| | * | Includes the effect of associated derivatives with members or their affiliates.
| | - | -------------------------------------------------------------------------------



21



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##### Table of Contents

 Transactions with Certain Members The following tables set forth information at the
dates and for the periods indicated with respect to the Seattle Banks transactions with:



| |  |  | members and former members holding more than 10% of the outstanding shares of our capital stock at each respective period end;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | members or former members with a representative serving on our Board of Directors at any time during the respective dates or during the respective periods; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | affiliates of the foregoing members or former members.
| | - |  | ------------------------------------------------------



|                                  |  |                     |            |                        |   |           
|--------------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Transactions with Certain Members |  | As of June 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)                    |  |                     |            |                       
|Assets                            |  |                     |            |                        |   |           
|Cash                              |  | $                   | 197        |                        | $ | 356       
|Federal funds sold                |  |                     | 332,000    |                        |   |           
|Held-to-maturity securities       |  |                     | 304,206    |                        |   | 366,799   
|Advances *                        |  |                     | 18,286,697 |                        |   | 18,923,425
|Mortgage loans held for portfolio |  |                     | 5,433,230  |                        |   | 5,770,420 
|Accrued interest receivable       |  |                     | 146,804    |                        |   | 163,115   
|Derivative assets                 |  |                     | 32,274     |                        |   | 12,106    
|                                  |  |                     |            |                        |   |           
|Total Assets                      |  | $                   | 24,535,408 |                        | $ | 25,236,221
|                                  |  |                     |            |                        |   |           
|Liabilities                       |  |                     |            |                        |   |           
|Deposits                          |  |                     | 13,633     |                        |   | 33,412    
|                                  |  |                     |            |                        |   |           
|Total liabilities                 |  | $                   | 13,633     |                        | $ | 33,412    
|                                  |  |                     |            |                        |   |           
|Other                             |  |                     |            |                        |   |           
|Notional amount of derivatives    |  | $                   | 2,359,900  |                        | $ | 808,650   
|Letters of credit                 |  | $                   | 6,579      |                        | $ | 10,594    

| | 
| | 

| | * | Includes the effect of associated derivatives with members or their affiliates.
| | - | -------------------------------------------------------------------------------



|                                               |  |      |         |   |      |   |         |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|For the Six Months Ended June 30,              |  | 2007 |         |   | 2006 |  
|(in thousands)                                 |  |      |         |   |      |  
|Interest Income                                |  |      |         |   |      |   |         |  
|Advances *                                     |  | $    | 442,792 |   |      | $ | 347,714 |  
|Federal funds sold                             |  |      | 7,051   |   |      |   | 7,811   |  
|Held to maturity securities                    |  |      | 9,187   |   |      |   | 9,555   |  
|Mortgage loans held for portfolio              |  |      | 144,780 |   |      |   | 167,961 |  
|                                               |  |      |         |   |      |   |         |  
|Total interest income                          |  |      | 603,810 |   |      |   | 533,041 |  
|                                               |  |      |         |   |      |   |         |  
|Interest Expense                               |  |      |         |   |      |   |         |  
|Deposits                                       |  |      | 556     |   |      |   | 769     |  
|Consolidated obligations *                     |  |      | (565    | ) |      |   | 400     |  
|                                               |  |      |         |   |      |   |         |  
|Total interest expense                         |  |      | (9      | ) |      |   | 1,169   |  
|                                               |  |      |         |   |      |   |         |  
|Net Interest Income                            |  | $    | 603,819 |   |      | $ | 531,872 |  
|Other Income (Loss)                            |  |      |         |   |      |   |         |  
|Net loss on derivatives and hedging activities |  |      | (2,162  | ) |      |   | (42     | )
|Other income (loss)                            |  |      | 10      |   |      |   | (16     | )
|                                               |  |      |         |   |      |   |         |  
|Total other income (loss)                      |  | $    | (2,152  | ) |      | $ | (58     | )
|                                               |  |      |         |   |      |   |         |  

| | 
| | 

| | * | Includes the effect of associated derivatives with members or their affiliates.
| | - | -------------------------------------------------------------------------------

 Transactions with Other FHLBanks Our transactions with other FHLBanks are identified on the face of our financial statements. For additional information on our investments in other FHLBanks
consolidated obligation bonds, see Note 2, and for debt transfers from other FHLBanks, see Note 5.



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##### Table of Contents

Note 10. Commitments and Contingencies

For accounting policies and additional information concerning commitments and contingencies, see Note 18 in our 2006 Audited Financials included in our
2006 annual report on Form 10-K.

We have not recognized a liability for our joint and several obligation related to other FHLBanks
consolidated obligations as of June 30, 2007 and December 31, 2006. The par amounts of all the FHLBanks outstanding consolidated obligations for which we are jointly and severally liable, net of interbank holdings, were approximately
$953.1 billion and $947.3 billion as of June 30, 2007 and December 31, 2006.

The FHLBank Act authorizes the U.S. Treasury, at
its discretion, to purchase consolidated obligations of the FHLBanks aggregating not more than $4.0 billion. The Secretary of the U.S. Treasury determines the terms, conditions, and interest rates. There were no such purchases by the U.S. Treasury
during the six months ended June 30, 2007 or in the year ended December 31, 2006.

Commitments that legally bind and
unconditionally obligate us for additional advances totaled $37.6 million and $46.2 million, as of June 30, 2007 and December 31, 2006. Commitments generally are for periods of up to 12 months. Standby letters of credit were approximately
$152.9 million and $135.6 million as of June 30, 2007 and December 31, 2006 and had original terms of one month to 15 years, with a final expiration in 2015. Based on our credit analyses and collateral requirements, we do not consider it
necessary to have any provision for credit losses on these commitments.

We have entered into a standby bond purchase agreement with a
state housing authority, whereby we agree to purchase and hold the authoritys bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the
standby agreement. The bond purchase agreement expires in May 2008. Total commitments for bond purchases were $66.0 million as of June 30, 2007 and $68.9 million as of December 31, 2006.

As of June 30, 2007 and December 31, 2006, we had no investments that had been traded but not settled. We had entered into agreements to issue
$655.0 million and $850.0 million par value of consolidated obligation bonds as of June 30, 2007 and December 31, 2006. We had no agreements outstanding to issue consolidated obligation discount notes as of June 30, 2007 and
December 31, 2006.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

This report contains forward-looking statements that are subject to risk
and uncertainty. These statements describe the expectations of the Federal Home Loan Bank of Seattle, or the Seattle Bank, regarding future events and developments, including future operating results, growth in assets, and continued success of our
products. These statements include, without limitation, statements as to future expectations, beliefs, plans, strategies, objectives, events, conditions, and financial performance. The words will, believe, expect,
intend, may, could, should, anticipate, and words of similar nature are intended in part to help identify forward-looking statements.

Future results, events, and developments are difficult to predict, and the expectations described in this report, including any forward-looking
statements, are subject to risk and uncertainty that may cause actual results to differ materially from those we currently anticipate. Consequently, there is no assurance that the expected events and developments will occur. See Part I.
Item 1A. Risk Factors of our 2006 annual report on Form 10-K and Part II. Item 1A. Risk Factors, of this report, for additional information on risks and uncertainties.

Factors that may cause actual results, events, and developments to differ materially from those discussed in this report include, among others, the
following:



| |  |  | a significant change in interest rates;
| | - |  | ---------------------------------------



| |  |  | withdrawal of one or more large members or significant decreases in business from large members, or consolidation among our members;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition from other alternative sources of funding available to our members, including other Federal Home Loan Banks, or FHLBanks;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse changes in the market prices of our financial instruments, or our failure to effectively hedge these instruments;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in investor demand for consolidated obligations or changes in our ability to participate in the issuance of consolidated obligations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our members willingness to do business with us despite limitations on our payment of dividends and continuing restrictions on repurchases of excess Class B
stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | effects of the late 2006 amendments to our capital plan, as amended, which we refer to as our Capital Plan, including amendments regarding the creation of an excess
stock pool and authorization of Class A stock to support new advances;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure to satisfy hedge accounting criteria under the accounting principles generally accepted in the United States, or U.S. GAAP, in hedging our interest-rate
risk;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | legislative or regulatory changes or actions initiated by the Federal Housing Finance Board, or the Finance Board, or other body, that could cause us to modify our
current structure, policies, or business operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in accounting rules or in the interpretation of existing accounting rules;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | negative changes in our credit agency ratings or ratings applicable to the FHLBanks, the Finance Board, and the Office of Finance, or collectively the FHLBank
System;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the need to make principal or interest payments on behalf of another FHLBank as a result of the joint and several liability of all FHLBanks for consolidated
obligations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse changes in local and national economic conditions; and
| | - |  | --------------------------------------------------------------



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##### Table of Contents

| |  |  | events such as terrorism, natural disasters, or other catastrophic events that could disrupt the financial markets where we obtain funding, our borrowers
ability to repay advances, the value of the collateral that we hold, or our ability to conduct business in general.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These cautionary statements apply to all related forward-looking statements, wherever they appear in this report. We do not undertake to update any forward-looking statements that we make in this report or that we may make from time to
time.

Overview

The Seattle Bank, a
federally chartered corporation and one of 12 FHLBanks, is a cooperative that is owned by member financial institutions located within our district, which includes Alaska, Hawaii, Idaho, Montana, Oregon, Utah, Washington, and Wyoming, as well as the
U.S. territories of American Samoa, Guam, and the Northern Mariana Islands. All federally insured depository institutions and insurance companies engaged in residential housing finance and community financial institutions located in the Seattle
Banks district are eligible to apply for membership. Our primary business activity is providing loans, or advances, to our members and eligible housing associates. We also work with our members and a variety of other entities, including
non-profit organizations, to provide affordable housing and community economic development funds through direct subsidy grants and low- or no-interest loans, to benefit individuals and communities in need. We fund these grants and loans through the
Affordable Housing Program, or AHP, and a number of other community investment programs.

Our principal funding source is consolidated
obligations issued by the Office of Finance on our behalf. We are primarily liable for repayment of consolidated obligations issued on our behalf and jointly and severally liable for the consolidated obligations issued on behalf of the other
FHLBanks.

Recent Developments

In
February 2007, Mr. James E. Gilleran, our president and chief executive officer, announced his resignation effective April 30, 2007, and our Board of Directors, or Board, appointed Mr. Richard M. Riccobono as our president and chief
executive officer effective May 1, 2007.

On July 26, 2007, the Board declared a $1.31 per share dividend on average Class A
stock outstanding during the second quarter of 2007 and a $0.15 per share dividend on average Class B stock outstanding during the second quarter of 2007. The dividends will be paid prior to the end of the third quarter of 2007.

On July 26, 2007, Mark R. Szczepaniak, executive vice president and chief financial officer, tendered his resignation effective August 31,
2007. Mr. Szczepaniak is leaving the Seattle Bank to pursue an opportunity at another institution.

As of August 9, 2007, our advances
outstanding have increased by $3.9 billion, of which 97.0% have maturities after September 30, 2007. We believe this increase is primarily due to our members turning to us for funding, as a result of recent volatility in the capital markets.

Quarterly Summary

This discussion and
analysis reviews our financial condition as of June 30, 2007 and December 31, 2006 and our results of operations for the three and six months ended June 30, 2007 and 2006. This discussion should be read in conjunction with our 2006
annual report on Form 10-K, including Part II. Item 8. Financial Statements and Supplementary Data and Item 1. Financial Statements in this report.



25



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##### Table of Contents

As of June 30, 2007, we had total assets of $56.9 billion, total deposits of $1.0 billion, and
retained earnings of $112.2 million, compared to total assets of $53.5 billion, total deposits of $1.0 billion, and retained earnings of $92.4 million as of December 31, 2006. The increase in assets primarily resulted from reducing our
capital-to-assets ratio to a target of 4.10% during the first quarter 2007 from a target of 4.30% during 2006, in order to more fully use our capital and increase net interest income.

The Seattle Banks net income increased by $12.1 million and $14.7 million, to $14.6 million and $25.2 million for the three and six months ended
June 30, 2007, compared to the same periods in 2006. The increases in net income for the three- and six-month periods were primarily due to an increase in net interest income resulting from reinvesting proceeds from maturing low-yielding
investments, including among others, the consolidated obligations of other FHLBanks, into higher-yielding short-term investments such as federal funds.

Our financial condition as of June 30, 2007 and operating results for the three and six months ended June 30, 2007 are not necessarily indicative of the financial condition and the operating results that may
be expected as of or for the year ending December 31, 2007 or any future dates or periods.

We expect to increase our advance balance
and our interest income from advances through continued use of differential pricing, introduction of additional advance product offerings, and members use of certain changes to our Capital Plan that were adopted to encourage increased advance
activity. Advance balances will vary from time to time as a result of changes in member demand, changes in market conditions, and other factors. Assuming future growth in our advances and a substantially unchanged interest-rate environment, we
anticipate continued improvement in net income for the remainder of 2007 and later years.



26



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##### Table of Contents

Financial Highlights

The following table presents a summary of certain financial information for the Seattle Bank for the periods indicated:



|                                                   |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|-------------------------------------------------- |  | ------------- | ------ | - | -------------- | - | ------ | ----------------- |  | - | ------------------ | - |  | ------------- | ------ | - |  | - | ------ | -
|Selected Financial Data                            |  | June 30, 2007 |        |   | March 31, 2007 |   |        | December 31, 2006 |  |   | September 30, 2006 |   |  | June 30, 2006 |       
|(in millions, except ratios)                       |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |       
|Statements of Condition (at period end)            |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|Total assets                                       |  | $             | 56,902 |   |                | $ | 56,474 |                   |  | $ | 53,515             |   |  | $             | 53,491 |   |  | $ | 53,189 |  
|Cash and investments (1)                           |  |               | 22,227 |   |                |   | 24,190 |                   |  |   | 18,686             |   |  |               | 19,423 |   |  |   | 19,143 |  
|Advances                                           |  |               | 28,141 |   |                |   | 25,653 |                   |  |   | 27,961             |   |  |               | 27,156 |   |  |   | 26,936 |  
|Mortgage loans held for portfolio                  |  |               | 5,993  |   |                |   | 6,188  |                   |  |   | 6,367              |   |  |               | 6,557  |   |  |   | 6,774  |  
|Deposits and other borrowings                      |  |               | 1,048  |   |                |   | 1,076  |                   |  |   | 1,004              |   |  |               | 876    |   |  |   | 890    |  
|Primary obligations on consolidated obligations    |  |               | 52,832 |   |                |   | 52,419 |                   |  |   | 49,537             |   |  |               | 49,657 |   |  |   | 49,388 |  
|Affordable Housing Program (AHP)                   |  |               | 21     |   |                |   | 21     |                   |  |   | 23                 |   |  |               | 24     |   |  |   | 26     |  
|Payable to Resolution FundingCorporation (REFCORP) |  |               | 4      |   |                |   | 3      |                   |  |   | 2                  |   |  |               | 2      |   |  |   | 1      |  
|Class B, B(1), and B(2) stock - putable            |  |               | 2,140  |   |                |   | 2,131  |                   |  |   | 2,141              |   |  |               | 2,136  |   |  |   | 2,135  |  
|Total capital                                      |  |               | 2,251  |   |                |   | 2,230  |                   |  |   | 2,231              |   |  |               | 2,225  |   |  |   | 2,214  |  
|                                                   |  |               |        |   |               
|Statements of Income                               |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|(for the three-month period ending)                |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|Interest income                                    |  | $             | 723    |   |                | $ | 691    |                   |  | $ | 670                |   |  | $             | 664    |   |  | $ | 619    |  
|Net interest income                                |  |               | 36     |   |                |   | 28     |                   |  |   | 21                 |   |  |               | 22     |   |  |   | 14     |  
|Other income (loss)                                |  |               | (5     | ) |                |   | (3     | )                 |  |   |                    |   |  |               |        |   |  |   | 1      |  
|Other expense                                      |  |               | 11     |   |                |   | 11     |                   |  |   | 12                 |   |  |               | 10     |   |  |   | 11     |  
|Income before AHP and REFCORP assessments          |  |               | 20     |   |                |   | 14     |                   |  |   | 9                  |   |  |               | 12     |   |  |   | 3      |  
|AHP and REFCORP assessments                        |  |               | 5      |   |                |   | 4      |                   |  |   | 2                  |   |  |               | 3      |   |  |   | 1      |  
|Net income                                         |  |               | 15     |   |                |   | 11     |                   |  |   | 7                  |   |  |               | 9      |   |  |   | 2      |  
|                                                   |  |               |        |   |               
|Dividends                                          |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|(for the three-month period ending)                |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|Dividends paid in cash                             |  | $             | 3      |   |                | $ | 2      |                   |  | $ | 2                  |   |  | $             |        |   |  | $ |        |  
|Annualized dividend rate                           |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|Class A stock                                      |  |               | 5.25   | % |                |   | N/A    |                   |  |   | N/A                |   |  |               | N/A    |   |  |   | N/A    |  
|Class B, B(1), and B(2) stock - putable            |  |               | 0.60   | % |                |   | 0.40   | %                 |  |   | 0.10               | % |  |               | N/A    |   |  |   | N/A    |  
|Dividend payout ratio                              |  |               | 21.90  | % |                |   | 20.20  | %                 |  |   | 34.60              | % |  |               | N/A    |   |  |   | N/A    |  
|                                                   |  |               |        |   |               
|Financial Statistics                               |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|(for the three-month period ending)                |  |               |        |   |                |   |        |                   |  |   |                    |   |  |               |        |   |  |   |        |  
|Return on average equity                           |  |               | 2.61   | % |                |   | 1.93   | %                 |  |   | 1.10               | % |  |               | 1.63   | % |  |   | 0.45   | %
|Return on average assets                           |  |               | 0.10   |   |                |   | 0.08   |                   |  |   | 0.05               |   |  |               | 0.07   |   |  |   | 0.02   |  
|Equity-to-assets ratio (2)                         |  |               | 4.10   |   |                |   | 4.17   |                   |  |   | 4.30               |   |  |               | 4.30   |   |  |   | 4.30   |  
|Total capital-assets ratio (3)                     |  |               | 4.10   |   |                |   | 4.10   |                   |  |   | 4.30               |   |  |               | 4.29   |   |  |   | 4.29   |  
|Net interest margin(4)                             |  |               | 0.26   |   |                |   | 0.21   |                   |  |   | 0.16               |   |  |               | 0.17   |   |  |   | 0.10   |  

---

|(1) | Investments include, among other things, interest-bearing deposits in banks, securities purchased under agreements to
resell, federal funds sold, and held-to-maturity securities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Equity-to-assets ratio is average capital stock, including mandatorily redeemable stock, plus retained earnings and
accumulated other comprehensive income, divided by the total average assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Total capital-to-assets ratio is capital stock, including mandatorily redeemable stock plus retained earnings, divided
by the total assets at the end of the period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Net interest margin is net interest income divided by the average earning assets.
|--- | ---------------------------------------------------------------------------------



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##### Table of Contents

Financial Condition

Our assets principally consist of advances, investments, and mortgage loans held for portfolio. The composition of our assets changed during the first six months of 2007 from year-end 2006, primarily due to an
increase in our short-term investments as a result of lowering our capital-to-assets ratio to a target of 4.10% from a target of 4.30% in order to more fully use our capital to earn interest income while maintaining liquidity to fund advances. We
seek to continue to increase our advances by using differential pricing, offering additional advance products, offering the purchase of Class A stock with a six-month redemption period, and, for a limited time, permitting the use of an excess
stock pool to support additional advances. Over time, we expect our advances to increase, our mortgage loan portfolio to decrease as mortgage loans are paid off due to our exit from the Mortgage Purchase Program, or MPP, and our investments to
decrease as a percentage of our total assets, although these balances will vary from time to time as a result of changes in member demand, changes in market conditions, and other factors.

The following table summarizes our total assets by major asset classes, as of the dates indicated.



|                                              |  |                    |  |                       
|--------------------------------------------- |  | ------------------ |  | ----------------------
|Asset Classes as a Percentage of Total Assets |  | As ofJune 30, 2007 |  | As ofDecember 31, 2006
|(in percentages)                              |  |                    |  |                       
|Advances                                      |  | 49.5               |  | 52.2                  
|Investments                                   |  | 39.1               |  | 34.9                  
|Mortgage loans held for portfolio             |  | 10.5               |  | 11.9                  
|Other assets                                  |  | 0.9                |  | 1.0                   
|                                              |  |                    |  |                       
|Total                                         |  | 100.0              |  | 100.0                 
|                                              |  |                    |  |                       

We obtain funding to support our business primarily through the issuance, by the Office of Finance
on our behalf, of debt securities in the form of consolidated obligations. We also rely on member deposits and on the issuance of our equity securities to our members in connection with their membership and their utilization of our products.
Restrictions on our ability to repurchase our Class B stock prior to the end of the five-year redemption period and limitations on our ability to pay dividends on our capital stock have reduced our members willingness to purchase our stock
and, therefore, have limited the amount of capital we receive from the issuance of stock.

We report our assets, liabilities, and
commitments in accordance with U.S. GAAP, including the market value of our assets, liabilities, and commitments, which we also review for purposes of risk management. The differences between the carrying value and market value of our assets,
liabilities, and commitments are unrealized market value gains or losses. As of June 30, 2007, we had net unrealized market value losses of $325.0 million. Because of these net unrealized market value losses, the ratio of the market value
of our equity to the book value of our equity was 85.6% as of June 30, 2007. Our net unrealized market value losses increased from $245.0 million reported as of December 31, 2006, largely due to a significant increase in the
unrealized market value losses of our mortgage loans held for portfolio, partially offset by an increase in unrealized market value gains of our consolidated obligations.

We discuss the material changes in each of our principal categories of assets and liabilities and our capital stock in more detail below.

Advances

Advances increased by $180.1 million, to $28.1 billion, as of June 30, 2007,
compared to December 31, 2006. For the three and six months ended June 30, 2007, new advances totaled $19.9 billion and $38.2 billion, while maturing advances totaled $17.4 billion and $37.9 billion. This level of activity was lower than
that of the same periods of 2006, when new advances totaled $31.9 billion and $54.0 billion and maturing advances totaled $26.9 billion and $48.5 billion due primarily to decreased advances business with one of our largest members.



28



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##### Table of Contents

As of June 30, 2007, five members held 70.3% of our outstanding advances compared to 69.5% as of
December 31, 2006. Two of these members, Bank of America Oregon, N.A. and Washington Mutual Bank, F.S.B., had advances totaling 56.4% of the par value of our outstanding advances as of June 30, 2007 (Bank of America Oregon, N.A. with 37.6%
and Washington Mutual Bank, F.S.B. with 18.8%) compared to those members holding 56.8% as of December 31, 2006 (Bank of America Oregon, N.A. with 36.0% and Washington Mutual Bank, F.S.B. with 20.8%). No other borrower held over 10% of our
outstanding advances as of June 30, 2007 or December 31, 2006. Because a large concentration of our advances is held by only a few members, changes in their borrowing decisions can significantly affect the amount of our advances
outstanding. As we refocus our business on our advances, we expect that the concentration of advances with our largest borrowers will remain significant for at least the remainder of 2007 and several years beyond.

As of June 30, 2007, 62.6% of the par value of our advance portfolio had a remaining term to maturity of one year or less, compared to 57.7% as of
December 31, 2006, primarily due to short-term advance activity with our largest members. The percentage of variable interest-rate advances as a portion of our total advance balance as of June 30, 2007 increased to 55.5%, compared to 43.5%
as of December 31, 2006, primarily due to the first quarter decrease in fixed interest-rate advances and their subsequent replacement with a higher percentage of variable interest-rate advances held by one of our largest members. The total
weighted-average interest rate on our advance portfolio as of June 30, 2007 and December 31, 2006, was 5.15% and 5.14%, reflecting the lack of movement of interest rates during the first six months of 2007.

For additional information on advances see Note 7 in Part II. Item 8. Financial Statements and Supplementary Data of our annual report
on Form 10-K and Note 3 in Item 1. Financial Statements in this report.

Member Demand for Advances. Many factors affect
the demand for advances, including changes in interest rates and changes in member funding needs. Members regularly evaluate financing options relative to our advance products and pricing. The Seattle Banks pricing alternatives include:
differential pricing, advance window daily market pricing, and auction funding, through which borrowers can generally save five basis-points or more, but which is offered only two times per week and for limited terms. Excluding cash management
advances, for the six months ended June 30, 2007, the amount of differentially priced advances accounted for 72.3% of new advances, compared to 79.5% for the year ended December 31, 2006. The decrease in differentially priced advances was
primarily due to the reduction in short-term advance volumes during the first quarter of 2007 with our largest members. Excluding cash management advances, the amount of window advances and auction-priced advances accounted for 17.7% and 10.0% of
the advances made for the six months ended June 30, 2007, compared to 10.0% and 10.5% of advances made for 2006.

We believe that the
use of differential pricing gives us greater flexibility to compete with regard to interest rates for more advance business. This means that interest rates on advances may be lower for some members than for others in order to be competitive with
lower interest rates available to those members that have alternative funding sources. In general, our larger members have more alternative funding sources and are able to access funding at lower interest rates than our smaller members. We believe
that the use of differential pricing has helped to increase our advance balance since 2005 and will continue to do so in the future.

The
demand for advances may be affected by the manner in which we may pay dividends on the stock our members are required to purchase in connection with such advances and any applicable restrictions on their ability to have that stock redeemed or
repurchased by us that may be in effect on the date of redemption or repurchase. During the first six months of 2007 and in 2006, demand for advances, particularly those that required new stock purchases, was limited as a result of our action in May
2005 to suspend the declaration or payment of dividends and to suspend the repurchase of Class B stock prior to the end of the statutory five-year redemption period, without prior approval of the Finance Boards Director of the Office of
Supervision in each case. We believe that our resumption of quarterly dividend payments in December 2006 pursuant to a waiver from the Director of the Office of Supervision may contribute to increased advances, particularly those that may require
new stock purchases.



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##### Table of Contents

In December 2006, we implemented a number of amendments to our Capital Plan, including the creation of an
excess stock pool and Class A stock. The excess stock pool allows a member, for new or renewing advance activity with terms consistent with the capital plan, to satisfy its total stock purchase requirement by relying on Seattle Bank capital that is
associated with total outstanding excess stock. We believe that the creation of the excess stock pool and a Class A stock with a six-month redemption feature will contribute to the continued growth of our advance portfolio, notwithstanding the
current restrictions relating to our repurchase of Class B stock and limitations on the payment of dividends, because members will have greater borrowing and investment flexibility. As of June 30, 2007, 15 of our members were using stock from
the excess stock pool to support $2.9 billion in additional advances.

Credit Risk. Our credit risk from advances is concentrated in
commercial banks and savings institutions. As of June 30, 2007 and December 31, 2006, we had advances of $15.9 billion outstanding to two members, which represented 56.4% and 56.8% of our total advances outstanding. We held sufficient
collateral to fully secure the advances to these members, and, as a result, we do not expect to incur any credit losses on these advances.

Investments

We maintain a portfolio of short-term investments and a portfolio of long-term investments for liquidity purposes and to generate
returns on our capital. Short-term investments generally include federal funds sold and other money market instruments, and long-term investments generally include mortgage-backed securities and agency obligations.

The following table summarizes our investments, both short- and long-term, as of the dates indicated.



|                                                |  |                     |            |                        |   |           
|----------------------------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Short- and Long-Term Investments                |  | As of June 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)                                  |  |                     |            |                       
|Short-Term Investments                          |  |                     |            |                        |   |           
|Federal funds sold                              |  | $                   | 7,420,000  |                        | $ | 2,832,000 
|Interest-bearing deposits                       |  |                     | 3,307,000  |                        |   | 2,165,000 
|Securities purchased under agreements to resell |  |                     | 300,000    |                        |   |           
|Commercial paper                                |  |                     | 99,824     |                        |   |           
|                                                |  |                     |            |                        |   |           
|Total short-term investments                    |  | $                   | 11,126,824 |                        | $ | 4,997,000 
|                                                |  |                     |            |                        |   |           
|Long-Term Investments                           |  |                     |            |                        |   |           
|Other FHLBanks consolidated obligations        |  |                     | 3,024,967  |                        |   | 4,224,959 
|Mortgage-backed securities                      |  |                     | 6,768,839  |                        |   | 6,613,347 
|Other U.S. agency obligations                   |  |                     | 109,599    |                        |   | 146,298   
|Government-sponsored enterprise obligations     |  |                     | 1,185,893  |                        |   | 2,691,238 
|State or local housing agency obligations       |  |                     | 10,228     |                        |   | 12,067    
|                                                |  |                     |            |                        |   |           
|Total long-term investments                     |  | $                   | 11,099,526 |                        | $ | 13,687,909
|                                                |  |                     |            |                        |   |           
|Total investments                               |  | $                   | 22,226,350 |                        | $ | 18,684,909
|                                                |  |                     |            |                        |   |           

During 2006, we significantly reduced our short-term investments as our advance balance increased.
During the first six months of 2007, we increased our short-term investments in order to more fully use our capital and provide liquidity to fund advances while staying within our minimum operating capital-to-assets ratio of 4.05%, which was
approved by our Board in January 2007. Going forward, we expect to continue to manage our business to a capital-to-assets ratio of 4.10%, subject to applicable regulatory requirements, although our actual capital-to-assets ratio may vary from our
target. We expect over time that as our advance balance increases, our short-term investments, primarily federal funds, will decline as a percentage of our total assets.



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As of June 30, 2007 and December 31, 2006, we held $7.3 billion and $10.5 billion, in
held-to-maturity investments with unrealized losses of $238.5 million and $238.6 million that had been in an unrealized loss position for over 12 months. The unrealized losses relating to our held-to-maturity investments as of June 30, 2007 and
December 31, 2006 were related to declining market values as a result of overall increases in market interest rates and widening credit spreads. Based on the creditworthiness of the issuers and underlying collateral, we believe that these
unrealized losses represent temporary impairments. See Note 2 in Item 1. Financial Statements in this report for tables summarizing the held-to-maturity securities with unrealized losses as of June 30, 2007 and December 31,
2006.

Consolidated Obligations of Other FHLBanks. Our investment in other FHLBanks consolidated obligation bonds of $3.0
billion as of June 30, 2007 represented a decrease of $1.2 billion from our investment in such bonds as of December 31, 2006. The decrease was primarily due to sales and maturities of certain of these consolidated obligation bonds during
the first quarter of 2007.

Mortgage-Backed Securities. Finance Board regulations limit each FHLBanks investment in
mortgage-backed securities, at the time a security is purchased, to 300% of a banks regulatory capital, which in our case is comprised of capital stock, retained earnings, and mandatorily redeemable capital stock. Our investment in
mortgage-backed securities represented 289.9% and 287.2% of our regulatory capital as of June 30, 2007 and December 31, 2006. Mortgage-backed securities as of June 30, 2007 and December 31, 2006, included $785.3 million and $1.0
billion in Federal Home Loan Mortgage Corporation, or Freddie Mac, mortgage-backed securities and $849.3 million and $758.1 million of investments in Federal National Mortgage Association, or Fannie Mae, mortgage-backed securities. The remaining
investment in mortgage-backed securities is rated AAA (or its equivalent) by a nationally recognized statistical rating organization, or NRSRO, such as Moodys Investor Services, or Moodys, and Standard & Poors.

Government-Sponsored Enterprises (GSEs). Our held-to-maturity investments in GSEs, excluding our investments in consolidated
obligations of other FHLBanks, consist primarily of unsecured debt securities of Fannie Mae and Freddie Mac. These securities are not guaranteed, directly or indirectly, by the U.S. government. Fannie Mae securities totaled $406.0 million and
$908.5 million and Freddie Mac securities totaled $481.0 million and $1.5 billion, as of June 30, 2007, and December 31, 2006. These securities represented 4.0% and 12.8% of total investments as of such dates. The decrease in GSE
debt securities as of June 30, 2007, compared to December 31, 2006, is primarily due to maturities of such securities. Finance Board regulations limit any investments in the debt of any one GSE to the lower of 100% of our capital or the
capital of the GSE, with the exception of the investment in other FHLBank consolidated obligations, in which we can no longer invest without Finance Board approval.

Mortgage Loans Held for Portfolio

The par balance of our mortgage loans held for portfolio consisted
of $5.7 billion and $6.0 billion in conventional mortgage loans and $259.9 million and $292.1 million in government-insured mortgage loans as of June 30, 2007 and December 31, 2006. The decrease during the six months ended June 30,
2007 was due to our receipt of $369.6 million in principal payments. As a result of our decision to exit the MPP, we ceased entering into new master commitment contracts in 2005 and terminated all open contracts.

As of June 30, 2007, 86.5% of our outstanding mortgage loan portfolio consisted of mortgage loans originally purchased from our largest
participating member, Washington Mutual Bank, F.S.B.



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The following table summarizes the activity and other information related to our mortgage loan portfolio,
as of the dates indicated.



|                                                          |  |                     |           |   |                        |   |           |  
|--------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loan Portfolio Activity                          |  | As of June 30, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands, except percentages and FICO scores)        |  |                     |           |   |                        |  
|Mortgage loan par balance, beginning of period            |  | $                   | 6,336,632 |   |                        | $ | 7,182,542 |  
|Mortgage loans transferred to real estate owned           |  |                     | (170      | ) |                        |   | (373      | )
|Maturities and principal amount received                  |  |                     | (369,586  | ) |                        |   | (845,537  | )
|                                                          |  |                     |           |   |                        |   |           |  
|Mortgage loan par balance at period end                   |  |                     | 5,966,876 |   |                        |   | 6,336,632 |  
|                                                          |  |                     |           |   |                        |   |           |  
|Mortgage loan net premium balance, beginning of period    |  |                     | 30,016    |   |                        |   | 33,065    |  
|Net premium recovery from repurchases                     |  |                     | (9        | ) |                        |   | (92       | )
|Net premium amortization                                  |  |                     | (3,497    | ) |                        |   | (2,957    | )
|                                                          |  |                     |           |   |                        |   |           |  
|Mortgage loan net premium balance at period end           |  |                     | 26,510    |   |                        |   | 30,016    |  
|                                                          |  |                     |           |   |                        |   |           |  
|Total mortgage loans held for portfolio                   |  | $                   | 5,993,386 |   |                        | $ | 6,366,648 |  
|                                                          |  |                     |           |   |                        |   |           |  
|Premium balance as a percent of mortgage loan par amounts |  |                     | 0.44      | % |                        |   | 0.47      | %
|Average FICO score*at origination                         |  |                     | 746       |   |                        |   | 745       |  
|Average loan-to-value ratio at origination                |  |                     | 64.49     | % |                        |   | 64.81     | %

| | 
| | 

| | * | The Fair Isaac Credit Organization, or FICO, score is a standardized credit score used as an indicator of consumer
financial responsibility, based on credit history.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Derivative Assets and Liabilities

As of June 30, 2007 and December 31, 2006, we held derivative assets, including associated accrued interest receivable and payable, of $186.2
million and $146.9 million and derivative liabilities of $25.6 million and $46.8 million. The changes in these balances reflect the effect of interest-rate changes on the fair value of our derivatives, as well as expirations and terminations of
outstanding interest-rate exchange agreements and entry into new interest-rate exchange agreements in the six months ended June 30, 2007.

The notional amount of interest-rate exchange agreements increased by $3.7 billion, to $36.9 billion, as of June 30, 2007, compared to December 31, 2006. The increase was primarily related to our increased use of interest-rate
exchange agreements to lower our cost of funds and reduce our interest-rate risk. For additional information, see Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Consolidated Obligations

Our principal liabilities
are the consolidated obligation discount notes and bonds issued on our behalf by the Office of Finance, and to a significantly lesser degree, a variety of other funding sources such as our member deposits. Although we are jointly and severally
liable for all consolidated obligations issued by the Office of Finance on behalf of all of the FHLBanks, we report only the portion of consolidated obligations issued on our behalf for which we are the primary obligor. As of June 30, 2007,
Standard and Poors and Moodys Investor Services outlooks for the Seattle Bank were stable. For additional information on consolidated obligations, see Part I. Item 1. Business  Debt Financing  Consolidated
Obligations in our 2006 annual report on Form 10-K.

Consolidated Obligation Discount Notes. Our allocated portion of the
FHLBank Systems combined consolidated discount notes increased by $2.8 billion as of June 30, 2007 compared to December 31, 2006, primarily to finance short-term investments that were purchased in accordance with our strategy of
managing our business to a target capital-to-assets ratio of 4.10%.

Consolidated Obligation Bonds. Our allocated portion of the
FHLBank Systems combined consolidated obligation bonds outstanding was a par amount of $48.8 billion and $48.2 billion as of June 30, 2007 and December 31, 2006.



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Our callable debt increased by $1.1 billion as of June 30, 2007, to $25.6 billion, compared to
December 31, 2006, primarily due to growth in our structured funding portfolio. We use structured funding, consisting of interest-rate swapped consolidated obligation bonds which may contain option features, to reduce our funding cost and
manage our liquidity. The relative increase in our use of callable debt reflects more favorable pricing of callable consolidated obligation bonds with associated interest-rate exchange agreements relative to unswapped consolidated discount notes.

During the three and six months ended June 30, 2007, we called $2.8 billion and $8.9 billion in fixed interest-rate consolidated
obligations with weighted-average interest-rates of 5.47% and 5.46%, and cancelled the associated interest-rate agreements, resulting in a net loss of $526,000 and $199,000. During the three-month and six-month period ended June 30, 2007, we
extinguished $9.9 million in callable consolidated obligations, which resulted in a gain of $371,000. In the three months and six months ended June 30, 2006, we extinguished $175.2 million in fixed-rate debt with a weighted-average interest rate of
6.15%. This extinguishment resulted in a net gain of $1.7 million on the consolidation obligations.

Capital Resources and Liquidity

Our capital resources consist of capital stock held by our members and several nonmember stockholders, retained earnings, and other comprehensive income.
The amount of our capital resources does not take into account our joint and several liability for the consolidated obligations of other FHLBanks. See Note 6 in Item 1. Financial Statements in this report for additional information. Our
principal sources of liquidity are the proceeds from the issuance of consolidated obligations and our short-term investments.

Capital Resources

Our capital resources increased $19.3 million for the six months ended June 30, 2007, from December 31, 2006. The increase for
the six months ended June 30, 2007 was driven primarily by changes in the amount of our retained earnings.

Seattle Bank Stock.
In December 2006, we amended our Capital Plan to allow for, among other things, the creation of: (i) a single Class B stock, (ii) a Class A stock, which may be used to satisfy a members activity-based stock purchase requirement
and may be redeemed upon six months notice, and (iii) an excess stock pool, which may be used to support certain additional advances without requiring a member to purchase additional stock.

Prior to our implementation of the December 2006 amendments to our Capital Plan, the Seattle Bank had two classes of capital stock, Class B(1) stock and
Class B(2) stock. In December 2006, our Class B(1) stock and Class B(2) stock were converted into a single Class B stock. As with the previous classes of Class B stock, Class B stock can be issued, redeemed, and repurchased only at par value, $100
per share. Class B stock is generally redeemable five years after written notice from the member. All stock redemptions are subject to restrictions set forth in the FHLBank Act, Finance Board regulations, our Capital Plan, and applicable
resolutions, if any, adopted by our Board. As of June 30, 2007 and December 31, 2006, our Class B stock totaled $2.2 billion, with $284.8 million and $207.5 million in Class B stock redemption requests and requests to withdraw from
membership. All of the Class B stock related to member withdrawals has been classified as mandatorily redeemable Class B stock in our Statements of Condition.

As of June 30, 2007, the balance of our Class A stock was $485,000. As of June 30, 2007, the Seattle Bank had excess stock of $901.7 million, with 15 of our members using stock from the excess stock
pool to support $2.9 billion in additional advances.

For additional information on our Capital plan amendments implemented in December
2006, see Part II. Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Capital Resources and Liquidity  Capital Resources  Capital Plan Amendments and Board Policies
Regarding Seattle Bank Stock in our 2006 annual report on Form 10-K.



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Retained Earnings and Dividends. In general, our retained earnings represent our net income after
the payment of any dividends to our members. During the six months ended June 30, 2007, our net income increased to $25.2 million, compared to $10.5 million for the same period in 2006.

Under our Capital Plan, our Board can declare and pay dividends either in cash or capital stock (although pursuant to Board resolution, Class A
stock dividends must be paid in cash) from retained earnings or current net earnings. In December 2006, the Finance Board issued a final rule that prohibits an FHLBank from declaring and paying stock dividends if its excess stock balance is greater
than one percent of its total assets. As of June 30, 2007, the Seattle Bank had excess stock of $901.7 million, or 1.58% of total assets, and is currently prohibited from issuing stock dividends.

In September 2004, our Board adopted a revised retained earnings policy in accordance with Finance Board guidance. Under this policy, we establish
retained earnings targets each quarter based on criteria including, among other things, market-, credit-, and operations-risk components. In April 2007, the Board approved a revised mechanism, which added, among other things, a component equal to
one year of operating expenses, for determining the target level of retained earnings and established a new target of $138.0 million. As of December 31, 2006, the retained earnings target was set $102.0 million. We reported retained earnings of
$112.2 million and $92.4 million as of June 30, 2007 and December 31, 2006.

Under a Board policy adopted in December 2006
(following a related waiver from the Finance Boards Director of the Office of Supervision), we are limited to paying dividends no greater than 50% of our year-to-date earnings until, among other requirements, our retained earnings target has
been met and the Finance Boards Director of Supervision removes our dividend restriction. Our longer term goal is to pay members a market-based dividend, subject to applicable dividend restrictions and capital requirements. On July 26,
2007, the Board declared a $1.31 per share dividend on average Class A stock outstanding during the second quarter of 2007 and a $0.15 per share dividend on average Class B stock outstanding during the second quarter of 2007. The cash dividends
will be paid in August 2007.

For additional information on our dividend policy, see Part II. Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations  Capital Resources and Liquidity  Retained Earnings and Dividends in our 2006 annual report on Form 10-K.

Statutory Capital Requirements. We are subject to three capital requirements. As of June 30, 2007 and December 31, 2006, we were in
compliance with these statutory capital requirements. These requirements are as follows:

First, we are required to hold at all times
risk-based capital at least equal to the sum of our credit-risk capital requirement, market-risk capital requirement, and operations-risk capital requirement, calculated in accordance with federal laws and regulations. Only permanent capital,
defined as retained earnings and Class B stock, can satisfy the risk-based capital requirement. Mandatorily redeemable Class B stock is included in our permanent capital based on a directive from the Finance Board. Class A stock and accumulated
other comprehensive income are considered nonpermanent capital. The Finance Board has the authority to require us to maintain a greater amount of permanent capital than is required by the risk-based capital requirement, but has not exercised such
authority.



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The following table presents our permanent capital and risk-based capital requirements as of
June 30, 2007 and December 31, 2006.



|                                              |  |                     |           |                        |   |          
|--------------------------------------------- |  | ------------------- | --------- | ---------------------- | - | ---------
|Permanent and Risk-Based Capital Requirements |  | As of June 30, 2007 |           | As ofDecember 31, 2006
|(in thousands)                                |  |                     |           |                       
|Permanent Capital                             |  |                     |           |                        |   |          
|Class B stock                                 |  | $                   | 2,139,987 |                        | $ | 2,140,997
|Mandatorily redeemable Class B stock          |  |                     | 82,345    |                        |   | 69,222   
|Retained earnings                             |  |                     | 112,240   |                        |   | 92,397   
|                                              |  |                     |           |                        |   |          
|Permanent capital                             |  | $                   | 2,334,572 |                        | $ | 2,302,616
|                                              |  |                     |           |                        |   |          
|Risk-Based Capital Requirement                |  |                     |           |                        |   |          
|Credit risk                                   |  |                     | 159,188   |                        |   | 140,870  
|Market risk                                   |  |                     | 118,105   |                        |   | 109,732  
|Operations risk                               |  |                     | 83,188    |                        |   | 75,180   
|                                              |  |                     |           |                        |   |          
|Risk-based capital requirement                |  | $                   | 360,481   |                        | $ | 325,782  
|                                              |  |                     |           |                        |   |          

Second, we are required to maintain at all times a total regulatory capital-to-assets ratio of at
least 4.00%. Total capital is the sum of permanent capital, Class A stock, any general loss allowance, if consistent with U.S. GAAP and not established for specific assets, and other amounts from sources determined by the Finance Board as
available to absorb losses. Pursuant to action taken by our Board in January 2007, our minimum capital-to-assets ratio is currently set at 4.05%. Between December 2004 and January 2007, under the terms of the business plan, the Board had set our
minimum capital-to-assets ratio at 4.25%.

The following table presents our capital-to-assets ratios as of June 30, 2007 and
December 31, 2006.



|                                                                                                             |  |                     |           |   |                        |   |           |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Capital-to-Assets Ratios                                                                                     |  | As of June 30, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands)                                                                                               |  |                     |           |   |                        |  
|Minimum Board-approved capital (4.05% of total assets as of June 30, 2007 and 4.25% as of December 31, 2006) |  | $                   | 2,304,547 |   |                        | $ | 2,274,377 |  
|Total permanent capital                                                                                      |  |                     | 2,334,572 |   |                        |   | 2,302,616 |  
|Capital-to-assets ratio (total capital as a percentage of total assets)                                      |  |                     | 4.10      | % |                        |   | 4.30      | %

Third, we are required to maintain a 5.00% minimum leverage ratio based on leverage capital, which
is the sum of permanent capital weighted by a 1.5 multiplier plus nonpermanent capital. A minimum leverage ratio, which is defined as leverage capital divided by total assets, is intended to ensure that we maintain sufficient amount of permanent
capital.

The following table presents our leverage ratios as of June 30, 2007 and December 31, 2006.



|                                                                                 |  |                     |           |   |                        |   |           |  
|-------------------------------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Leverage Ratios                                                                  |  | As of June 30, 2007 |           |   | As ofDecember 31, 2007 |  
|(in thousands, except percentages)                                               |  |                     |           |   |                        |  
|Minimum leverage capital (5.00% of total assets)                                 |  | $                   | 2,845,120 |   |                        | $ | 2,675,737 |  
|Leverage capital (includes 1.5 weighting factor applicable to permanent capital) |  |                     | 3,502,343 |   |                        |   | 3,453,922 |  
|Leverage ratio (leverage capital as a percentage of total assets)                |  |                     | 6.16      | % |                        |   | 6.45      | %

Liquidity

We are required to maintain liquidity in accordance with federal laws and regulations, and policies established by our Board. In addition, in their asset and liability management planning, members may look to the
Seattle Bank as a source of standby liquidity. We seek to meet our members credit and liquidity needs, while complying with regulatory requirements and board-established policies, without maintaining excessive holdings of low-yielding liquid
investments or incurring unnecessarily high borrowing costs. We actively manage our liquidity to preserve stable, reliable, and cost-effective sources of funds to meet all current and future normal operating financial commitments.



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Our primary sources of liquidity are short-term investments and the proceeds of new consolidated
obligation issuances. Secondary sources of liquidity are other short-term borrowings, including federal funds purchased, and securities sold under agreements to repurchase. Member deposits and capital are also liquidity sources. To ensure that
adequate liquidity is available to meet our requirements, we monitor and forecast our future cash flows and anticipated member liquidity needs, and we adjust our funding and investment strategies as needed. Our access to liquidity may be negatively
affected by, among other things, rating agency actions and changes in demand for FHLBank System debt or regulatory action that would limit debt issuances.

Federal regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are cash, secured advances, assets with an
assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations, mortgage loans or other securities of or issued by the U.S. government or its agencies, and securities that fiduciary and trust funds may
invest in under the laws of the state in which the FHLBank is located. The following table presents our compliance with this requirement as of June 30, 2007 and December 31, 2006.



|                            |  |                     |            |                        |   |           
|--------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Unpledged Qualifying Assets |  | As of June 30, 2007 |            | As ofDecember 31, 2006
|(in thousands)              |  |                     |            |                       
|Outstanding debt            |  | $                   | 52,831,753 |                        | $ | 49,536,576
|Aggregate qualifying assets |  |                     | 56,684,003 |                        |   | 53,337,012

We maintain contingency liquidity plans designed to enable us to meet our obligations and the
liquidity needs of our members in the event of operational disruptions at the Seattle Bank or the Office of Finance or financial market disruptions. These include back-up funding sources in the repurchase and federal funds markets. In addition, in
the event of a financial market disruption in which the FHLBank System is not able to issue consolidated obligations, we could pledge our held-to-maturity investment portfolio to borrow funds. Our investment portfolio includes high-quality
investment securities that are readily marketable. Our long-term investments include mortgage-backed securities and U.S. agency obligations, of which almost 100% were rated AAA by Standard & Poors or Aaa by
Moodys as of June 30, 2007.

As of June 30, 2007, we also were in compliance with other federal laws and regulations and
policies established by our Board relating to liquidity. For additional information on our statutory liquidity requirements, see Part I. Item 1. BusinessRegulationLiquidity Requirements. of our 2006 annual report on Form
10-K.

Contractual Obligations and Other Commitments

The following table presents our contractual obligations and commitments as of June 30, 2007.



|                                                 |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           
|------------------------------------------------ |  | ----------------------------------------- | ---------- | ------------ | - | ------------ |  | ---------- | --------- | ----- | - | --------- |  | - | ----------
|                                                 |  | As of June 30, 2007 Payment Due by Period
|Contractual Obligations and Commitments          |  | Less than 1Year                           |            | 1 to 3 Years |   | 3 to 5 Years |  | Thereafter |           | Total
|(in thousands)                                   |  |                                           |            |              |   |              |  |            |           |      
|Member term deposits                             |  | $                                         | 109,835    |              | $ |              |  | $          |           |       | $ |           |  | $ | 109,835   
|Consolidated obligations                         |  |                                           | 18,157,125 |              |   | 14,938,570   |  |            | 6,312,765 |       |   | 9,386,200 |  |   | 48,794,660
|Consolidated obligation bonds traded not settled |  |                                           | 230,000    |              |   | 280,000      |  |            | 30,000    |       |   | 115,000   |  |   | 655,000   
|Derivative liabilities                           |  |                                           | 25,609     |              |   |              |  |            |           |       |   |           |  |   | 25,609    
|Mandatorily redeemable capital stock             |  |                                           |            |              |   | 64,336       |  |            | 18,009    |       |   |           |  |   | 82,345    
|Operating leases                                 |  |                                           | 2,659      |              |   | 5,835        |  |            | 6,197     |       |   | 2,629     |  |   | 17,320    
|                                                 |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           
|Total contractual obligations                    |  | $                                         | 18,525,228 |              | $ | 15,288,741   |  | $          | 6,366,971 |       | $ | 9,503,829 |  | $ | 49,684,769
|                                                 |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           
|Other Commitments                                |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           
|Commitments for additional advances              |  | $                                         | 30,901     |              | $ | 6,686        |  | $          |           |       | $ |           |  | $ | 37,587    
|Standby letters of credit                        |  |                                           | 144,957    |              |   | 7,510        |  |            | 329       |       |   | 73        |  |   | 152,869   
|Standby bond purchase agreements                 |  |                                           | 65,955     |              |   |              |  |            |           |       |   |           |  |   | 65,955    
|Unused lines of credit and other commitments     |  |                                           | 50,000     |              |   |              |  |            |           |       |   |           |  |   | 50,000    
|                                                 |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           
|Total other commitments                          |  | $                                         | 291,813    |              | $ | 14,196       |  | $          | 329       |       | $ | 73        |  | $ | 306,411   
|                                                 |  |                                           |            |              |   |              |  |            |           |       |   |           |  |   |           



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In June 2006, the FHLBanks and the Office of Finance entered into the Federal Home Loan Banks P&I
Funding and Contingency Plan Agreement, or the Contingency Agreement, effective in July 2006. The FHLBanks and the Office of Finance entered into the Contingency Agreement in response to the Board of Governors of the Federal Reserve System revising
its Policy Statement on Payments System Risk concerning the disbursement by the Federal Reserve Banks of interest and principal payments on securities issued by GSEs, such as the FHLBanks. Under the Contingency Agreement, in the event that one or
more FHLBanks does not fund its principal and interest payments under a consolidated obligation by deadlines agreed upon by the FHLBanks, the other FHLBanks will be responsible for those payments in the manner described in the Contingency Agreement.
We have not funded any consolidated obligation principal and interest payments under the Contingency Agreement.

Results of Operations

For the Three and Six Months Ended June 30, 2007 and 2006

The Seattle Banks net income increased by $12.1 million and $14.7 million, to $14.6 million and $25.2 million, for the three and six months ended
June 30, 2007, compared to the same periods in 2006. The increases in net income for the three- and six-month periods were primarily due to increased net interest income resulting from reinvesting proceeds from maturing low-yielding investments
in consolidated obligations of other FHLBanks into higher-yielding short-term investments and decreasing our target capital-to-assets ratio to 4.10% from 4.30%. Partially offsetting the improved net interest income were net other losses on
derivatives and hedging activities.

Net interest income increased by $22.4 million and $30.6 million, to $36.0 million and $64.5 million
for the three and six months ended June 30, 2007, compared to the same periods in 2006, as a result of increases in short-term interest rates, which favorably impacted our short-term advance rates as well as our short-term investment rates. The
$1.2 billion in funds from the maturity and sale of low-yielding consolidated obligations of other FHLBanks in the first quarter of 2007, which were reinvested in higher-yielding short-term investments, also increased net interest income.

As discussed above, as of June 30, 2007, we had a net unrealized market value loss of $325.0 million, which is not reflected in our
Statement of Condition. See  Financial Condition, Item 8. Financial Statements and Supplementary Data  Financial Statements in our 2006 annual report on Form 10-K, and Note 8 of Item 1. Financial
Statements in this report. The low-yielding investments that primarily contribute to our unrealized market value losses will continue to depress our net income in 2007 and in later years.

Net Interest Income

Net interest
income is the primary performance measure for our ongoing operations. Our net interest income consists of interest earned on advances, mortgage loans held for portfolio, and investments, less interest accrued or paid on consolidated obligations,
deposits, and other borrowings. Our net interest income is affected by changes in the average balance (volume) of our interest-earning assets and interest-bearing liabilities and changes in the average yield (rate) for both the interest-earning
assets and interest-bearing liabilities. These changes are influenced by economic factors and by changes in our products or services. Interest rates are the primary economic factor affecting net interest income.

Average Balances, Interest Income and Expense, and Average Yields. The following tables present average balances and yields, and interest income and expense of
our major categories of interest-earning assets and interest-bearing liabilities, for the three and six months ended June 30, 2007 and 2006. The tables also present interest-rate spreads between the average yield on total earning assets and the
average cost of total interest-bearing liabilities, as well as net interest margin (i.e., net interest income divided by average earning assets), for the three and six months ended June 30, 2007 and 2006.



37



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##### Table of Contents

|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|------------------------------------ |  | ----------------------------------- | ---------- | ------------------------ | - | -------------- |  | --------------- |  | ------------------------ | ---------- | -------------- | - | --------- |  | ----- | -
|                                     |  | For the Three Months Ended June 30, |           
|                                     |  | 2007                                |            | 2006                     |  
|                                     |  | Average Balance                     |            | InterestIncome/Expense   |   | AverageYield % |  | Average Balance |  | InterestIncome/Expense   |            | AverageYield % |  
|(in thousands, exceptpercentages)    |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |  
|Interest-Earning Assets              |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Advances                             |  | $                                   | 26,145,266 |                          | $ | 350,990        |  | 5.38            |  | $                        | 24,841,660 |                | $ | 307,274   |  | 4.96  |  
|Mortgage loans held for portfolio    |  |                                     | 6,098,194  |                          |   | 76,683         |  | 5.04            |  |                          | 6,885,753  |                |   | 89,046    |  | 5.19  |  
|Investments                          |  |                                     | 24,023,975 |                          |   | 295,539        |  | 4.93            |  |                          | 21,025,337 |                |   | 222,707   |  | 4.25  |  
|Other interest-earning assets        |  |                                     | 911        |                          |   | 12             |  | 5.35            |  |                          | 1,399      |                |   | 18        |  | 5.12  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total interest-earning assets        |  | $                                   | 56,268,346 |                          | $ | 723,224        |  | 5.16            |  | $                        | 52,754,149 |                | $ | 619,045   |  | 4.71  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Other assets                         |  |                                     | 505,883    |                          |   |                |  |                 |  |                          | 299,782    |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total assets                         |  | $                                   | 56,774,229 |                          |   |                |  |                 |  | $                        | 53,053,931 |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Interest-Bearing Liabilities         |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Consolidated obligations             |  | $                                   | 52,781,111 |                          | $ | 674,859        |  | 5.13            |  | $                        | 49,317,299 |                | $ | 595,504   |  | 4.84  |  
|Deposits                             |  |                                     | 938,539    |                          |   | 12,181         |  | 5.21            |  |                          | 626,393    |                |   | 7,497     |  | 4.80  |  
|Mandatorily redeemable Class B stock |  |                                     | 82,222     |                          |   | 165            |  | 0.80            |  |                          | 68,201     |                |   |           |  |       |  
|Other borrowings                     |  |                                     | 540        |                          |   | 7              |  | 5.36            |  |                          | 196,107    |                |   | 2,394     |  | 4.90  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total interest-bearing liabilities   |  | $                                   | 53,802,412 |                          | $ | 687,212        |  | 5.13            |  | $                        | 50,208,000 |                | $ | 605,395   |  | 4.84  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Other liabilities                    |  |                                     | 726,371    |                          |   |                |  |                 |  |                          | 632,233    |                |   |           |  |       |  
|Capital                              |  |                                     | 2,245,446  |                          |   |                |  |                 |  |                          | 2,213,698  |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total liabilities and capital        |  | $                                   | 56,774,229 |                          |   |                |  |                 |  | $                        | 53,053,931 |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Net interest income                  |  |                                     |            |                          | $ | 36,012         |  |                 |  |                          |            |                | $ | 13,650    |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Interest-rate spread                 |  |                                     |            |                          |   |                |  | 0.03            |  |                          |            |                |   |           |  | (0.13 | )
|Net interest margin                  |  |                                     |            |                          |   |                |  | 0.26            |  |                          |            |                |   |           |  | 0.10  |  
|                                     | 
|                                     |  | For the Six Months Ended June 30,   |           
|                                     |  | 2007                                |            | 2006                     |  
|                                     |  | Average Balance                     |            | Interest Income/ Expense |   | AverageYield % |  | Average Balance |  | Interest Income/ Expense |            | AverageYield % |  
|(in thousands, exceptpercentages)    |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |  
|Interest-Earning Assets              |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Advances                             |  | $                                   | 26,591,361 |                          | $ | 709,725        |  | 5.38            |  | $                        | 23,556,827 |                | $ | 557,496   |  | 4.77  |  
|Mortgage loans held for portfolio    |  |                                     | 6,186,443  |                          |   | 154,773        |  | 5.05            |  |                          | 6,995,500  |                |   | 180,368   |  | 5.20  |  
|Investments                          |  |                                     | 22,740,623 |                          |   | 549,897        |  | 4.88            |  |                          | 22,100,430 |                |   | 460,979   |  | 4.21  |  
|Other interest-earning assets        |  |                                     | 492        |                          |   | 13             |  | 5.35            |  |                          | 704        |                |   | 18        |  | 5.12  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total interest-earning assets        |  | $                                   | 55,518,919 |                          | $ | 1,414,408      |  | 5.14            |  | $                        | 52,653,461 |                | $ | 1,198,861 |  | 4.59  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Other assets                         |  |                                     | 493,004    |                          |   |                |  |                 |  |                          | 300,204    |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total assets                         |  | $                                   | 56,011,923 |                          |   |                |  |                 |  | $                        | 52,953,665 |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Interest-Bearing Liabilities         |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Consolidated obligations             |  | $                                   | 52,092,019 |                          | $ | 1,327,191      |  | 5.14            |  | $                        | 49,107,940 |                | $ | 1,143,524 |  | 4.70  |  
|Deposits                             |  |                                     | 870,419    |                          |   | 22,481         |  | 5.21            |  |                          | 675,929    |                |   | 15,326    |  | 4.57  |  
|Mandatorily redeemableClass B stock  |  |                                     | 79,459     |                          |   | 241            |  | 0.61            |  |                          | 67,441     |                |   |           |  |       |  
|Other borrowings                     |  |                                     | 944        |                          |   | 25             |  | 5.34            |  |                          | 268,392    |                |   | 6,103     |  | 4.59  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total interest-bearing liabilities   |  | $                                   | 53,042,841 |                          | $ | 1,349,938      |  | 5.13            |  | $                        | 50,119,702 |                | $ | 1,164,953 |  | 4.69  |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Other liabilities                    |  |                                     | 732,658    |                          |   |                |  |                 |  |                          | 623,489    |                |   |           |  |       |  
|Capital                              |  |                                     | 2,236,424  |                          |   |                |  |                 |  |                          | 2,210,474  |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Total liabilities and capital        |  | $                                   | 56,011,923 |                          |   |                |  |                 |  | $                        | 52,953,665 |                |   |           |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Net interest income                  |  |                                     |            |                          | $ | 64,470         |  |                 |  |                          |            |                | $ | 33,908    |  |       |  
|                                     |  |                                     |            |                          |   |                |  |                 |  |                          |            |                |   |           |  |       |  
|Interest-rate spread                 |  |                                     |            |                          |   |                |  | 0.01            |  |                          |            |                |   |           |  | (0.10 | )
|Net interest margin                  |  |                                     |            |                          |   |                |  | 0.23            |  |                          |            |                |   |           |  | 0.13  |  



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##### Table of Contents

Both total interest income and total interest expense increased for the three and six months ended
June 30, 2007, compared to the same periods in 2006 because of higher prevailing short-term interest rates and increases in advances and the debt required to fund those advances, resulting in an increase in net interest income. Net interest
income also increased as a result of the replacement of certain of our low-yielding investments with higher-yielding short-term investments. We expect that our existing high-cost, long-term borrowings and our remaining low-yielding investments in
consolidated obligations of other FHLBanks will continue to depress our net interest income in 2007 and in later years.

For the three and
six months ended June 30, 2007, the composition of our interest-earning assets changed significantly from those of the same period in 2006, as we continued to refocus our business on advances, with the average balances of our advances and
investments increasing and the average balance of our mortgage loans held for portfolio decreasing. The significant increase in advances largely reflected our increased use of differential pricing and the lowering of our members activity-based
stock purchase requirement from 3.50% to 2.50% from April 2006 to December 2006. Effective in December 2006, the Board increased the activity-based stock purchase requirement to 4.00%. The reduction in mortgage loans held for portfolio reflected our
decision in early 2005 to exit the MPP, which led to our discontinuing the purchase of new mortgage loans. Since the yield on our advances is higher than the yield on our mortgage loans held for portfolio and investments, there was an overall
increase in net interest income as our mortgage loans were paid down and certain of our low-yielding investments were sold or matured and were replaced with higher-yielding investments. We expect these trends to continue as we continue to reduce our
mortgage loan balance and increase our advance business.

The 100 basis-point increase in the federal funds rate between January 1,
2006 and June 30, 2007 caused a similar increase in short-term interest rates, which resulted in higher average yields on our interest-earning assets and higher average costs on our interest-bearing liabilities during the three and six months
ended June 30, 2007, compared to the same periods in 2006. However, during the three and six months ended June 30, 2007, compared to the same periods in 2006, we experienced a larger increase in the average yield on our interest-earning
assets than in the average cost on our interest-bearing liabilities, increasing our interest-rate spread by 16 and 11 basis points to 3 and 1 basis points, and increasing our net interest income. This improvement of our interest-rate spread
primarily resulted from a reduction in the amount of our low-yielding investments due to sales and maturities of our investment in the consolidated obligations of other FHLBanks and an increase in the amount of our higher-yielding advances.

Changes in Volume and Rate. The following table separates the two principal components of the changes in our net interest incomeinterest
income and interest expenseidentifying the amounts due to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in the average interest rate for the three and six months ended June 30, 2007 and
2006.



|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|--------------------------------- |  | ----------------------------------- | ------ | - | --------------------------------- | - | ------ | ----- |  | - | -------- | - |  | ------ | ------- | - | ----- | - | ------- | - |  | - | ------- | -
|                                  |  | For the Three Months Ended June 30, |        |   | For the Six Months Ended June 30, |  
|                                  |  | 2007 v. 2006                        |        |   | 2007 v. 2006                      |  
|                                  |  | Increase (Decrease)                 |        |   | Increase (Decrease)               |  
|Change in Volume and Rate         |  | Volume *                            |        |   | Rate *                            |   |        | Total |  |   | Volume * |   |  | Rate * |         |   | Total |  
|(in thousands)                    |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |  
|Interest Income                   |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Advances                          |  | $                                   | 28,084 |   |                                   | $ | 15,632 |       |  | $ | 43,716   |   |  | $      | 76,422  |   |       | $ | 75,807  |   |  | $ | 152,229 |  
|Investments and other             |  |                                     | 4,366  |   |                                   |   | 68,460 |       |  |   | 72,826   |   |  |        | 13,675  |   |       |   | 75,238  |   |  |   | 88,913  |  
|Mortgage loans held for portfolio |  |                                     | (7,621 | ) |                                   |   | (4,742 | )     |  |   | (12,363  | ) |  |        | (20,368 | ) |       |   | (5,227  | ) |  |   | (25,595 | )
|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Total interest income             |  | $                                   | 24,829 |   |                                   | $ | 79,350 |       |  | $ | 104,179  |   |  | $      | 69,729  |   |       | $ | 145,818 |   |  | $ | 215,547 |  
|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Interest Expense                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Consolidated obligations          |  | $                                   | 25,805 |   |                                   | $ | 53,550 |       |  | $ | 79,355   |   |  | $      | 72,053  |   |       | $ | 111,614 |   |  | $ | 183,667 |  
|Deposits and other borrowings     |  |                                     | (124   | ) |                                   |   | 2,586  |       |  |   | 2,462    |   |  |        | (1,344  | ) |       |   | 2,662   |   |  |   | 1,318   |  
|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Total interest expense            |  |                                     | 25,681 |   |                                   |   | 56,136 |       |  |   | 81,817   |   |  |        | 70,709  |   |       |   | 114,276 |   |  |   | 184,985 |  
|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  
|Change in net interest income     |  | $                                   | (852   | ) |                                   | $ | 23,214 |       |  | $ | 22,362   |   |  | $      | (980    | ) |       | $ | 31,542  |   |  | $ | 30,562  |  
|                                  |  |                                     |        |   |                                   |   |        |       |  |   |          |   |  |        |         |   |       |   |         |   |  |   |         |  

---

|* | Changes in interest income and interest expense not identifiable as either volume-related or rate-related, but rather equally attributable to both volume and rate changes, are
allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

For the three and six months ended June 30, 2007, compared to the same periods in 2006, increases in
net interest income were attributable to favorable changes in interest rates. The favorable change in net interest income as a result of interest-rate changes was primarily due to the reinvestment of proceeds from the sale and call of certain
low-yielding investments into higher-yielding short-term investments.

Interest Income

The following table presents the components of our interest income by category of interest-earning assets and the percentage change in each category for
the three and six months ended June 30, 2007 and 2006.



|                                   |  |                                     |         |      |                                   |                             |  |         |      |  |      |           |                             |   |           |  |       |  
|---------------------------------- |  | ----------------------------------- | ------- | ---- | --------------------------------- | --------------------------- |  | ------- | ---- |  | ---- | --------- | --------------------------- | - | --------- |  | ----- | -
|                                   |  | For the Three Months Ended June 30, |         |      | For the Six Months Ended June 30, |                            
|Interest Income                    |  | 2007                                |         | 2006 |                                   | PercentIncrease /(Decrease) |  |         | 2007 |  | 2006 |           | PercentIncrease /(Decrease) |  
|(in thousands, except percentages) |  |                                     |         |      |                                   |                             |  |         |      |  |      |           |                             |  
|Advances                           |  | $                                   | 349,966 |      | $                                 | 307,196                     |  | 13.9    |      |  | $    | 707,558   |                             | $ | 557,074   |  | 27.0  |  
|Prepayment fees on advances        |  |                                     | 1,024   |      |                                   | 78                          |  | 1,212.8 |      |  |      | 2,167     |                             |   | 422       |  | 413.5 |  
|                                   |  |                                     |         |      |                                   |                             |  |         |      |  |      |           |                             |   |           |  |       |  
|Subtotal                           |  |                                     | 350,990 |      |                                   | 307,274                     |  | 14.2    |      |  |      | 709,725   |                             |   | 557,496   |  | 27.3  |  
|Investments                        |  |                                     | 295,539 |      |                                   | 222,707                     |  | 32.7    |      |  |      | 549,897   |                             |   | 460,979   |  | 19.3  |  
|Mortgage loans held for portfolio  |  |                                     | 76,683  |      |                                   | 89,046                      |  | (13.9   | )    |  |      | 154,773   |                             |   | 180,368   |  | (14.2 | )
|Other                              |  |                                     | 12      |      |                                   | 18                          |  | (33.3   | )    |  |      | 13        |                             |   | 18        |  | (27.8 | )
|                                   |  |                                     |         |      |                                   |                             |  |         |      |  |      |           |                             |   |           |  |       |  
|Total interest income              |  | $                                   | 723,224 |      | $                                 | 619,045                     |  | 16.8    |      |  | $    | 1,414,408 |                             | $ | 1,198,861 |  | 18.0  |  
|                                   |  |                                     |         |      |                                   |                             |  |         |      |  |      |           |                             |   |           |  |       |  

Total interest income increased for the three and six months ended June 30, 2007, compared to
the same periods in 2006, primarily due to significant increases in the volume and yield on our advance portfolio as well as a significant increase in yield on our investment portfolio. These increases were partially offset by the decreases in the
volume and yield on our mortgage loans held for portfolio.

Advances. Interest income from advances increased 13.9% and 27.0% for
the three and six months ended June 30, 2007, compared to the same periods in 2006, due to significant increases in the average advance volumes and increases in interest rates. A $1.3 billion and $3.0 billion increase, representing a 5.2%
and 12.9% growth in the average advance balances for the three and six months ended June 30, 2007, compared to the same periods of 2006, primarily resulted from our increased use of differential pricing for advances and our members use of
the excess stock pool. The yield on advances increased by 42 and 61 basis points, to 5.38% for both the three and six month periods ending June 30, 2007, compared to the same periods of 2006, primarily due to significantly higher
prevailing short-term interest rates, combined with our high percentage of short-term advances.

We expect to continue to increase our
advance business in the future. In refocusing our business on advances, we have continued our use of differential pricing, offered additional advance products, and enhanced our marketing efforts. However, as a result of the use of differential
pricing, we expect our overall advance balance to continue to be dependent upon the borrowing decisions of a few large members. We expect that our continued use of differential pricing will generate spreads similar to those earned on investments in
federal funds, while we increase our advance balance. Consequently, we would not expect repayments of advances by these members to significantly affect our net interest income because we would likely invest the proceeds of any such advance
repayments in federal funds.

Prepayment Fees on Advances. During the three and six months ended June 30, 2007, prepayment fee
income of $1.0 million and $2.2 million primarily resulted from fees charged to borrowers that prepaid $181.9 million and $206.9 million in advances, which is partially offset by termination fees charged on the cancellation of interest-rate exchange
agreements hedging those advances. This is compared to $78,000 and $422,000 for the same periods in 2006 when borrowers prepaid $54.8 million and $102.5 million in advances.



40



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##### Table of Contents

Investments. Interest income from investments increased by 32.7% and 19.3% for the three and six
months ended June 30, 2007, compared to the same periods in 2006, primarily resulting from a higher average investment yield as well as an increase in our average investment portfolio balance. We benefited from the significant increases in
short-term interest rates that increased the yields earned on our short-term investments. For the three and six months ended June 30, 2007, the yield on the investment portfolio increased by 68 and 67 basis points due to the addition of new
investments at generally higher yields than the existing investments we held or replaced.

Mortgage Loans Held for Portfolio.
Interest income from mortgage loans held for portfolio decreased by 13.9% and 14.2% for the three and six months ended June 30, 2007, compared to the same periods in 2006. The decreases were due to a significant decline in the average balance
of mortgage loans held for portfolio resulting from our decision in early 2005 to exit the MPP. The average balance of our mortgage loans held for portfolio decreased by $787.6 million and $809.1 million to $6.1 billion and $6.2 billion, for
the three-and six month periods ended June 30, 2007 and 2006. Contributing to the decline in interest income caused by the reduction in the average balance was a 15-basis point decrease in the average yield on mortgage loans held for portfolio
for both the three and six months ended June 30, 2007, compared to the same periods in 2006. The balance of our remaining mortgage loans held for portfolio will continue to decrease as these loans are paid off.

Interest Expense

The following table
presents the components of our interest expense by category of interest-bearing liability and the percentage change in each category for the three and six months ended June 30, 2007 and 2006.



|                                                          |  |                                     |         |      |                                   |                             |  |       |      |  |      |           |                             |   |           |  |       |  
|--------------------------------------------------------- |  | ----------------------------------- | ------- | ---- | --------------------------------- | --------------------------- |  | ----- | ---- |  | ---- | --------- | --------------------------- | - | --------- |  | ----- | -
|                                                          |  | For the Three Months Ended June 30, |         |      | For the Six Months Ended June 30, |                            
|Interest Expense                                          |  | 2007                                |         | 2006 |                                   | PercentIncrease /(Decrease) |  |       | 2007 |  | 2006 |           | PercentIncrease /(Decrease) |  
|(in thousands, except percentages)                        |  |                                     |         |      |                                   |                             |  |       |      |  |      |           |                             |  
|Consolidated obligations                                  |  | $                                   | 674,859 |      | $                                 | 595,504                     |  | 13.3  |      |  | $    | 1,327,191 |                             | $ | 1,143,524 |  | 16.1  |  
|Deposits                                                  |  |                                     | 12,181  |      |                                   | 7,497                       |  | 62.5  |      |  |      | 22,481    |                             |   | 15,326    |  | 46.7  |  
|Securities sold under agreements to repurchase            |  |                                     | 4       |      |                                   | 2,361                       |  | (99.8 | )    |  |      | 8         |                             |   | 6,059     |  | (99.9 | )
|Mandatorily redeemable Class B stock and other borrowings |  |                                     | 168     |      |                                   | 33                          |  | 409.1 |      |  |      | 258       |                             |   | 44        |  | 486.4 |  
|                                                          |  |                                     |         |      |                                   |                             |  |       |      |  |      |           |                             |   |           |  |       |  
|Total interest expense                                    |  | $                                   | 687,212 |      | $                                 | 605,395                     |  | 13.5  |      |  | $    | 1,349,938 |                             | $ | 1,164,953 |  | 15.9  |  
|                                                          |  |                                     |         |      |                                   |                             |  |       |      |  |      |           |                             |   |           |  |       |  

Consolidated Obligations. Interest expense on consolidated obligations increased by 13.3%
and 16.1% for the three and six months ended June 30, 2007, compared to the same periods in 2006. These increases were the result of significant increases in both the volume of borrowings and the increased interest rates during the first three
and six months of 2007 and throughout 2006. The average balance of consolidated obligations increased by $3.5 billion and $3.0 billion, or 7.0% and 6.1%, from the same periods in 2006. We increased the average balance of our consolidated obligations
in order to fund growth in our advance portfolio and implement our strategy of managing our business to a capital-to-assets target of 4.10% in order to more fully use our capital, while staying within our minimum capital-to-assets ratio of 4.05%.
The average cost of consolidated obligations increased by 29 and 44 basis points due to the addition of new consolidated obligations at generally higher costs than the existing obligations held or the obligations replaced.

Deposits. Interest expense on deposits increased by 62.5% and 46.7% for the three and six months ended June 30, 2007, compared to the same
periods in 2006, due to a 41- and 64-basis point increase in the average yield paid to members and a 49.8% and 28.8% increase in the average balance of deposits. Deposit levels vary based on the interest rates paid to our members as well as our
members liquidity levels.

Securities Sold Under Agreements to Repurchase. Interest expense decreased significantly during the
three- and six-month periods ended June 30, 2007 and 2006, as we did not find it economical to utilize reverse repurchase agreements in significant volume. We consider using reverse repurchase agreements when it is economically advantageous to
do so.



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Mandatorily Redeemable Class B Stock and Other Borrowings.Interest expense on mandatorily
redeemable Class B stock and other borrowings increased in the first three and six months of 2007, compared to the same periods in 2006, primarily due to our resumption of dividend payments in December 2006. Prior to that date, no interest expense
was accrued on mandatorily redeemable stock as we were not paying dividends on our capital stock.

Effect of Derivatives and Hedging on
Net Interest Income

The following table presents the effect of derivatives and hedging on the components of our interest income and
interest expense for the three and six months ended June 30, 2007 and 2006.



|                                                        |      |                                                |         |      |                                              |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------------------- | ---- | ---------------------------------------------- | ------- | ---- | -------------------------------------------- | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|Effect of Derivatives and Hedging on Net InterestIncome |      | Net Change For the Three Months Ended
June 30, |         |      | Net Change For the Six Months Ended
June 30, |  
|                                                        | 2007 |                                                |         | 2006 |                                              |   | 2007    |   |  | 2006 |        
|(in thousands)                                          |      |                                                |         |      |                                              |   |         |   |  |      |         |  
|Increase in Interest Income                             |      |                                                |         |      |                                              |   |         |   |  |      |         |   |  |   |         |  
|Advances                                                |      | $                                              | 10,772  |      |                                              | $ | 7,037   |   |  | $    | 20,758  |   |  | $ | 10,599  |  
|Increase in Interest Expense                            |      |                                                |         |      |                                              |   |         |   |  |      |         |   |  |   |         |  
|Consolidated obligations                                |      |                                                | (17,908 | )    |                                              |   | (26,598 | ) |  |      | (38,528 | ) |  |   | (40,164 | )
|                                                        |      |                                                |         |      |                                              |   |         |   |  |      |         |   |  |   |         |  
|Decrease in net interest income                         |      | $                                              | (7,136  | )    |                                              | $ | (19,561 | ) |  | $    | (17,770 | ) |  | $ | (29,565 | )
|                                                        |      |                                                |         |      |                                              |   |         |   |  |      |         |   |  |   |         |  

Our use of interest-rate exchange agreements had a net unfavorable effect on our net interest
income for the three-and six-month periods ended June 30, 2007 and 2006, primarily because we held higher notional balances in interest-rate exchange agreements hedging consolidated obligations than those hedging advances. As a result, the
effective conversion of our consolidated obligations to short-term floating rates, combined with significant increases in short-term interest rates, resulted in a decrease in net interest income for the three- and six-month periods ended
June 30, 2007 and 2006.

Other Income (Loss)

Other income (loss) includes member service fees, gain or loss on sale of held to maturity securities, gain or loss on derivatives and hedging activities, gain or loss on the early extinguishment of consolidated
obligation bonds, and other miscellaneous income or loss not included in net interest income. Because of the type of financial activity reported in this category, other income (loss) can be volatile from one period to another. For instance, gain and
loss on derivatives and hedging activities is highly dependent on changes in interest rates and spreads between various interest-rate yield curves.

The following table presents the components of our other income (loss) for the three and six months ended June 30, 2007 and 2006.



|                                                                           |  |                                     |        |   |                                   |   |        |                             |  |        |      |  |   |               |   |  |                             |        |   |  |        |  
|-------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | --------------------------------- | - | ------ | --------------------------- |  | ------ | ---- |  | - | ------------- | - |  | --------------------------- | ------ | - |  | ------ | -
|                                                                           |  | For the Three Months Ended June 30, |        |   | For the Six Months Ended June 30, |  
|Other Income (Loss)                                                        |  | 2007                                |        |   | 2006                              |   |        | PercentIncrease /(Decrease) |  |        | 2007 |  |   | 2006          |   |  | PercentIncrease /(Decrease) |       
|(in thousands, except percentages)                                         |  |                                     |        |   |                                   |   |        |                             |  |        |      |  |   |               |   |  |                             |       
|Service fees                                                               |  | $                                   | 410    |   |                                   | $ | 426    |                             |  | (3.8   | )    |  | $ | 814           |   |  | $                           | 883    |   |  | (7.8   | )
|Net (loss) on sale of held-to-maturity securities                          |  |                                     | (1,292 | ) |                                   |   | (1,622 | )                           |  | 20.3   |      |  |   | (3,643        | ) |  |                             | (1,622 | ) |  | (124.6 | )
|Net (loss) gain on derivatives and hedging activities                      |  |                                     | (3,506 | ) |                                   |   | 662    |                             |  | (629.6 | )    |  |   | (4,693        | ) |  |                             | 2,527  |   |  | (285.7 | )
|Net (loss) gain from early extinguishment of consolidated obligation bonds |  |                                     | (155   | ) |                                   |   | 1,745  |                             |  | (108.9 | )    |  |   | 172           |   |  |                             | 1,745  |   |  | (90.1  | )
|Other (loss), net                                                          |  |                                     | (143   | ) |                                   |   | (80    | )                           |  | (78.8  | )    |  |   | (118          | ) |  |                             | (78    | ) |  | (51.3  | )
|                                                                           |  |                                     |        |   |                                   |   |        |                             |  |        |      |  |   |               |   |  |                             |        |   |  |        |  
|Total other income (loss)                                                  |  | $                                   | (4,686 | ) |                                   | $ | 1,131  |                             |  | (514.3 | )    |  |   | $      (7,468 | ) |  | $                           | 3,455  |   |  | (316.2 | )
|                                                                           |  |                                     |        |   |                                   |   |        |                             |  |        |      |  |   |               |   |  |                             |        |   |  |        |  



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##### Table of Contents

Total other income (loss) decreased by $5.8 million and $10.9 million for the three and six months ended
June 30, 2007, compared to the same periods in 2006, primarily due to a $4.2 million and $7.2 million increase in net loss on derivatives and hedging activities and a $1.9 million and $1.6 million decline in net gains from early extinguishment
of consolidated obligation bonds. In addition, there was a $2.0 million increase in net loss on sale of held-to-maturity securities for the six-month period ended June 30, 2007, compared to the same period in 2006. The significant changes
are discussed in more detail below.

Net (Loss) on Sale of Held-to-Maturity Securities.During the first six months of 2007, we sold
$1.2 billion of investments in consolidated obligations of other FHLBanks that were within 90 days of maturity, resulting in a net loss of $1.3 million and $3.6 million for the three- and six-month periods ended June 30, 2007.

Net (Loss) Gain on Derivatives and Hedging Activities. For the three and six months ended June 30, 2007, compared to the same periods in
2006, we had a $4.2 million and $7.2 million increase in our total net loss on derivatives and hedging activities. These increased losses are discussed below.

Consolidated Obligations. For the three and six months ended June 30, 2007, we recognized a net loss of $2.8 million and $3.7 million on interest-rate exchange agreements used to hedge consolidated
obligations, compared to net gains of $702,000 and $2.3 million for the same periods in 2006.

Economic Hedges. We held $300.0
million notional amount of interest-rate caps as of June 30, 2007 and 2006, and $150.0 million notional amount of interest-rate floors as of June 30, 2007, that are used to economically hedge changes in the fair value of our assets and
liabilities caused by changes in interest rates. Our recorded gains or losses related to interest-rate caps and floors were $506,000 and $708,000 of net losses for the three and six months ended June 30, 2007, compared to $222,000 and $151,000
of net gains for the same periods in 2006.

Net Gain on Early Extinguishment of Consolidated Obligation Bonds. For the three and six
months ended June 30, 2007, we recognized $155,000 in losses and $172,000 in net gains on calls and extinguishments of consolidated obligations, including the related cancellation of interest-rate exchange agreements hedging those consolidated
obligations, a decrease of $1.9 million and $1.6 million compared to the same periods in 2006. We cancelled these agreements primarily as a part of our risk management strategy. See Item 3. Qualitative and Quantitative Disclosures about Market
Risk in this report for additional information regarding our risk strategy.

Other Expense

Other expense includes operating expenses, Finance Board and Office of Finance assessments, and other items, which consist primarily of mortgage loan
administrative fees paid to vendors related to our mortgage loans held for portfolio. The following table presents the components of our other expense for the three and six months ended June 30, 2007 and 2006.



|                                   |  |                                     |        |      |                                   |                             |  |       |      |  |      |        |                             |   |        |  |       |  
|---------------------------------- |  | ----------------------------------- | ------ | ---- | --------------------------------- | --------------------------- |  | ----- | ---- |  | ---- | ------ | --------------------------- | - | ------ |  | ----- | -
|                                   |  | For the Three Months Ended June 30, |        |      | For the Six Months Ended June 30, |                            
|Other Expense                      |  | 2007                                |        | 2006 |                                   | PercentIncrease /(Decrease) |  |       | 2007 |  | 2006 |        | PercentIncrease /(Decrease) |  
|(in thousands, except percentages) |  |                                     |        |      |                                   |                             |  |       |      |  |      |        |                             |  
|Operating expenses                 |  |                                     |        |      |                                   |                             |  |       |      |  |      |        |                             |   |        |  |       |  
|Compensation and benefits          |  | $                                   | 5,636  |      | $                                 | 5,504                       |  | 2.4   |      |  | $    | 11,293 |                             | $ | 11,201 |  | 0.8   |  
|Occupancy cost                     |  |                                     | 1,116  |      |                                   | 1,237                       |  | (9.8  | )    |  |      | 2,482  |                             |   | 2,178  |  | 14.0  |  
|Other operating                    |  |                                     | 3,668  |      |                                   | 3,544                       |  | 3.5   |      |  |      | 6,736  |                             |   | 7,406  |  | (9.0  | )
|Finance Board                      |  |                                     | 444    |      |                                   | 458                         |  | (3.1  | )    |  |      | 891    |                             |   | 917    |  | (2.8  | )
|Office of Finance                  |  |                                     | 355    |      |                                   | 318                         |  | 11.6  |      |  |      | 761    |                             |   | 693    |  | 9.8   |  
|Other                              |  |                                     | 218    |      |                                   | 352                         |  | (38.1 | )    |  |      | 534    |                             |   | 711    |  | (24.9 | )
|                                   |  |                                     |        |      |                                   |                             |  |       |      |  |      |        |                             |   |        |  |       |  
|Total expense                      |  | $                                   | 11,437 |      | $                                 | 11,413                      |  | 0.2   |      |  | $    | 22,697 |                             | $ | 23,106 |  | (1.8  | )
|                                   |  |                                     |        |      |                                   |                             |  |       |      |  |      |        |                             |   |        |  |       |  



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##### Table of Contents

Operating expenses increased by $135,000 for the three months ended June 30, 2007 and decreased by
$274,000 for the six months ended June 30, 2007, compared to the same periods in 2006.

Occupancy cost primarily includes the expenses
related to our leases on one office building in downtown Seattle and an emergency back-up facility outside of downtown Seattle. Occupancy cost decreased in the three months ended June 30, 2007, compared to the same period in 2006, primarily due
to reduced amortization on leasehold improvements. Occupancy cost increased by $304,000 for the six months ended June 30, 2007, compared to the same period in 2006, primarily due to an expense recovery on the early payoff of one of our building
leases in January 2006.

Other operating expenses decreased by $670,000 for the six months ended June 30, 2007 compared to the same
period in 2006 primarily due to decreases in professional and other contractual service fees.

Finance Board and Office of Finance expenses
represent costs allocated to us by the Finance Board and the Office of Finance, calculated through a formula based on our percentage of capital stock, consolidated obligations issued, and consolidated obligations outstanding for the previous month
for the FHLBank System as a whole.

Assessments

Our assessments for AHP and REFCORP increased for the three and six months ended June 30, 2007, compared to the same periods in 2006, due to increased net income on which these assessments are generally based.
The table below presents our AHP and REFCORP assessments for the three and six months ended June 30, 2007 and 2006.



|                                   |  |                                     |       |                                   |   |                             |  |       |  |      |       |                             |   |       |  |      
|---------------------------------- |  | ----------------------------------- | ----- | --------------------------------- | - | --------------------------- |  | ----- |  | ---- | ----- | --------------------------- | - | ----- |  | -----
|                                   |  | For the Three Months Ended June 30, |       | For the Six Months Ended June 30,
|AHP and REFCORP Assessments        |  | 2007                                |       | 2006                              |   | PercentIncrease /(Decrease) |  | 2007  |  | 2006 |       | PercentIncrease /(Decrease)
|(in thousands, except percentages) |  |                                     |       |                                   |   |                             |  |       |  |      |       |                            
|AHP                                |  | $                                   | 1,640 |                                   | $ | 275                         |  | 496.4 |  | $    | 2,825 |                             | $ | 1,157 |  | 144.2
|REFCORP                            |  |                                     | 3,650 |                                   |   | 619                         |  | 489.7 |  |      | 6,296 |                             |   | 2,620 |  | 140.3
|                                   |  |                                     |       |                                   |   |                             |  |       |  |      |       |                             |   |       |  |      
|Total assessments                  |  | $                                   | 5,290 |                                   | $ | 894                         |  | 491.7 |  | $    | 9,121 |                             | $ | 3,777 |  | 141.5
|                                   |  |                                     |       |                                   |   |                             |  |       |  |      |       |                             |   |       |  |      

Segment Information

Our core business is traditional member finance, which includes making advances, providing letters of credit, accepting deposits, and providing securities safekeeping and other services. Historically, we offered
products and services through two operating segments, traditional member finance and the MPP. The MPP segment consisted of mortgage loans held for portfolio as a result of purchases from participating members. During the first quarter of 2005, we
decided to exit the MPP. As a result of this decision, Seattle Bank management no longer manages the business using separate operating segments. The Seattle Bank now aggregates the operating results of the former MPP segment with the traditional
member finance segment for decision-making purposes. Accordingly, we stopped reporting segment information in the third quarter of 2006 and no longer discuss our operations in separate segments.

Summary of Critical Accounting Policies and Estimates

We did not implement any material change to our accounting policies or estimates, nor did we implement any new accounting policy that had a material impact on our results of operations or financial condition, during the quarter ended
June 30, 2007. For accounting policies and additional information concerning, among other things, estimated fair values, see Note 1 in Item 1. Financial Statements of this report, Note 17 in Part II. Item 8. Financial
Statements and Supplementary Data of our annual report on Form 10-K and Part II. Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies and
Estimates included in our 2006 annual report on Form 10-K.



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##### Table of Contents

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Market risk is the risk of loss to the market value of financial instrumentsand potential loss of future net interest incomethat may result from changes in interest rates and other market factors. Our business model requires us
to take on market risks. We measure our sensitivity to changes in interest rates by measuring the effective duration and effective convexity of our financial positions. Effective duration is an approximation of the estimated proportional change in
the price of a financial instrument relative to the absolute change in interest rates. Effective convexity is an approximation of the non-proportional change in the price of a financial instrument relative to the absolute change in interest rates.
All else equal, the greater the absolute value of an instruments effective duration measure, the greater its sensitivity to changes in interest rates. A positive effective convexity measure for an instrument predicts, all else equal, that
price increases will exceed the effect predicted by effective duration alone and that price decreases will be less than the effect predicted by effective duration alone. The converse is true for negative convexity. Yield-curve risk refers to changes
in the relative relationship among various points of the term structure of interest rates and an instruments relative price sensitivity to the various term points. We measure our sensitivity to yield-curve risk by calculating effective
key-rate durations. Key-rate durations measure an instruments relative sensitivity to various specified points in the term structure of interest rates. These measures can be calculated for individual financial instruments, such as one of our
mortgage-backed securities, or for an entire portfolio such as our MPP. We seek to control market risk through our funding and investment decisions, and with interest-rate exchange agreements. Through our market-risk management, we attempt to ensure
that we are profitable and to protect net interest income and market value of equity over a wide range of interest-rate environments.

Our
general approach to managing market risk is to acquire and maintain a portfolio of assets and liabilities that, together with our associated interest-rate exchange agreements, limits our expected market value and income statement volatility. Our
approach complies with Finance Board regulations regarding interest-rate exchange agreements, which enable the FHLBanks to enter into these agreements only to reduce the market-risk exposures inherent in otherwise unhedged assets and funding
positions.

Measurement of Market Risk

We monitor our market risk through a variety of measures. Our Board oversees policy and has adopted four primary risk measureseffective duration of equity, effective key-rate duration of equity mismatch, effective convexity of equity,
and market value of equity sensitivity. These policy measures are described below. We quantify and monitor our market risk daily and manage market risk within the policy limits. These measures and other key terms are defined below.



| |  |  | Market Value of Equity. Market value of equity is the present value of the expected net cash flows from all our assets, liabilities, and commitments.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Duration. Effective duration represents the estimated change in the value of a financial instrument for a given instantaneous parallel shift in the yield
curve. Stated simply, effective duration is a measure of the price sensitivity of a financial instrument to changes in interest rates. Higher duration numbers, whether positive or negative, indicate greater price-sensitivity to changes in interest
rates. For example, if a portfolio has an effective duration of two, then the portfolios value would be expected to decline about 2% for a 1% increase in interest ratesor rise about 2% for a 1% decrease in interest rates.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Duration of Equity. Effective duration of equity is the market value of assets multiplied by the effective duration of assets minus the market value of
liabilities multiplied by the effective duration of liabilities, plus or minus the market value of commitments multiplied by the effective duration of commitments, with the net result divided by the market value of equity. Effective duration of
equity measures the sensitivity of the market value of equity to instantaneous changes in interest rates. All else equal, higher effective duration numbers, whether positive or negative, indicate greater market value sensitivity to changes in
interest rates.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | Market Value of Equity Sensitivity. Market value of equity sensitivity is the change observed in our estimated market value of equity, given an instantaneous
parallel increase or decrease in the yield curve.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Convexity. Effective convexity measures the estimated effect of the non-proportional changes in instrument prices that is not incorporated in the
proportional effects measured by effective duration. Financial instruments can have positive or negative effective convexity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Convexity of Equity. Effective convexity of equity is the market value of assets multiplied by the effective convexity of assets minus the market value of
liabilities multiplied by the effective convexity of liabilities, plus or minus the market value of commitments multiplied by the effective convexity of commitments, with the net result divided by the market value of equity.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Key-Rate Duration of Equity. Effective key-rate duration of equity disaggregates effective duration of equity into various points on the yield curve to
allow us to measure and manage our exposure to changes in the shape of the yield curve.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effective Key-Rate Duration of Equity Mismatch. This measurement is the difference between the maximum and minimum effective key-rate duration of equity measures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market-Risk Management

Our market-risk measures reflect the sensitivity of our business to changes in interest rates, primarily because of mismatches in the maturities and embedded options associated with our mortgage-based assets and the consolidated obligation
bonds we use to fund these assets. The prepayment options embedded in mortgage-based instruments may be exercised at any time, while the call options embedded in our callable debt are exercisable on a set date or series of dates following a lock-out
period. These differences in the structure and characteristics of the mortgage prepayment options embedded in our mortgage-based assets and the debt call options in the consolidated obligations sold on our behalf cause the market values of our
mortgage-based assets and callable debt to respond differently to changes in interest rates and the shape of the yield curve. For example, a significant drop in interest rates will likely trigger rapid prepayments of our mortgage-based assets, while
the debt issued to fund the purchase of those assets may or may not be callable depending on the remaining length of the lock-out periods, the exercise prices of the call options, and whether the options are exercisable continuously, periodically,
or on a specific date.

We evaluate our market-risk measures on an ongoing basis, under a variety of parallel and non-parallel shock
scenarios. As of June 30, 2007 and December 31, 2006, our market-risk measures were within our policy limits.

The following
table summarizes our four primary risk measures and their respective limits and our compliance as of June 30, 2007 and December 31, 2006.



|                                                    |  |                    |    |  |                        |    |  |                   |  
|--------------------------------------------------- |  | ------------------ | -- |  | ---------------------- | -- |  | ----------------- | -
|Primary Risk Measure                                |  | As ofJune 30, 2007 |    |  | As ofDecember 31, 2006 |    |  | Risk MeasureLimit |  
|Effective duration of equity                        |  | 2.00               |    |  | 0.96                   |    |  | +/-5.00           |  
|Effective convexity of equity                       |  | 0.73               |    |  | (1.96                  | )  |  | +/-5.00           |  
|Effective key-rate-duration-of-equity mismatch      |  | 1.25               |    |  | 1.09                   |    |  | +/-5.50           |  
|Market value of equity sensitivity                  |  |                    |    |  |                        |    |  |                   |  
|(+ 100 basis point shock scenario) (in percentages) |  | (1.32              | )% |  | (1.87                  | )% |  | +/-4.50           | %
|Market value of equity sensitivity                  |  |                    |    |  |                        |    |  |                   |  
|( -100 basis point shock scenario) (in percentages) |  | 2.31               | %  |  | 0.06                   | %  |  | +/-4.50           | %

As of June 30, 2007, the effective duration of equity increased 1.04 and the effective convexity of equity
increased 2.69, compared to December 31, 2006. The change in effective duration of equity resulted primarily from the significant extension in the duration of our mortgage portfolio relative to our callable and bullet consolidated obligation
portfolios. Similarly the significant increase in convexity occurred because the negative convexity on our mortgages decreased significantly. The changes in duration were caused primarily by changes in the level and shape of the yield curve along
with changes in market volatilities.



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Instruments That Address Market Risk

We use interest-rate exchange agreements, such as interest-rate swaps, interest-rate caps and floors, forward purchase and sale agreements, and swaptions to manage our exposure to changes in interest rates. This
enables us to adjust the effective maturity, repricing frequency, or option characteristics of our assets and liabilities in response to changing market conditions.

The total notional amount of interest-rate exchange agreements outstanding was $36.9 billion as of June 30, 2007 and $33.2 billion as of December 31, 2006. The notional amount of interest-rate exchange
agreements increased during the first quarter of 2007, primarily due to increases in fair value hedges of consolidated obligations.

The
notional amount of these agreements serves as a factor in determining periodic interest payments or cash flows received and paid and does not represent actual amounts exchanged or our exposure to credit or market risk. Therefore, the notional amount
is significantly greater than the potential market or credit loss that could result from such transactions. Notional values are not meaningful measures of the risks associated with interest-rate exchange agreements or other derivatives, which can
only be meaningfully measured on a market value basis, taking into consideration the cost of replacing interest-rate exchange agreements with similar agreements from a highly-rated counterparty.

Credit-Risk Management

Credit risk is the risk of
loss due to default. We face credit risk on advances, certain investments, mortgage loans, interest-rate exchange agreements, and counterparty exposures.

Advances

We have never experienced a credit loss on advances. We protect against credit risk
on advances by requiring collateral on all advances we fund. We can also call for additional or substitute collateral during the life of an advance to protect our security interest. The FHLBank Act limits eligible collateral to certain investment
securities, residential mortgage loans, deposits with the Seattle Bank, and other real estate-related assets. To ensure that the whole mortgage loans and pools of mortgage loans that we accept as collateral meet our required collateral quality
levels, we periodically review such collateral. Members with a certain amount of subprime collateral are required to participate in the subprime collateral program described below.

We accept certain categories of first-lien single-family subprime mortgage loans as collateral under our subprime collateral program. Prior to being
approved for this program, members must complete a separate application process, which includes a thorough assessment of their credit and collateral administration policies and procedures for subprime lending. Also, our credit department staff
reviews individual subprime loans for compliance with the policies and tests for loans with predatory characteristics and compliance with our responsible lending policy. Borrowing capacity rates for approved subprime loans vary from 50% to 75% of
the loans market value, according to loan characteristics. The market value of the subprime loans is determined regularly by a third-party expert in mortgage valuation, contracted by the Seattle Bank. The policy adopted by our Board to govern
the subprime collateral program prohibits as eligible collateral: loans delinquent more than 60 days, second liens, loans with a debt-to-income ratio in excess of 49%, and non-owner occupied properties. In addition, certain state concentration
limits have been established. The policies and procedures described above have sufficiently mitigated the credit risk of subprime loan collateral.

The GLB Act and other federal regulations allow the FHLBanks to expand eligible collateral for many of their members. Members that qualify as community financial institutions, defined in the GLB Act as FDIC-insured depository institutions
with average assets for the past three calendar years totaling no more than $599.0 million, may pledge small-business, small-farm, and small-agribusiness loans as collateral for advances. Advances to community financial institutions secured with
expanded collateral represented $174.0 million of the



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$28.1 billion of advances as of June 30, 2007 and $133.0 million of the $28.0 billion of advances as of December 31, 2006. We believe that we have
the policies and procedures in place to effectively manage this credit risk. Accordingly, we have not provided any allowance for losses on advances, including those referenced above.

Investments

We are subject to
credit risk on some investments. We limit our unsecured credit exposure to any counterparty, other than the U.S. government or GSEs, based on the credit quality and capital level of the counterparty and the capital level of the Seattle Bank. As of
June 30, 2007 and December 31, 2006, our unsecured credit exposure was $15.4 billion and $12.3 billion, primarily consisting of $3.0 billion and $4.2 billion of other FHLBank consolidated obligations and $7.5 billion and $2.8 billion of
federal funds sold. This increase in unsecured credit exposure primarily resulted from an increase in our short-term investments, primarily federal funds sold.

Mortgage Loans Held for Portfolio

As of June 30, 2007, the Seattle Bank has never
experienced a credit loss nor has our SMI provider experienced a loss claim on an MPP mortgage loan. Under the MPP, we have purchased mortgage loans from members, and the participating members continue to bear a portion of the credit risk on the
outstanding loans. Our total principal of mortgage loans outstanding through the MPP was $6.0 billion and $6.3 billion as of June 30, 2007 and December 31, 2006, which comprised $259.9 million and $292.1 million in government-insured
mortgage loans and $5.7 billion and $6.0 billion in conventional mortgage loans. The conventional mortgage loans are credit-enhanced by our participating members to a level equivalent to at least an investment-grade rating through the lender risk
account and supplemental mortgage insurance. As part of our business plan, we are exiting the MPP. However, we do not expect that this decision will impact the credit risk of the mortgage loans held for portfolio. We conduct a loss reserve analysis
on a quarterly basis and have determined that no loan loss allowance is necessary, and believe that we have the policies and procedures in place to appropriately manage this credit risk.

Derivative Credit-Risk Exposure and Counterparty Ratings

The Seattle Bank is subject to credit risk because of the potential nonperformance by a counterparty to an agreement. The degree of counterparty risk on interest-rate exchange agreements and other derivatives depends
on our selection of counterparties and the extent to which we use netting procedures and other credit enhancements to mitigate the risk. We manage counterparty credit risk through credit analysis, collateral management, and other credit
enhancements. We require agreements to be in place for all counterparties. These agreements must include provisions for netting exposures across all transactions with that counterparty. The agreements also require a counterparty to deliver
collateral to the Seattle Bank if the total market value of our exposure to that counterparty exceeds a specific threshold limit as denoted in the agreement. As a result of these risk mitigation initiatives, we do not currently anticipate any credit
losses on our interest-rate exchange agreements.

Our credit risk equals the estimated cost of replacing favorable interest-rate swaps,
forward agreements, and purchased caps and floors, if the counterparty defaults, net of the value of related collateral. Our maximum credit risk, taking into consideration master netting agreements but before considering collateral, was $186.7
million and $146.9 million as of June 30, 2007 and December 31, 2006. In determining maximum credit risk, we consider accrued interest receivable and payable, and the legal right to offset assets and liabilities by counterparty. Our net
exposure after considering collateral was $130.8 million and $133.5 million as of June 30, 2007 and December 31, 2006. Changes in credit risk and net exposure after considering collateral are primarily due to changes in market conditions,
including the level and slope of the yield curve.



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Counterparty Credit Exposure

Our counterparty credit exposure, by credit rating, was as follows as of June 30, 2007 and December 31, 2006.



|                                             |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|-------------------------------------------- |  | ----------------------- | ---------- | ------------------------------ | - | --------------- |  | ---------------------------- | ------ |  | - | -------
|                                             |  | As of June 30, 2007    
|Counterparty Credit Exposureby Credit Rating |  | NotionalAmount          |            | Total NetExposure atFair Value |   | Collateral Held |  | Net ExposureAfter Collateral
|(in thousands)                               |  |                         |            |                                |   |                 |  |                             
|AA+                                          |  | $                       | 3,603,680  |                                | $ | 35,979          |  | $                            |        |  | $ | 35,979 
|AA                                           |  |                         | 18,446,890 |                                |   | 116,551         |  |                              | 54,685 |  |   | 61,866 
|AA                                          |  |                         | 11,814,250 |                                |   | 16,161          |  |                              |        |  |   | 16,161 
|A+                                           |  |                         | 3,027,000  |                                |   | 17,992          |  |                              | 1,209  |  |   | 16,783 
|A                                            |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|Member institutions(1)                       |  |                         | 9,000      |                                |   |                 |  |                              |        |  |   |        
|                                             |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|Total                                        |  | $                       | 36,900,820 |                                | $ | 186,683         |  | $                            | 55,894 |  | $ | 130,789
|                                             |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|                                             | 
|                                             |  | As of December 31, 2006
|Counterparty Credit Exposureby Credit Rating |  | NotionalAmount          |            | Total NetExposure atFair Value |   | Collateral Held |  | Net ExposureAfter Collateral
|(in thousands)                               |  |                         |            |                                |   |                 |  |                             
|AA+                                          |  | $                       | 1,132,780  |                                | $ | 3,134           |  | $                            |        |  | $ | 3,134  
|AA                                           |  |                         | 11,061,155 |                                |   | 82,672          |  |                              |        |  |   | 82,672 
|AA                                          |  |                         | 17,021,136 |                                |   | 28,811          |  |                              |        |  |   | 28,811 
|A+                                           |  |                         | 3,978,500  |                                |   | 32,324          |  |                              | 13,438 |  |   | 18,886 
|A                                            |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|Member institutions (1)                      |  |                         | 55,500     |                                |   |                 |  |                              |        |  |   |        
|                                             |  |                         |            |                                |   |                 |  |                              |        |  |   |        
|Total                                        |  | $                       | 33,249,071 |                                | $ | 146,941         |  | $                            | 13,438 |  | $ | 133,503
|                                             |  |                         |            |                                |   |                 |  |                              |        |  |   |        

| | 
| | 

| | (1) | Collateral held with respect to interest-rate exchange agreements with member institutions represents either collateral
physically held by or on behalf of the Seattle Bank or collateral assigned to the Seattle Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Seattle Bank. This notional amount excludes
stand-alone delivery commitments.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have never experienced a loss on a derivative transaction due to default by a
counterparty. We believe that the credit risk on our interest-rate exchange agreements is low because we contract with counterparties that are of very high credit quality. As of June 30, 2007, 18 counterparties represented the total notional
amount of our outstanding interest-rate exchange agreements excluding agreements in which we served as intermediaries. As of June 30, 2007, 91.8% of the total notional amount of our outstanding interest-rate exchange agreements was with 14
counterparties rated AA or higher. Excluding interest-rate exchange agreements in which we are an intermediary for members and which are fully collateralized, 100.0% as of June 30, 2007 and December 31, 2006 of the notional amount of
our outstanding interest-rate exchange agreements were with counterparties with credit ratings of A or equivalent from an NRSRO, such as Standard & Poors or Moodys.



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls and Procedures

Under the supervision and with the participation of the Seattle Banks management, including the President and Chief Executive Officer
and the Chief Financial Officer, the Seattle Bank evaluated the effectiveness of the Seattle Banks disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2007, the end of the period covered
by this report. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

The
President and Chief Executive Officer and the Chief Financial Officer conducted an evaluation of our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to determine whether any changes in our internal control over
financial reporting occurred during the quarter ended June 30, 2007 that have materially affected or which are reasonably likely to materially affect our internal control over financial reporting. Based on that evaluation, no such change
occurred during such period.



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PART II  OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

From time to time, the Seattle
Bank is subject to legal proceedings arising in the normal course of business. After consultations with legal counsel, we do not anticipate that the ultimate liability, if any, arising out of any current matters will have a material impact on our
financial condition, results of operations, or cash flows.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Other than as disclosed in our
quarterly report on Form 10-Q for the quarter ended March 31, 2007, there have been no material changes to the risk factors previously disclosed in our 2006 annual report on Form 10-See the risk factors included in our 2006 annual report on
Form 10-K for the year ended December 31, 2006 and our quarterly report on Form 10-Q for the quarter ended March 31, 2007 for a discussion of risks and uncertainties that may affect the Seattle Bank.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Not applicable.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

Under the FHLBank Act, no matters are submitted to stockholders for a vote except the election of the Seattle Banks elected directors. See Part III. Item 10. Directors, Executive Officers and Corporate Governance 
Corporate Governance of our 2006 annual report on Form 10-K for a discussion of the election process. See Item 5. Other Information and our current report on Form 8-K filed with the SEC on May 1, 2007, for more information
relating to the Finance Boards appointment of four new public interest directors to our Board in the second quarter of 2007.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On July 26, 2007, the Board
elected James G. Livingston, vice president, Zions First National Bank, to fill a vacancy on Board. Mr. Livingston will serve the remainder of the term being vacated as a result of the resignation of the previous Utah elective director from the
Board on May 16, 2007. Mr. Livingston will complete the existing term, which expires December 31, 2009.

On July 26,
2007, the Board declared a $1.31 per share dividend on average Class A stock outstanding during the second quarter of 2007 and a $0.15 per share dividend on average Class B stock outstanding during the second quarter of 2007. The dividends will
be paid prior to the end of the third quarter of 2007.

On July 26, 2007, Mark R. Szczepaniak, executive vice president and chief
financial officer, tendered his resignation, effective August 31, 2007. Mr. Szczepaniak is leaving the Seattle Bank to pursue an opportunity at another institution.



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|ITEM 6. | EXHIBITS
|------- | --------



|           |  |                                                                                                                                                                     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibits                                                                                                                                                            
|10.1       |  | Federal Home Loan Bank of Seattle Incentive Compensation Plan (BICP)  Long Term Incentive Plans as of May 1, 2007                                                  
|           | 
|10.2       |  | Federal Home Loan Bank of Seattle Incentive Compensation Plan (BICP) Annual Plan for Exempt Staff and Officers as of May 1, 2007                                    
|           | 
|31.1       |  | Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|           | 
|31.2       |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             
|           | 
|32.1       |  | Certification of the President and Chief Executive Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|           | 
|32.2       |  | Certification of the Chief Financial Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Federal Home Loan Bank of Seattle



|    |  |                                                                          |  |                       
|--- |  | ------------------------------------------------------------------------ |  | ----------------------
|    |  |                                                                         
|By: |  | /s/ Richard M. Riccobono                                                 |  | Dated: August 10, 2007
|    |  | Richard M. Riccobono President and Chief
Executive Officer               |  |                       
|    |  |                                                                         
|By: |  | /s/ Mark R. Szczepaniak                                                  |  | Dated: August 10, 2007
|    |  | Mark R. Szczepaniak Executive Vice President and Chief
Financial Officer |  |                       



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EXHIBITS



|            |  |                                                                                                                                                                     
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibits                                                                                                                                                            
|            | 
|10.1        |  | Federal Home Loan Bank of Seattle Incentive Compensation Plan (BICP)  Long Term Incentive Plans as of May 1, 2007                                                  
|            | 
|10.2        |  | Federal Home Loan Bank of Seattle Incentive Compensation Plan (BICP) Annual Plan for Exempt Staff and Officers as of May 1, 2007                                    
|            | 
|31.1        |  | Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|            | 
|31.2        |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             
|            | 
|32.1        |  | Certification of the President and Chief Executive Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            | 
|32.2        |  | Certification of the Chief Financial Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              



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