##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2009

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





FEDERAL HOME LOAN BANK OF SEATTLE

(Exact name of registrant as specified in
its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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





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 has
submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                       |  |                              |  |  |  | 
|---------------------------------------------------------------------- |  | ---------------------------- |  |  |  | 
|Large accelerated filer  ̈                                              |  | Accelerated filer   ̈        
|                                                                       | 
|Non-accelerated filer x  (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Exchange 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
April 30, 2009, the registrant had 1,585,622 shares of Class A stock and 26,326,365 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 March 31, 2009

TABLE OF CONTENTS



|                              |  |                                                                                           |  |     
|----------------------------- |  | ----------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                           |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                          
|                              |  |                                                                                          
|Item 1.                       |  | Financial Statements:                                                                     |  |     
|                              |  |                                                                                          
|                              |  | Statements of Condition  As of March 31, 2009 (unaudited) and December 31, 2008          |  | 3   
|                              |  |                                                                                          
|                              |  | Statements of Operations  For the three months ended March 31, 2009 and 2008 (unaudited) |  | 4   
|                              |  |                                                                                          
|                              |  | Statements of Capital  For the three months ended March 31, 2009 and 2008 (unaudited)    |  | 5   
|                              |  |                                                                                          
|                              |  | Statements of Cash Flows  For the three months ended March 31, 2009 and 2008 (unaudited) |  | 6   
|                              |  |                                                                                          
|                              |  | Condensed Notes to Financial Statements (unaudited)                                       |  | 8   
|                              |  |                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations     |  | 38  
|                              |  |                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                |  | 77  
|                              |  |                                                                                          
|Item 4T.                      |  | Controls and Procedures                                                                   |  | 81  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                          
|                              |  |                                                                                          
|Item 1.                       |  | Legal Proceedings                                                                         |  | 85  
|                              |  |                                                                                          
|Item 1A.                      |  | Risk Factors                                                                              |  | 85  
|                              |  |                                                                                          
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                               |  | 87  
|                              |  |                                                                                          
|Item 3.                       |  | Defaults Upon Senior Securities                                                           |  | 87  
|                              |  |                                                                                          
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                       |  | 87  
|                              |  |                                                                                          
|Item 5.                       |  | Other Information                                                                         |  | 87  
|                              |  |                                                                                          
|Item 6.                       |  | Exhibits                                                                                  |  | 88  
|                              | 
|SIGNATURES                    |  | 89                                                                                       



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 ofMarch 31, 2009 |            |   | As ofDecember 31, 2008 |  
|(in thousands, except par value)                                                                                                                             |  | (unaudited)         |            |   |                        |  
|Assets                                                                                                                                                       |  |                     |            |   |                        |   |            |  
|Cash and due from banks                                                                                                                                      |  | $                   | 1,423      |   |                        | $ | 1,395      |  
|Interest-bearing deposits                                                                                                                                    |  |                     | 65         |   |                        |   |            |  
|Securities purchased under agreements to resell                                                                                                              |  |                     | 5,000,000  |   |                        |   | 3,900,000  |  
|Federal funds sold                                                                                                                                           |  |                     | 4,191,500  |   |                        |   | 2,320,300  |  
|Held-to-maturity securities*(Note 2)                                                                                                                         |  |                     | 10,771,909 |   |                        |   | 9,784,891  |  
|Advances (Note 3)                                                                                                                                            |  |                     | 31,848,395 |   |                        |   | 36,943,851 |  
|Mortgage loans held for portfolio (Note 4)                                                                                                                   |  |                     | 4,898,886  |   |                        |   | 5,087,323  |  
|Accrued interest receivable                                                                                                                                  |  |                     | 141,903    |   |                        |   | 241,124    |  
|Premises, software, and equipment, net                                                                                                                       |  |                     | 15,543     |   |                        |   | 14,228     |  
|Derivative assets (Note 7)                                                                                                                                   |  |                     | 37,831     |   |                        |   | 31,984     |  
|Other assets                                                                                                                                                 |  |                     | 39,971     |   |                        |   | 36,594     |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total Assets                                                                                                                                                 |  | $                   | 56,947,426 |   |                        | $ | 58,361,690 |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Liabilities and Capital                                                                                                                                      |  |                     |            |   |                        |   |            |  
|Liabilities                                                                                                                                                  |  |                     |            |   |                        |   |            |  
|Deposits:                                                                                                                                                    |  |                     |            |   |                        |   |            |  
|Interest-bearing                                                                                                                                             |  | $                   | 671,446    |   |                        | $ | 582,258    |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total deposits                                                                                                                                               |  |                     | 671,446    |   |                        |   | 582,258    |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Consolidated obligations, net (Note 5):                                                                                                                      |  |                     |            |   |                        |   |            |  
|Discount notes                                                                                                                                               |  |                     | 22,023,488 |   |                        |   | 15,878,281 |  
|Bonds                                                                                                                                                        |  |                     | 31,457,464 |   |                        |   | 38,590,399 |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total consolidated obligations, net                                                                                                                          |  |                     | 53,480,952 |   |                        |   | 54,468,680 |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Mandatorily redeemable capital stock (Note 6)                                                                                                                |  |                     | 920,972    |   |                        |   | 917,876    |  
|Accrued interest payable                                                                                                                                     |  |                     | 218,073    |   |                        |   | 337,303    |  
|Affordable Housing Program                                                                                                                                   |  |                     | 15,302     |   |                        |   | 16,210     |  
|Derivative liabilities (Note 7)                                                                                                                              |  |                     | 263,583    |   |                        |   | 235,417    |  
|Other liabilities                                                                                                                                            |  |                     | 416,467    |   |                        |   | 37,621     |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total liabilities                                                                                                                                            |  |                     | 55,986,795 |   |                        |   | 56,595,365 |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Commitments and contingencies (Note 11)                                                                                                                      |  |                     |            |   |                        |   |            |  
|Capital (Note 6)                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Capital stock:                                                                                                                                               |  |                     |            |   |                        |   |            |  
|Class B capital stock putable ($100 par value) - issued and outstanding shares: 17,330 shares as of March 31, 2009 and 17,302 shares as
of December 31, 2008 |  |                     | 1,733,093  |   |                        |   | 1,730,287  |  
|Class A capital stock putable ($100 par value) - issued and outstanding shares: 1,345 shares as of March 31, 2009 and 1,179 shares
as of December 31, 2008   |  |                     | 134,420    |   |                        |   | 117,853    |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total capital stock                                                                                                                                          |  |                     | 1,867,513  |   |                        |   | 1,848,140  |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Retained earnings (accumulated deficit)                                                                                                                      |  |                     | 198,314    |   |                        |   | (78,876    | )
|Accumulated other comprehensive loss:                                                                                                                        |  |                     |            |   |                        |   |            |  
|Non-credit portion of other-than-temporary impairment loss on held-to-maturity securities                                                                    |  |                     | (1,102,296 | ) |                        |   |            |  
|Pension benefits (Note 8)                                                                                                                                    |  |                     | (2,900     | ) |                        |   | (2,939     | )
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total accumulated other comprehensive loss                                                                                                                   |  |                     | (1,105,196 | ) |                        |   | (2,939     | )
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total capital                                                                                                                                                |  |                     | 960,631    |   |                        |   | 1,766,325  |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  
|Total Liabilities and Capital                                                                                                                                |  | $                   | 56,947,426 |   |                        | $ | 58,361,690 |  
|                                                                                                                                                             |  |                     |            |   |                        |   |            |  



|* | Fair values of held-to-maturity securities were $9,470,236 and $7,857,197 as of March 31, 2009 and
December 31, 2008.
|- | ---------------------------------------------------------------------------------------------------------------------

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



3



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Operations

(Unaudited)



|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------- | -------- | - | ---- | - | ------- | -
|                                                                                                                                           |  | For the Three Months EndedMarch 31, |         
|                                                                                                                                           |  | 2009                                |          |   | 2008 |  
|(in thousands)                                                                                                                             |  |                                     |          |   |      |   |         |  
|Interest Income                                                                                                                            |  |                                     |          |   |      |   |         |  
|Advances                                                                                                                                   |  | $                                   | 175,245  |   |      | $ | 424,589 |  
|Prepayment fees on advances, net                                                                                                           |  |                                     | 3,988    |   |      |   | 14,471  |  
|Interest-bearing deposits                                                                                                                  |  |                                     | 27       |   |      |   |         |  
|Securities purchased under agreements to resell                                                                                            |  |                                     | 2,591    |   |      |   |         |  
|Federal funds sold                                                                                                                         |  |                                     | 1,448    |   |      |   | 72,937  |  
|Held-to-maturity securities (Other FHLBanks consolidated obligations - $0 and $19,697 for the three months ended March 31, 2009 and
2008) |  |                                     | 68,293   |   |      |   | 125,430 |  
|Mortgage loans held for portfolio                                                                                                          |  |                                     | 63,640   |   |      |   | 68,446  |  
|Loans to other FHLBanks                                                                                                                    |  |                                     |          |   |      |   | 14      |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Total interest income                                                                                                                      |  |                                     | 315,232  |   |      |   | 705,887 |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Interest Expense                                                                                                                           |  |                                     |          |   |      |   |         |  
|Consolidated obligations - discount notes                                                                                                  |  |                                     | 31,615   |   |      |   | 145,990 |  
|Consolidated obligations - bonds                                                                                                           |  |                                     | 208,772  |   |      |   | 485,644 |  
|Deposits                                                                                                                                   |  |                                     | 481      |   |      |   | 9,255   |  
|Securities sold under agreements to repurchase                                                                                             |  |                                     |          |   |      |   | 3       |  
|Mandatorily redeemable capital stock and other borrowings                                                                                  |  |                                     |          |   |      |   | 245     |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Total interest expense                                                                                                                     |  |                                     | 240,868  |   |      |   | 641,137 |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Net Interest Income                                                                                                                        |  |                                     | 74,364   |   |      |   | 64,750  |  
|Other Loss                                                                                                                                 |  |                                     |          |   |      |   |         |  
|Service fees                                                                                                                               |  |                                     | 572      |   |      |   | 449     |  
|Total other-than-temporary impairment loss on held-to-maturity securities                                                                  |  |                                     | (895,195 | ) |      |   |         |  
|Less: Non-credit portion of other-than-temporary impairment loss on held-to-maturity securities                                            |  |                                     | 823,527  |   |      |   |         |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Net other-than-temporary impairment loss on held-to-maturity securities                                                                    |  |                                     | (71,668  | ) |      |   |         |  
|Net (loss) gain on derivatives and hedging activities                                                                                      |  |                                     | (2,941   | ) |      |   | 6,001   |  
|Net realized loss on early extinguishment of consolidated obligations                                                                      |  |                                     | (4,526   | ) |      |   | (16,177 | )
|Other income (loss), net                                                                                                                   |  |                                     | 13       |   |      |   | (106    | )
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Total other loss                                                                                                                           |  |                                     | (78,550  | ) |      |   | (9,833  | )
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Other Expense                                                                                                                              |  |                                     |          |   |      |   |         |  
|Operating:                                                                                                                                 |  |                                     |          |   |      |   |         |  
|Compensation and benefits                                                                                                                  |  |                                     | 6,652    |   |      |   | 6,358   |  
|Other operating                                                                                                                            |  |                                     | 4,229    |   |      |   | 4,512   |  
|Finance Agency/Finance Board                                                                                                               |  |                                     | 496      |   |      |   | 503     |  
|Office of Finance                                                                                                                          |  |                                     | 484      |   |      |   | 470     |  
|Other, net                                                                                                                                 |  |                                     | 145      |   |      |   | 165     |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Total other expense                                                                                                                        |  |                                     | 12,006   |   |      |   | 12,008  |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|(Loss) Income Before Assessments                                                                                                           |  |                                     | (16,192  | ) |      |   | 42,909  |  
|Assessments                                                                                                                                |  |                                     |          |   |      |   |         |  
|Affordable Housing Program                                                                                                                 |  |                                     |          |   |      |   | 3,528   |  
|REFCORP                                                                                                                                    |  |                                     | 33       |   |      |   | 7,876   |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Total assessments                                                                                                                          |  |                                     | 33       |   |      |   | 11,404  |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  
|Net (Loss) Income                                                                                                                          |  | $                                   | (16,225  | ) |      | $ | 31,505  |  
|                                                                                                                                           |  |                                     |          |   |      |   |         |  

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



4



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Capital

(Unaudited)



|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------- | - |  | ---------------------- | ------- | - | ------------------------------------- | ------ | - | --------------------------------- | - | --------- | ------------ |  | - | ------- | - |  | - | ---------- | - |  | - | --------- | -
|                                                                                                       |  | For the Three Months Ended March 31, 2009 and 2008 |  
|                                                                                                       |  | Class A Capital Stock*                             |   |  | Class B Capital Stock* |         |   | Retained Earnings(AccumulatedDeficit) |        |   | AccumulatedOtherComprehensiveLoss |   |           | TotalCapital | 
|                                                                                                       |  | Shares                                             |   |  | Par Value              |         |   | Shares                                |        |   | Par Value                         |   |           |              | 
|(amounts and shares in thousands)                                                                      |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |           
|Balance, December 31, 2007                                                                             |  | 2,874                                              |   |  | $                      | 287,449 |   |                                       | 21,411 |   |                                   | $ | 2,141,141 |              |  | $ | 148,723 |   |  | $ | (1,420     | ) |  | $ | 2,575,893 |  
|Proceeds from sale of capital stock                                                                    |  | 2,534                                              |   |  |                        | 253,387 |   |                                       | 34     |   |                                   |   | 3,398     |              |  |   |         |   |  |   |            |   |  |   | 256,785   |  
|Repurchase/redemption of capital stock                                                                 |  | (970                                               | ) |  |                        | (97,001 | ) |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   | (97,001   | )
|Comprehensive income:                                                                                  |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Net income                                                                                             |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | 31,505  |   |  |   |            |   |  |   | 31,505    |  
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Total comprehensive income                                                                             |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | 31,505  |   |  |   |            |   |  |   | 31,505    |  
|Dividends on capital stock:                                                                            |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Cash                                                                                                   |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | (8,371  | ) |  |   |            |   |  |   | (8,371    | )
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Balance, March 31, 2008                                                                                |  | 4,438                                              |   |  | $                      | 443,835 |   |                                       | 21,445 |   |                                   | $ | 2,144,539 |              |  | $ | 171,857 |   |  | $ | (1,420     | ) |  | $ | 2,758,811 |  
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Balance, December 31, 2008                                                                             |  | 1,179                                              |   |  | $                      | 117,853 |   |                                       | 17,302 |   |                                   | $ | 1,730,287 |              |  | $ | (78,876 | ) |  | $ | (2,939     | ) |  | $ | 1,766,325 |  
|Cumulative effect of adjustments to opening balance relating to FSP FAS 115-2                          |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | 293,415 |   |  |   | (293,415   | ) |  |   |           |  
|Proceeds from sale of capital stock                                                                    |  | 188                                                |   |  |                        | 18,820  |   |                                       | 43     |   |                                   |   | 4,318     |              |  |   |         |   |  |   |            |   |  |   | 23,138    |  
|Net shares reclassified to mandatorily redeemable capital stock                                        |  | (22                                                | ) |  |                        | (2,253  | ) |                                       | (15    | ) |                                   |   | (1,512    | )            |  |   |         |   |  |   |            |   |  |   | (3,765    | )
|Comprehensive loss:                                                                                    |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Net loss                                                                                               |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | (16,225 | ) |  |   |            |   |  |   | (16,225   | )
|Non-credit portion of other-than-temporary impairment loss on held-to-maturity securities, net         |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   | (823,527   | ) |  |   | (823,527  | )
|Accretion of non-credit portion of other-than-temporary impairment loss on held-to-maturity securities |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   | 14,646     |   |  |   | 14,646    |  
|Pension benefits                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   | 39         |   |  |   | 39        |  
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Total comprehensive loss                                                                               |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   | 277,190 |   |  |   | (1,102,257 | ) |  |   | (825,067  | )
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  
|Balance, March 31, 2009                                                                                |  | 1,345                                              |   |  | $                      | 134,420 |   |                                       | 17,330 |   |                                   | $ | 1,733,093 |              |  | $ | 198,314 |   |  | $ | (1,105,196 | ) |  | $ | 960,631   |  
|                                                                                                       |  |                                                    |   |  |                        |         |   |                                       |        |   |                                   |   |           |              |  |   |         |   |  |   |            |   |  |   |           |  



|* | Putable.
|- | --------

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 Three Months EndedMarch 31, |            
|                                                                                                   |  | 2009                                |             |   | 2008 |  
|(in thousands)                                                                                     |  |                                     |             |   |      |  
|Operating Activities                                                                               |  |                                     |             |   |      |   |             |  
|Net (loss) income                                                                                  |  | $                                   | (16,225     | ) |      | $ | 31,505      |  
|                                                                                                   |  |                                    
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                                     |             |   |      |   |             |  
|Depreciation and amortization                                                                      |  |                                     | (59,371     | ) |      |   | 4,548       |  
|Change in net fair value adjustment on derivative and hedging activities                           |  |                                     | (28,414     | ) |      |   | 75,941      |  
|Loss on extinguishment of consolidated obligations                                                 |  |                                     | 4,526       |   |      |   | 16,158      |  
|Net other-than-temporary impairment loss on held-to-maturity securities                            |  |                                     | 71,668      |   |      |   |             |  
|Other                                                                                              |  |                                     | (3          | ) |      |   | 131         |  
|Net change in:                                                                                     |  |                                     |             |   |      |   |             |  
|Accrued interest receivable                                                                        |  |                                     | 99,219      |   |      |   | 51,126      |  
|Other assets                                                                                       |  |                                     | (568        | ) |      |   | 6,661       |  
|Accrued interest payable                                                                           |  |                                     | (119,230    | ) |      |   | (102,020    | )
|Other liabilities                                                                                  |  |                                     | (3,787      | ) |      |   | 2,949       |  
|                                                                                                   |  |                                     |             |   |      |   |             |  
|Total adjustments                                                                                  |  |                                     | (35,960     | ) |      |   | 55,494      |  
|                                                                                                   |  |                                     |             |   |      |   |             |  
|Net cash (used in) provided by operating activities                                                |  |                                     | (52,185     | ) |      |   | 86,999      |  
|                                                                                                   |  |                                     |             |   |      |   |             |  
|                                                                                                   |  |                                    
|Investing Activities                                                                               |  |                                     |             |   |      |   |             |  
|Net change in:                                                                                     |  |                                     |             |   |      |   |             |  
|Interest-bearing deposits                                                                          |  |                                     | 43,845      |   |      |   |             |  
|Deposits with other FHLBanks                                                                       |  |                                     | (65         | ) |      |   |             |  
|Securities purchased under agreements to resell                                                    |  |                                     | (1,100,000  | ) |      |   |             |  
|Federal funds sold                                                                                 |  |                                     | (1,871,200  | ) |      |   | (9,847,800  | )
|Premises, software and equipment                                                                   |  |                                     | (2,196      | ) |      |   | (542        | )
|Held-to-maturity securities:                                                                       |  |                                     |             |   |      |   |             |  
|Net increase in short-term                                                                         |  |                                     | (1,845,000  | ) |      |   | (4,460,200  | )
|Proceeds from maturities                                                                           |  |                                     | 545,002     |   |      |   | 2,272,191   |  
|Purchases of long-term                                                                             |  |                                     | (178,672    | ) |      |   | (597,666    | )
|Advances:                                                                                          |  |                                     |             |   |      |   |             |  
|Proceeds                                                                                           |  |                                     | 26,133,145  |   |      |   | 39,055,516  |  
|Made                                                                                               |  |                                     | (21,112,400 | ) |      |   | (31,049,733 | )
|Mortgage loans held for portfolio:                                                                 |  |                                     |             |   |      |   |             |  
|Principal collections                                                                              |  |                                     | 186,762     |   |      |   | 141,295     |  
|                                                                                                   |  |                                     |             |   |      |   |             |  
|Net cash provided by (used in) investing activities                                                |  |                                     | 799,221     |   |      |   | (4,486,939  | )
|                                                                                                   |  |                                     |             |   |      |   |             |  

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



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Federal Home Loan Bank of Seattle

Statements of Cash Flows  (Continued)

(Unaudited)



|                                                                |  |                                     |              |   |      |   |              |  
|--------------------------------------------------------------- |  | ----------------------------------- | ------------ | - | ---- | - | ------------ | -
|                                                                |  | For the Three Months EndedMarch 31, |             
|                                                                |  | 2009                                |              |   | 2008 |  
|(in thousands)                                                  |  |                                     |              |   |      |  
|Financing Activities                                            |  |                                     |              |   |      |   |              |  
|Net change in:                                                  |  |                                     |              |   |      |   |              |  
|Deposits                                                        |  | $                                   | 89,188       |   |      | $ | 331,838      |  
|Net proceeds from issuance of consolidated obligations:         |  |                                     |              |   |      |   |              |  
|Discount notes                                                  |  |                                     | 141,514,120  |   |      |   | 264,620,585  |  
|Bonds                                                           |  |                                     | 11,314,822   |   |      |   | 13,182,044   |  
|Payments for maturing and retiring consolidated obligations:    |  |                                     |              |   |      |   |              |  
|Discount notes                                                  |  |                                     | (135,315,357 | ) |      |   | (259,531,300 | )
|Bonds                                                           |  |                                     | (18,372,250  | ) |      |   | (14,355,071  | )
|Proceeds from issuance of capital stock                         |  |                                     | 23,138       |   |      |   | 256,785      |  
|Payments for interest on mandatorily redeemable capital stock   |  |                                     |              |   |      |   | 204          |  
|Payments for repurchase of capital stock                        |  |                                     |              |   |      |   | (97,001      | )
|Payments for redemption of mandatorily redeemable capital stock |  |                                     | (669         | ) |      |   |              |  
|Cash dividends paid                                             |  |                                     |              |   |      |   | (8,371       | )
|                                                                |  |                                     |              |   |      |   |              |  
|Net cash (used in) provided by financing activities             |  |                                     | (747,008     | ) |      |   | 4,399,713    |  
|                                                                |  |                                     |              |   |      |   |              |  
|Net increase (decrease) in cash and cash equivalents            |  |                                     | 28           |   |      |   | (227         | )
|Cash and cash equivalents at beginning of the period            |  |                                     | 1,395        |   |      |   | 1,197        |  
|                                                                |  |                                     |              |   |      |   |              |  
|Cash and cash equivalents at end of the period                  |  | $                                   | 1,423        |   |      | $ | 970          |  
|                                                                |  |                                     |              |   |      |   |              |  
|Supplemental Disclosures                                        |  |                                     |              |   |      |   |              |  
|Interest paid                                                   |  | $                                   | 360,099      |   |      | $ | 742,954      |  
|AHP payments                                                    |  | $                                   | 908          |   |      | $ | 1,627        |  
|REFCORP payments                                                |  | $                                   |              |   |      | $ | 4,687        |  
|Real-estate owned                                               |  | $                                   | 266          |   |      | $ |              |  

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



7



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Federal Home Loan Bank of Seattle

Condensed Notes to Financial Statements  (Unaudited)



|Note 1. | Basis of Presentation, Adoptions of Accounting Principles, and Recently Issued Accounting Standards and Interpretations
|------- | -----------------------------------------------------------------------------------------------------------------------

Basis of Presentation

These unaudited
financial statements and condensed notes should be read in conjunction with the 2008 audited financial statements and related notes (2008 Audited Financials) included in the 2008 annual report on Form 10-K of the Federal Home Loan Bank of Seattle
(Seattle Bank). These unaudited financial statements and condensed notes have been prepared in conformity with accounting principles generally accepted in the United States (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. In the opinion of management, all adjustments (consisting only of normal recurring accruals),
considered necessary for a fair statement have been included. The financial condition as of and the operating results for the three months ended March 31, 2009 are not necessarily indicative of the condition or results that may be expected as
of or for the year ending December 31, 2009.

Use of Estimates

The preparation of financial statements in accordance with 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.

Reclassifications

During the third
quarter of 2008, on a retrospective basis, we reclassified our investments in negotiable certificates of deposit, previously reported as interest-bearing deposits, as held-to-maturity securities in our Statements of Condition and Operations based on
the definition of a debt security under Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for Certain Investments in Debt and Equity Securities. This reclassification had no effect on total assets, net interest
income, or net income. The effect of this reclassification on our Statement of Operations for the three months ended March 31, 2008 was $14.0 million moving from interest income on interest-bearing deposits to interest income on
held-to-maturity securities.

Adoptions of Accounting Principles and Recently Issued Accounting Standards and Interpretations

FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP FAS 157-2)

In February 2008, the Financial Accounting Standards Board (FASB) issued FSP FAS 157-2, which delayed the effective date of SFAS No. 157, Fair
Value Measurements (SFAS 157) by one year (January 1, 2009 for the Seattle Bank) for non-financial assets and liabilities, except for items that are recognized or disclosed in the financial statements on a recurring basis. Application of SFAS
157 as of January 1, 2009 to our non-financial assets and liabilities, which consist primarily of real-estate owned, did not have a significant effect on our financial condition, results of operations, or cash flows.

SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an Amendment of FASB Statement No. 133 (SFAS 161)

In March 2008, the FASB issued SFAS 161, which requires enhanced disclosures on the effects of derivative instruments and hedging
activities on an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 (January 1, 2009 for the
Seattle Bank). Our adoption of SFAS 161 as of January 1, 2009 resulted in additional financial statement disclosures (see Note 7) but did not impact our results of operations, financial condition, or cash flows.

FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS

115-2)

On April 9, 2009, the
FASB issued FSP FAS 115-2, which is intended to provide greater clarity to investors about the credit and noncredit components of other-than-temporary impairments (OTTI) of debt securities and to more effectively communicate



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when an OTTI event has occurred. FSP FAS 115-2 amends the OTTI guidance in GAAP for debt securities to make the guidance
more operational, improves the presentation and disclosure of OTTI on debt and equity securities, and changes the calculation for the amount of OTTI recognized in earnings in the financial statements. FSP FAS 115-2 does not amend existing
recognition and measurement guidance related to OTTI of equity securities. For debt securities where the fair value of a security is less than its amortized cost basis, FSP FAS 115-2 requires an entity to assess whether (a) it has the intent to
sell the debt security or (b) it is more likely than not that it will be required to sell the debt security before the securitys anticipated recovery. If either of these conditions is met, an OTTI on the security must be recognized in the
statement of income for the difference between the fair value of the debt security and its amortized cost basis.

In instances in which a
determination is made that a credit loss (defined by FSP FAS 115-2 as the difference between the present value of the cash flows expected to be collected and the amortized cost basis) exists but the entity does not intend to sell the debt security
and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its amortized cost basis (i.e., the previous amortized cost basis less any current-period credit loss), FSP FAS 115-2
changes the presentation and amount of the OTTI recognized in the statement of income. In these instances, the impairment is separated into (a) the amount of the total impairment related to the credit loss and (b) the amount of the total
impairment related to all other factors. The amount of the total OTTI related to the credit loss is recognized in earnings. The amount of the total impairment related to all other factors is recognized in other comprehensive income and is amortized
over the remaining life of the debt security as an increase in the carrying value of the security (with no effect on earnings unless the security is subsequently sold or there is additional OTTI recognized). The total OTTI is presented in the
statement of income with an offset for the portion of the total OTTI that is recognized in other comprehensive income. Previously, in all cases, if an impairment was determined to be other-than-temporary, an impairment loss was recognized in
earnings in an amount equal to the entire difference between the securitys amortized cost basis and its fair value at the statement of condition date of the reporting period for which the assessment was made. The new presentation provides
additional information about the amounts that the entity does not expect to collect related to a debt security.

FSP FAS 115-2 is effective
and should be applied prospectively for financial statements issued for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for reporting periods ending after March 15, 2009. Early adoption of FSP
FAS 115-2 also requires early adoption of FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. When adopting FSP
FAS 115-2, an entity is required to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the non-credit component of a previously recognized OTTI from retained earnings to accumulated other comprehensive
income if the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis.

We adopted FSP FAS 115-2 as of January 1, 2009, and recognized the effects of applying FSP FAS 115-2 as a change in accounting principle. We
recognized the $293.4 million cumulative effect of initially applying FSP FAS 115-2 as an increase to our retained earnings at January 1, 2009, with a corresponding adjustment to accumulated other comprehensive loss. Had we elected not to early
adopt FSP FAS 115-2, we would have recognized the entire first quarter 2009 OTTI amount of $895.2 million in net loss. The adoption of FSP FAS 115-2 also increased financial statement disclosures (see Note 2).

FSP No. FAS 157-4, Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions that are Not Orderly (FSP FAS 157-4)

On April 9, 2009, the FASB issued FSP FAS 157-4, which clarifies the application
of SFAS 157 when there is no active market or where the price inputs being used represent distressed sales. FSP FAS 157-4 provides additional guidance for estimating the fair value of an asset or liability (financial and non-financial) when the
volume and level of activity for the asset or liability have significantly decreased and for identifying transactions that are not orderly. FSP FAS 157-4 is effective for periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. We elected to adopt FSP FAS 157-4 for the quarter ended March 31, 2009, and adoption did not have a material impact on our financial condition, results of operations, or cash flows.

FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1)

On April 9, 2009, the FASB issued FSP FAS 107-1 and APB 28-1, which amends SFAS No. 107, Disclosures about Fair Value of Financial
Instruments(SFAS 107), to require disclosures about the fair value of financial instruments within the scope of SFAS 107, including disclosure of the method(s) and significant assumptions used to estimate the fair value of financial
instruments, in interim as well as in annual financial statements. The FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in interim financial statements. FSP FAS 107-1 and APB 28-1 is effective
for interim and



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annual periods ending after June 15, 2009, with early adoption permitted. We adopted FSP FAS 107-1 and APB 28-1 for
the quarter ended March 31, 2009, with no effect on our financial condition, results of operations, cash flows, or existing interim disclosures.



|Note 2. | Held-To-Maturity Securities
|------- | ---------------------------

For accounting
policies and additional information concerning held-to-maturity securities, see Notes 1 and 5 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

Major Security Types

The following tables summarize our held-to-maturity securities as of
March 31, 2009 and December 31, 2008.



|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|----------------------------------------- |  | ----------------------- | ---------- | --------------------------------------- | - | ---------- | ----------------- |  | ---------------------------- | ---------- | ----------------------------- | - | ------ | ------------------- | - | ---------- | - |  | - | ---------
|                                          |  | As of March 31, 2009   
|Held-to-Maturity Securities               |  | AmortizedCost Basis (1) |            | OTTIRecognized inOtherComprehensiveLoss |   |            | CarryingValue (2) |  | GrossUnrealizedHolding Gains |            | GrossUnrealizedHolding Losses |   |        | EstimatedFair Value
|(in thousands)                            |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                    
|Certificates of deposit(3)                |  | $                       | 2,377,000  |                                         |   |            |                   |  | $                            | 2,377,000  |                               | $ | 229    |                     | $ | (1         | ) |  | $ | 2,377,228
|Other U.S. agency obligations(4)          |  |                         | 60,311     |                                         |   |            |                   |  |                              | 60,311     |                               |   | 835    |                     |   | (64        | ) |  |   | 61,082   
|Government-sponsored enterprises(5)       |  |                         | 678,895    |                                         |   |            |                   |  |                              | 678,895    |                               |   | 60,201 |                     |   |            |   |  |   | 739,096  
|State or local housing agency obligations |  |                         | 5,560      |                                         |   |            |                   |  |                              | 5,560      |                               |   |        |                     |   | (3         | ) |  |   | 5,557    
|Other(6)                                  |  |                         | 1,100,000  |                                         |   |            |                   |  |                              | 1,100,000  |                               |   | 301    |                     |   |            |   |  |   | 1,100,301
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Subtotal                                  |  |                         | 4,221,766  |                                         |   |            |                   |  |                              | 4,221,766  |                               |   | 61,566 |                     |   | (68        | ) |  |   | 4,283,264
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Residential Mortgage-Backed Securities    |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Government-sponsored enterprises(5)       |  |                         | 2,079,031  |                                         |   |            |                   |  |                              | 2,079,031  |                               |   | 22,364 |                     |   | (11,638    | ) |  |   | 2,089,757
|Other U.S. agency obligations(4)          |  |                         | 4,629      |                                         |   |            |                   |  |                              | 4,629      |                               |   | 43     |                     |   |            |   |  |   | 4,672    
|Private-label                             |  |                         | 5,568,779  |                                         |   | (1,102,296 | )                 |  |                              | 4,466,483  |                               |   |        |                     |   | (1,373,940 | ) |  |   | 3,092,543
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Subtotal                                  |  |                         | 7,652,439  |                                         |   | (1,102,296 | )                 |  |                              | 6,550,143  |                               |   | 22,407 |                     |   | (1,385,578 | ) |  |   | 5,186,972
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Total                                     |  | $                       | 11,874,205 |                                         | $ | (1,102,296 | )                 |  | $                            | 10,771,909 |                               | $ | 83,973 |                     | $ | (1,385,646 | ) |  | $ | 9,470,236
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|                                          |  |                        
|                                          |  |                         |            | As of December 31, 2008                
|Held-to-Maturity Securities               |  |                         |            | AmortizedCost Basis                     |   |            | CarryingValue     |  | GrossUnrealizedGains         |            | GrossUnrealizedLosses         |   |        | EstimatedFair Value
|(in thousands)                            |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                    
|Other U.S. agency obligations(4)          |  |                         |            |                                         | $ | 64,164     |                   |  | $                            | 64,164     |                               | $ | 876    |                     | $ | (68        | ) |  | $ | 64,972   
|Government-sponsored enterprises(5)       |  |                         |            |                                         |   | 875,604    |                   |  |                              | 875,604    |                               |   | 62,480 |                     |   |            |   |  |   | 938,084  
|State or local housing agency obligations |  |                         |            |                                         |   | 5,700      |                   |  |                              | 5,700      |                               |   | 1      |                     |   |            |   |  |   | 5,701    
|Other(6)                                  |  |                         |            |                                         |   | 1,250,000  |                   |  |                              | 1,250,000  |                               |   | 1,118  |                     |   |            |   |  |   | 1,251,118
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Subtotal                                  |  |                         |            |                                         |   | 2,195,468  |                   |  |                              | 2,195,468  |                               |   | 64,475 |                     |   | (68        | ) |  |   | 2,259,875
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Residential Mortgage-Backed Securities    |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Government-sponsored enterprises(5)       |  |                         |            |                                         |   | 1,997,942  |                   |  |                              | 1,997,942  |                               |   | 12,855 |                     |   | (24,074    | ) |  |   | 1,986,723
|Other U.S. agency obligations(4)          |  |                         |            |                                         |   | 4,759      |                   |  |                              | 4,759      |                               |   | 10     |                     |   | (19        | ) |  |   | 4,750    
|Private-label                             |  |                         |            |                                         |   | 5,586,722  |                   |  |                              | 5,586,722  |                               |   |        |                     |   | (1,980,873 | ) |  |   | 3,605,849
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Subtotal                                  |  |                         |            |                                         |   | 7,589,423  |                   |  |                              | 7,589,423  |                               |   | 12,865 |                     |   | (2,004,966 | ) |  |   | 5,597,322
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          
|Total                                     |  |                         |            |                                         | $ | 9,784,891  |                   |  | $                            | 9,784,891  |                               | $ | 77,340 |                     | $ | (2,005,034 | ) |  | $ | 7,857,197
|                                          |  |                         |            |                                         |   |            |                   |  |                              |            |                               |   |        |                     |   |            |   |  |   |          



|(1) | In accordance with FSP FAS 115-2, the amortized cost basis includes unpaid principal balance, unamortized
purchase premiums and discounts, and previous other-than-temporary impairments recognized in earnings (less any cumulative-effect adjustments recognized).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In accordance with FSP FAS 115-2, effective January 1, 2009, the carrying value of held-to-maturity securities
represents amortized cost after adjustment for any non-credit related impairment (including subsequent accretion) recognized in other comprehensive loss.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of certificates of deposit that meet the definition of a security under SFAS 115.
|--- | ------------------------------------------------------------------------------------------

|(4) | Primarily consists of Government National Mortgage Association (Ginnie Mae), or Small Business Association (SBA)
investment pools.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(5) | Primarily consists of debt securities issued by Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National
Mortgage Association (Fannie Mae), or Tennessee Valley Authority (TVA).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of promissory notes guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the
Temporary Liquidity Guarantee Program (TLGP).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2009 and December 31, 2008, we held $2.0 billion
and $938.8 million of held-to-maturity securities purchased from members or affiliates of members who own more than 10% of our total outstanding capital stock and outstanding mandatorily redeemable capital stock or members with representatives
serving on our Board of Directors (Board). See Note 10 for additional information concerning these related parties.

Our investment in
mortgage-backed securities represented 219.3% and 282.4% of our regulatory capital as of March 31, 2009 and December 31, 2008.



10



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##### Table of Contents

Unrealized Losses on Held-to-Maturity Securities

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 March 31, 2009 and December 31, 2008.



|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|-------------------------------------------------------- |  | ----------------------- | --------- | --------------------- | ----------------- | -------- | ------------------- | ----- | --------------------- | --------- |  | ------------------- | ---------- | --------------------- |  | - | --------- |  | - | ---------- | -
|                                                         |  | As of March 31, 2009    |          
|                                                         |  | Less than 12 months     |           |                       | 12 months or more |          |                     | Total |                      
|Held-to-Maturity Securities in Unrealized Loss Positions |  | EstimatedFair Value     |           | GrossUnrealizedLosses |                   |          | EstimatedFair Value |       | GrossUnrealizedLosses |           |  | EstimatedFair Value |            | GrossUnrealizedLosses | 
|(in thousands)                                           |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       | 
|Certificates of deposit                                  |  | $                       | 936,999   |                       | $                 | (1       | )                   |       | $                     |           |  | $                   |            |                       |  | $ | 936,999   |  | $ | (1         | )
|Other U.S. agency obligations(1)                         |  |                         | 7,978     |                       |                   | (64      | )                   |       |                       |           |  |                     |            |                       |  |   | 7,978     |  |   | (64        | )
|State or local housing agency obligations                |  |                         | 377       |                       |                   | (3       | )                   |       |                       |           |  |                     |            |                       |  |   | 377       |  |   | (3         | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Subtotal                                                 |  |                         | 945,354   |                       |                   | (68      | )                   |       |                       |           |  |                     |            |                       |  |   | 945,354   |  |   | (68        | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Residential Mortgage-Backed Securities                   |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Government-sponsored enterprises(2)                      |  |                         | 439,951   |                       |                   | (10,088  | )                   |       |                       | 176,361   |  |                     | (1,550     | )                     |  |   | 616,312   |  |   | (11,638    | )
|Temporarily impaired private-label                       |  |                         | 348,146   |                       |                   | (200,611 | )                   |       |                       | 2,165,171 |  |                     | (1,173,329 | )                     |  |   | 2,513,317 |  |   | (1,373,940 | )
|Other-than-temporarily impaired private-label            |  |                         |           |                       |                   |          |                     |       |                       | 579,226   |  |                     | (1,102,296 | )                     |  |   | 579,226   |  |   | (1,102,296 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Subtotal                                                 |  |                         | 788,097   |                       |                   | (210,699 | )                   |       |                       | 2,920,758 |  |                     | (2,277,175 | )                     |  |   | 3,708,855 |  |   | (2,487,874 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Total                                                    |  | $                       | 1,733,451 |                       | $                 | (210,767 | )                   |       | $                     | 2,920,758 |  | $                   | (2,277,175 | )                     |  | $ | 4,654,209 |  | $ | (2,487,942 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|                                                         | 
|                                                         |  | As of December 31, 2008 |          
|                                                         |  | Less than 12 months     |           |                       | 12 months or more |          |                     | Total |                      
|Held-to-Maturity Securities in Unrealized Loss Positions |  | EstimatedFair Value     |           | GrossUnrealizedLosses |                   |          | EstimatedFair Value |       | GrossUnrealizedLosses |           |  | EstimatedFair Value |            | GrossUnrealizedLosses | 
|(in thousands)                                           |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       | 
|Other U.S. agency obligations(1)                         |  | $                       | 8,107     |                       | $                 | (68      | )                   |       | $                     |           |  | $                   |            |                       |  | $ | 8,107     |  | $ | (68        | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Subtotal                                                 |  |                         | 8,107     |                       |                   | (68      | )                   |       |                       |           |  |                     |            |                       |  |   | 8,107     |  |   | (68        | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Residential Mortgage-Backed Securities                   |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Other U.S. agency obligations(1)                         |  |                         | 4,118     |                       |                   | (19      | )                   |       |                       |           |  |                     |            |                       |  |   | 4,118     |  |   | (19        | )
|Government-sponsored enterprises(2)                      |  |                         | 536,268   |                       |                   | (15,380  | )                   |       |                       | 429,243   |  |                     | (8,694     | )                     |  |   | 965,511   |  |   | (24,074    | )
|Private-label                                            |  |                         | 1,045,671 |                       |                   | (219,697 | )                   |       |                       | 2,401,023 |  |                     | (1,761,176 | )                     |  |   | 3,446,694 |  |   | (1,980,873 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Subtotal                                                 |  |                         | 1,586,057 |                       |                   | (235,096 | )                   |       |                       | 2,830,266 |  |                     | (1,769,870 | )                     |  |   | 4,416,323 |  |   | (2,004,966 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  
|Total                                                    |  | $                       | 1,594,164 |                       | $                 | (235,164 | )                   |       | $                     | 2,830,266 |  | $                   | (1,769,870 | )                     |  | $ | 4,424,430 |  | $ | (2,005,034 | )
|                                                         |  |                         |           |                       |                   |          |                     |       |                       |           |  |                     |            |                       |  |   |           |  |   |            |  



|(1) | Primarily consists of Ginnie Mae or SBA investment pools.
|--- | ---------------------------------------------------------

|(2) | Primarily consists of securities issued by Freddie Mac, Fannie Mae, or TVA.
|--- | ---------------------------------------------------------------------------

As of March 31, 2009, 184 of our investment positions had gross unrealized losses totaling $2.5 billion, with the total estimated fair value of
these positions approximating 79.3% of their carrying value. Of these 184 positions, 150 positions had gross unrealized losses for at least 12 months. As of December 31, 2008, 186 of our investment positions had gross unrealized losses totaling
$2.0 billion, with the total estimated fair value of these positions approximating 68.8% of their carrying value. Of these 186 positions, 127 positions had gross unrealized losses for at least 12 months.

Investments in government-sponsored enterprise securities, specifically debentures issued by Fannie Mae and Freddie Mac, were additionally affected by
investor concerns regarding those entities capital levels needed to offset expected credit losses that may result from declining home prices. The Housing and Economic Recovery Act of 2008 (Housing Act) contains provisions allowing the U.S.
Department of Treasury (U.S. Treasury) to provide support to Fannie Mae and Freddie Mac. Additionally, in September 2008, the U.S. Treasury and the Finance Agency announced that Fannie Mae and Freddie Mac had been placed into conservatorship, with
the Finance Agency named as conservator. The Finance Agency is managing Fannie Mae and Freddie Mac in an attempt to stabilize their financial condition and their ability to support the secondary mortgage market.

Credit Risk

Our mortgage-backed security
investments consist of agency-guaranteed securities and senior tranches of privately issued prime or Alt-A residential mortgage-backed securities, including hybrid adjustable-rate mortgages (ARMs), option ARMs, etc. Our exposure to the risk of loss
on our investments in mortgage-backed securities increases when the loans underlying the mortgage-backed securities exhibit high rates of delinquency and foreclosure, as well as losses on the sale of foreclosed properties. In order to reduce our
risk of loss on these investments, all of the mortgage-backed securities owned by the Seattle Bank contain one or more of the following forms of credit protection:



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| |  |  | Subordination  where the mortgage-backed security is structured such that payments to junior classes are subordinated to senior classes to ensure cash flows
to the senior classes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excess spread  where the weighted-average coupon rate of the underlying mortgage loans in the pool is higher than the weighted-average coupon rate on the
mortgage-backed security. The spread differential may be used to cover any losses that may occur.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Over-collateralization  where the total outstanding balance on the underlying mortgage loans in the pool is greater than the outstanding mortgage-backed
security balance. The excess collateral is available to cover any losses that may occur.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance wrap  where a third-party bond insurance company (e.g., a monoline insurer) guarantees timely payment of principal and interest on the
mortgage-backed security. The bond insurance company is obligated to cover any losses that occur. As of March 31, 2009, the Seattle Bank held $3.6 million in investments with unrealized losses of $2.4 million that had been credit-enhanced by a
monoline insurer, MBIA. Although we expect the insurer to be able to meet its contractual obligations, we have additional credit enhancements on these securities such that we expect to collect all amounts due according to their contractual terms.
The Seattle Bank does not anticipate investing in any material amount of securities where the primary credit protection is provided by monoline insurers for the foreseeable future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our investments in private-label residential mortgage-backed securities were rated AAA (or its equivalent) by a nationally recognized
statistical rating organization (NRSRO), such as Moodys Investor Service (Moodys) or Standard & Poors (S&P), at their respective purchase dates. The AAA-rated securities achieved their ratings through
credit enhancement, primarily subordination and over-collateralization. The following tables summarize the carrying value of our long-term held-to-maturity investments by credit rating as of March 31, 2009 and December 31, 2008.



|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|---------------------------------------------------- |  | ----------------------- | --------- | -- | - | ------- |  | -------------------- | ------ | -------------------- | - | ------- |  | ----- | --------- |  | - | ------- |  | - | ---------
|                                                     |  | As of March 31, 2009   
|Long-Term Investments by Credit Rating               |  | AAA orGovernmentAgency  |           | AA |   | A       |  | BBB                  |        | BelowInvestmentGrade |   | Unrated |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|U.S. agency obligations                              |  | $                       | 725,579   |    | $ |         |  | $                    |        |                      | $ |         |  | $     |           |  | $ | 13,627  |  | $ | 739,206  
|State or local housing investments                   |  |                         | 380       |    |   | 5,180   |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 5,560    
|Residential mortgage-backed securities               |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Government-sponsored enterprise                      |  |                         | 2,083,660 |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 2,083,660
|Private-label                                        |  |                         | 2,904,002 |    |   | 96,621  |  |                      | 93,483 |                      |   | 338,799 |  |       | 1,033,578 |  |   |         |  |   | 4,466,483
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total long-term investment securities                |  | $                       | 5,713,621 |    | $ | 101,801 |  | $                    | 93,483 |                      | $ | 338,799 |  | $     | 1,033,578 |  | $ | 13,627  |  | $ | 7,294,909
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|                                                     |  |                         |           |   
|                                                     |  |                         |           |    |   |         |  | As of March 31, 2009
|Long-Term Investments below Investment Grade         |  |                         |           |    |   |         |  | BB                   |        | B                    |   | CCC     |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|Private-label residential mortgage-backed securities |  |                         |           |    |   |         |  |                      |        |                      | $ | 357,943 |  | $     | 305,947   |  | $ | 369,688 |  | $ | 1,033,578
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total securities below investment grade              |  |                         |           |    |   |         |  |                      |        |                      | $ | 357,943 |  | $     | 305,947   |  | $ | 369,688 |  | $ | 1,033,578
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|                                                     | 
|                                                     |  | As of December 31, 2008
|Long-Term Investments by Credit Rating               |  | AAA orGovernmentAgency  |           | AA |   | A       |  | BBB                  |        | CCC                  |   | Unrated |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|U.S. agency obligations                              |  | $                       | 925,771   |    | $ |         |  | $                    |        |                      | $ |         |  | $     |           |  | $ | 13,997  |  | $ | 939,768  
|State or local housing investments                   |  |                         | 380       |    |   | 5,320   |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 5,700    
|Residential mortgage-backed securities               |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Government-sponsored enterprise                      |  |                         | 2,002,701 |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 2,002,701
|Private-label                                        |  |                         | 5,470,426 |    |   | 56,779  |  |                      | 38,905 |                      |   | 17,694  |  |       | 2,918     |  |   |         |  |   | 5,586,722
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total long-term investment securities                |  | $                       | 8,399,278 |    | $ | 62,099  |  | $                    | 38,905 |                      | $ | 17,694  |  | $     | 2,918     |  | $ | 13,997  |  | $ | 8,534,891
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          

The following table summarizes the unpaid principal balance of our private-label residential
mortgage-backed securities by credit rating and year of issuance, as well as the weighted-average credit enhancement on the applicable securities as of March 31, 2009. The current weighted-average credit enhancement is the weighted average
percent of par value of subordinated tranches and over-collateralization currently in place that will absorb losses before the investments incur a loss.



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|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|------------------------------------------------ |  | ----------------------- | --------- | ------------- | - | -------------- |  | -------------------- | --------- |  | ----------------------------------------- | ---------- | - |  | ------
|                                                 |  | As of March 31, 2009   
|Private-Label Mortgage-Backed Securities Ratings |  | UnpaidPrincipal Balance |           | AmortizedCost |   | Carrying Value |  | GrossUnrealized Loss |           |  | CurrentWeighted-AverageCredit Enhancement
|(in thousands except percentages)                |  |                         |           |               |   |                |  |                      |           |  |                                          
|Prime                                            |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|AAA                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  | $                       | 1,180,085 |               | $ | 1,176,681      |  | $                    | 1,176,681 |  | $                                         | (79,810    | ) |  | 6.58  
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total prime                                      |  | $                       | 1,180,085 |               | $ | 1,176,681      |  | $                    | 1,176,681 |  | $                                         | (79,810    | ) |  | 6.58  
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Alt-A                                            |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|AAA                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  | $                       | 615,249   |               | $ | 613,804        |  | $                    | 613,804   |  | $                                         | (110,704   | ) |  | 6.25  
|2005                                             |  |                         | 46,700    |               |   | 46,726         |  |                      | 46,726    |  |                                           | (19,656    | ) |  | 22.21 
|2007                                             |  |                         | 471,046   |               |   | 468,255        |  |                      | 313,750   |  |                                           | (302,324   | ) |  | 45.86 
|2008                                             |  |                         | 753,392   |               |   | 753,041        |  |                      | 753,041   |  |                                           | (349,821   | ) |  | 34.93 
|AA                                               |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 8,031     |               |   | 8,031          |  |                      | 8,031     |  |                                           | (3,871     | ) |  | 28.94 
|2005                                             |  |                         | 48,101    |               |   | 48,097         |  |                      | 48,097    |  |                                           | (32,221    | ) |  | 46.74 
|2007                                             |  |                         | 40,493    |               |   | 40,493         |  |                      | 40,493    |  |                                           | (24,090    | ) |  | 39.94 
|A                                                |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 2,558     |               |   | 2,553          |  |                      | 2,553     |  |                                           | (1,646     | ) |  | 100.00
|2005                                             |  |                         | 7,948     |               |   | 7,948          |  |                      | 7,948     |  |                                           | (4,457     | ) |  | 32.35 
|2007                                             |  |                         | 82,982    |               |   | 82,982         |  |                      | 82,982    |  |                                           | (50,960    | ) |  | 43.82 
|BBB                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 70,516    |               |   | 70,552         |  |                      | 70,552    |  |                                           | (43,551    | ) |  | 46.50 
|2006                                             |  |                         | 85,123    |               |   | 85,123         |  |                      | 85,123    |  |                                           | (47,205    | ) |  | 51.09 
|2007                                             |  |                         | 183,193   |               |   | 183,124        |  |                      | 183,124   |  |                                           | (115,941   | ) |  | 40.66 
|BB                                               |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 16,895    |               |   | 16,895         |  |                      | 16,895    |  |                                           | (9,719     | ) |  | 27.31 
|2006                                             |  |                         | 248,632   |               |   | 239,748        |  |                      | 110,774   |  |                                           | (152,052   | ) |  | 45.44 
|2007                                             |  |                         | 444,743   |               |   | 441,615        |  |                      | 230,274   |  |                                           | (299,874   | ) |  | 41.97 
|B                                                |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 1,070     |               |   | 1,071          |  |                      | 1,071     |  |                                           | (720       | ) |  | 100.00
|2005                                             |  |                         | 49,447    |               |   | 49,436         |  |                      | 18,932    |  |                                           | (30,503    | ) |  | 42.68 
|2006                                             |  |                         | 322,613   |               |   | 306,571        |  |                      | 179,905   |  |                                           | (189,329   | ) |  | 46.24 
|2007                                             |  |                         | 263,285   |               |   | 254,820        |  |                      | 106,039   |  |                                           | (169,600   | ) |  | 40.98 
|CCC                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 49,244    |               |   | 45,916         |  |                      | 32,223    |  |                                           | (25,335    | ) |  | 29.99 
|2006                                             |  |                         | 351,183   |               |   | 346,173        |  |                      | 247,402   |  |                                           | (223,785   | ) |  | 46.14 
|2007                                             |  |                         | 308,935   |               |   | 279,124        |  |                      | 90,063    |  |                                           | (189,062   | ) |  | 17.09 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total Alt-A                                      |  | $                       | 4,471,379 |               | $ | 4,392,098      |  | $                    | 3,289,802 |  | $                                         | (2,396,426 | ) |  | 35.21 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total                                            |  | $                       | 5,651,464 |               | $ | 5,568,779      |  | $                    | 4,466,483 |  | $                                         | (2,476,236 | ) |  | 29.23 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       

Other-Than-Temporary Impairment Assessment

We evaluate our individual held-to-maturity investments for OTTI on at least a quarterly basis. We
use indicators, or screens, to determine which impaired, individual securities require additional quantitative evaluation using detailed cash flow analysis. These screens consider numerous factors, which include, but are not limited to, the credit
rating; the creditworthiness of the issuers of agency debt securities; the strength of the government-sponsored enterprises guarantees; the type of underlying collateral; the duration and severity of the unrealized loss; any credit
enhancements or insurance; and certain other collateral-related characteristics such as FICO® credit scores, delinquency rates, and the securitys performance. The relative importance
of this qualitative and quantitative information may vary based on the facts and circumstances surrounding each security, as well as on the market and economic environment at the time of our assessment. As part of this process, we consider our
intent to sell each debt security and whether it is more likely than not that we would be required to sell such security before its anticipated recovery. If either of these conditions is met, we recognize an OTTI in earnings equal to the entire
difference between the securitys amortized cost and its fair value as of the statement of condition date. If neither condition is met, we consider whether or not we will recover the entire amortized cost of the security by comparing our best
estimate of the present value of the cash flows expected to be collected from the security with the amortized cost basis of the security. The difference between our best estimate



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of the present value of the cash flows expected to be collected and the amortized cost basis is considered to be a credit
loss, which is recorded in current earnings. The portion of an other-than-temporary impairment loss that is not attributable to the credit loss is recognized through other comprehensive loss.

We determined that for GSE residential mortgage-backed securities, the strength of the issuers guarantees through direct obligations or U.S.
government support is sufficient to protect us from losses based on current information. Further it is not more likely than not that the Seattle Bank will be required to sell impaired securities prior to their anticipated recovery. We expect to
recover the entire cost basis of these securities and have thus concluded that our gross unrealized losses on GSE residential mortgage-backed securities are temporary as of March 31, 2009.

Private-label mortgage-backed securities identified as at risk of OTTI are subjected to a detailed cash flow analysis to determine the projected future
cash flows that are more likely than not to be collected. Beginning in the first quarter of 2009, to ensure consistency in determination of the OTTI for private-label mortgage-backed securities among all FHLBanks, the FHLBanks used the same key
modeling assumptions for purposes of their cash flow analysis. At-risk securities are evaluated by estimating projected cash that an FHLBank is likely to collect based on an assessment of all available information about each individual security, the
structure of the security and certain assumptions, such as the remaining payment terms of the security, prepayment speeds, default rates, loss severity on the collateral supporting the FHLBanks security, based on underlying loan level borrower
and loan characteristics, expected housing price changes, and future interest rates, to determine whether the FHLBank will recover the entire amortized cost basis of the security. A significant input to such analysis is the forecast of housing price
changes, which are based on an assessment of the housing market. In response to the ongoing deterioration in housing prices, credit market stress, and weakness in the U.S. economy in the first quarter of 2009, which continued to affect the credit
quality of the collateral, the FHLBanks, including the Seattle Bank, modified certain assumptions in their cash flow analyses to reflect more adverse loss severities and more moderate rates of housing price recovery than the FHLBanks used in their
analyses as of December 31, 2008. The loan level cash flows and losses are allocated to various security classes, including the security classes owned by each FHLBank, based on the cash flow and loss allocation rules of the individual security.
In performing a cash flow analysis, an FHLBank identifies its best estimate of the cash flows expected to be collected. If this estimate results in a present value of expected cash flows that is less than the amortized cost basis of a security (that
is, a credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, the impairment is considered temporary.

In
accordance with Finance Agency guidance, we contracted with the FHLBank of San Francisco to provide the key modeling assumptions and cash flow analyses for certain of our private-label mortgage-backed securities. Because such assumptions are
material to the determination of OTTI, we also established and performed procedures to review the documentation, assumptions, and cash flow analyses provided by the FHLBank of San Francisco in order to ensure such assumptions are reasonable. We
employ the third-party risk model and a third-party loan data source specified by Finance Agency guidance to project the lifetime cash flows that would be passed through to us from our at-risk securities.

As a result of our OTTI evaluation as of March 31, 2009, we determined that the present value of the cash flows expected to be collected was less
than the amortized cost basis of certain private-label mortgage-backed securities. These securities included nine securities that we identified as other-than-temporarily impaired in 2008 and 15 securities that were identified as
other-than-temporarily impaired in the first quarter of 2009. As a result of their continued credit deterioration, additional impairments of $42.4 million related to credit loss and $30.5 million related to all other factors were recorded for the
three months ended March 31, 2009 on the nine previously impaired private-label mortgage-backed securities. For the newly identified private-label mortgage-backed securities with OTTI, we recorded impairments of $29.3 million related to credit
losses and $793.0 million related to all other factors. We do not intend to sell these securities, and it is not more likely than not that we will be required to sell these securities prior to recovery.

In accordance with FSP FAS 115-2, for the three months ended March 31, 2009, we recognized OTTI charges of $71.7 million related to credit losses on
our private-label mortgage-backed securities, which are reported in our Statement of Operations as net other-than-temporary impairment loss on held-to-maturity securities and $823.5 million related to non-credit losses, which are
reported in our Statement of Condition in accumulated other comprehensive loss as non-credit portion of OTTI loss on held-to-maturity securities. The OTTI recognized in accumulated other comprehensive loss will be accreted to the
carrying value of each security on a prospective basis, based on the amount and timing of future cash flows, over the remaining life of each security. The accretion increases the carrying value of each security and does not affect earnings unless
the security is subsequently sold or has an additional OTTI charge that is recognized in earnings.

The following table summarizes key
information as of March 31, 2009 on the private-label securities on which we recorded OTTI during the first quarter of 2009.



14



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##### Table of Contents

|                                               |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               |  |   |          |   |  |   |          |  
|---------------------------------------------- |  | ---------------------- | --------- | ----------------------------------------- | - | --------------------- |  | - | ---------- | - | ------------------------- | - | ------- | ----------------------------- | - | ------- | ------------- |  | - | -------- | - |  | - | -------- | -
|                                               |  | As of March 31, 2009   |           | For the Three Months Ended March 31, 2009 |  
|Other-than-Temporarily Impaired Securities     |  | UnpaidPrincipalBalance |           | AmortizedCost                             |   | GrossUnrealizedLosses |  |   | FairValue  |   | OTTIRelated toCredit Loss |   |         | OTTIRelated toNon-Credit Loss |   |         | TotalOTTILoss | 
|(in thousands)                                 |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               |  |   |          |   |  |   |          |  
|Alt-A private-label mortgage-backed securities |  | $                      | 1,758,993 |                                           | $ | 1,681,522             |  | $ | (1,102,296 | ) |                           | $ | 579,226 |                               | $ | (71,668 | )             |  | $ | (823,527 | ) |  | $ | (895,195 | )

Key inputs and assumptions used to measure the amount of credit loss related to private-label
mortgage-backed securities include, among other things, prepayments, default rates, and loss severity. To discount expected cash flows, we use the interest rate in effect prior to other-than-temporary impairment.

The following table summarizes the credit loss components of our OTTI charges recognized in earnings for the three months ended March 31, 2009.



|                                                                                               |  |                                          |       
|---------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------
|Credit Loss Component of Other-Than-Temporary Impairment Losses                                |  | For the Three Months EndedMarch 31,
2009
|(in thousands)                                                                                 |  |                                         
|Balance, January 1, 2009(1)                                                                    |  | $                                        | 8,693 
|Additions                                                                                      |  |                                          |       
|Credit losses on securities for which OTTI was not previously recognized                       |  |                                          | 29,234
|Additional OTTI credit losses on securities for which an OTTI charge was previously recognized |  |                                          | 42,434
|                                                                                               |  |                                          |       
|Balance, March 31, 2009                                                                        |  | $                                        | 80,361
|                                                                                               |  |                                          |       



|(1) | We adopted FSP FAS 115-2 as of January 1, 2009 and recognized the cumulative effect of initially
applying this guidance, totaling $293.4 million, as an adjustment to our retained earnings at January 1, 2009, with a corresponding adjustment to other comprehensive loss. This amount represents credit losses remaining in retained earnings
related to the adoption of FSP FAS 115-2.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The remaining portion of our held-to-maturity security portfolio has
experienced unrealized losses and a decrease in fair value due to market volatility, illiquidity in the marketplace, and credit deterioration in the U.S. mortgage markets. However, the decline is considered temporary as we expect to recover the
entire amortized cost basis of the remaining held-to-maturity securities in unrealized loss positions and neither intend to sell these securities nor believe it is more likely than not that we will be required to sell these securities before the
anticipated recovery of their amortized cost basis.

Redemption Terms

The amortized cost, carrying value, and estimated fair value, as applicable, of held-to-maturity securities by contractual maturity as of March 31,
2009 and December 31, 2008 are shown below. Expected maturities of some securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.



|                                      |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|------------------------------------- |  | -------------------- | ---------- | ----------------------- | - | ------------------- |  | ------------------- | --------- | ------------------- | - | --------- |  | - | ---------
|                                      |  | As of March 31, 2009 |            | As of December 31, 2008
|Year of Maturity                      |  | AmortizedCost Basis  |            | CarryingValue           |   | EstimatedFair Value |  | AmortizedCost Basis |           | EstimatedFair Value
|(in thousands)                        |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|Non-Mortgage-Backed Securities        |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|Due in one year or less               |  | $                    | 3,560,353  |                         | $ | 3,560,353           |  | $                   | 3,561,058 |                     | $ | 1,524,889 |  | $ | 1,527,528
|Due after one year through five years |  |                      | 619,860    |                         |   | 619,860             |  |                     | 680,426   |                     |   | 628,059   |  |   | 689,602  
|Due after five years through 10 years |  |                      | 4,924      |                         |   | 4,924               |  |                     | 4,941     |                     |   | 4,622     |  |   | 4,636    
|Due after 10 years                    |  |                      | 36,629     |                         |   | 36,629              |  |                     | 36,839    |                     |   | 37,898    |  |   | 38,109   
|                                      |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|Subtotal                              |  |                      | 4,221,766  |                         |   | 4,221,766           |  |                     | 4,283,264 |                     |   | 2,195,468 |  |   | 2,259,875
|                                      |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|Mortgage-Backed Securities            |  |                      | 7,652,439  |                         |   | 6,550,143           |  |                     | 5,186,972 |                     |   | 7,589,423 |  |   | 5,597,322
|                                      |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          
|Total                                 |  | $                    | 11,874,205 |                         | $ | 10,771,909          |  | $                   | 9,470,236 |                     | $ | 9,784,891 |  | $ | 7,857,197
|                                      |  |                      |            |                         |   |                     |  |                     |           |                     |   |           |  |   |          

The amortized cost of our mortgage-backed securities classified as held-to-maturity includes net
discounts of $1.2 billion and $23.0 million as of March 31, 2009 and December 31, 2008.

We generally execute interest-rate
exchange agreements with major broker-dealers under bilateral collateral agreements. As of March 31, 2009, we did not have any securities pledged as collateral to broker-dealers that they cannot sell or repledge.



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##### Table of Contents

|Note 3. | Advances
|------- | --------

For accounting policies and additional
information concerning advances, see Note 6 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K as well as Note 11 in this report.

Redemption Terms

We had advances outstanding at interest rates ranging from 0.20% to 8.62% as of March 31, 2009
and from 0.13% to 8.62% as of December 31, 2008. Our interest rates on our AHP advances ranged from 2.80% to 5.99% as of March 31, 2009 and December 31, 2008.

The following table summarizes the amount and weighted-average interest rate of our advances by term-to-maturity as of March 31, 2009 and
December 31, 2008.



|                                                     |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|---------------------------------------------------- |  | -------------------- | ---------- | ----------------------- | ---------------------------- | ---- | ------ | - | ---------- | ---------------------------- |  | ----
|                                                     |  | As of March 31, 2009 |            | As of December 31, 2008
|Term-to-Maturity and Weighted-Average Interest Rates |  | Amount               |            |                         | Weighted-AverageInterestRate |      | Amount |   |            | Weighted-AverageInterestRate
|(in thousands, except interest rates)                |  |                      |            |                         |                              |      |        |   |            |                             
|Due in one year or less                              |  | $                    | 19,777,475 |                         |                              | 1.96 |        | $ | 24,014,584 |                              |  | 2.65
|Due after one year through two years                 |  |                      | 3,798,963  |                         |                              | 2.76 |        |   | 4,540,058  |                              |  | 3.34
|Due after two years through three years              |  |                      | 2,076,538  |                         |                              | 3.34 |        |   | 1,679,058  |                              |  | 3.83
|Due after three years through four years             |  |                      | 1,542,572  |                         |                              | 3.39 |        |   | 1,440,120  |                              |  | 3.89
|Due after four years through five years              |  |                      | 828,311    |                         |                              | 3.24 |        |   | 1,353,482  |                              |  | 3.32
|Thereafter                                           |  |                      | 3,251,513  |                         |                              | 4.40 |        |   | 3,268,677  |                              |  | 4.41
|                                                     |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|Total par value                                      |  |                      | 31,275,372 |                         |                              | 2.51 |        |   | 36,295,979 |                              |  | 3.02
|                                                     |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|Commitment fees                                      |  |                      | (765       | )                       |                              |      |        |   | (803       | )                            |  |     
|Discount on AHP advances                             |  |                      | (114       | )                       |                              |      |        |   | (126       | )                            |  |     
|Discount on advances                                 |  |                      | (4,963     | )                       |                              |      |        |   | (5,030     | )                            |  |     
|SFAS 133 hedging adjustments                         |  |                      | 578,865    |                         |                              |      |        |   | 653,831    |                              |  |     
|                                                     |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|Total                                                |  | $                    | 31,848,395 |                         |                              |      |        | $ | 36,943,851 |                              |  |     
|                                                     |  |                      |            |                         |                              |      |        |   |            |                              |  |     

Generally, advances prepaid prior to maturity are subject to a prepayment fee. The prepayment fee
is required by regulation and is intended to make us financially indifferent to a borrowers decision to prepay an advance. Prepayment fees received in connection with the restructure of an existing advance are included in discount on
advances.

We offer putable advances, on which we have a right to terminate at par at our discretion on specific dates, and callable
advances, on which our borrower has the right to terminate at par at its discretion on specific dates. We had putable advances outstanding of $4.4 billion as of March 31, 2009 and December 31, 2008. We had no callable advances outstanding
as of either March 31, 2009 or December 31, 2008. We also offer convertible advances, or advances that initially are variable interest-rate advances and then, on a predetermined date, convert to fixed interest-rate advances. We have the
option on specified dates to cancel the convertible advance with the borrower. We had convertible advances of $370.0 million outstanding as of March 31, 2009 and December 31, 2008.

Interest-Rate Payment Terms

The following
table summarizes advances by interest-rate payment terms as of March 31, 2009 and December 31, 2008.



|                                   |  |                      |            |                          |       |        |   |                          |  |      
|---------------------------------- |  | -------------------- | ---------- | ------------------------ | ----- | ------ | - | ------------------------ |  | -----
|                                   |  | As of March 31, 2009 |            | As of December 31, 2008 
|Interest-Rate Payment Terms        |  | Amount               |            | Percent of TotalAdvances |       | Amount |   | Percent of TotalAdvances
|(in thousands, except percentages) |  |                      |            |                          |       |        |   |                         
|Fixed-interest rate                |  | $                    | 23,618,986 |                          | 75.5  |        | $ | 24,844,273               |  | 68.5 
|Variable-interest rate             |  |                      | 7,286,386  |                          | 23.3  |        |   | 11,081,706               |  | 30.5 
|Floating-to-fixed convertible rate |  |                      | 370,000    |                          | 1.2   |        |   | 370,000                  |  | 1.0  
|                                   |  |                      |            |                          |       |        |   |                          |  |      
|Total par value                    |  | $                    | 31,275,372 |                          | 100.0 |        | $ | 36,295,979               |  | 100.0
|                                   |  |                      |            |                          |       |        |   |                          |  |      

Credit Risk



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##### Table of Contents

We have never experienced a credit loss on an advance. Given the current economic environment, some of
our member institutions may experience financial difficulties, including failure, and our credit protection may not be sufficient to protect our security interest. For example, the number of borrowers on our internal credit watch list has trended
sharply upward over the past year, generally as a result of increases in non-performing assets and the need for additional capital. Further, in the three months ended March 31, 2009, two of our member institutions failed (three additional
member institutions failed subsequent to March 31, 2009, and prior to these unaudited financial statements and condensed notes). All outstanding advances to these members were collateralized and were prepaid by the acquiring institution or the
FDIC.

We protect against credit risk on advances by requiring collateral on all advances we fund and may also request additional or
substitute collateral during the life of an advance to protect our security interest. As of March 31, 2009 and December 31, 2008, we had rights to collateral, either loans or securities, on a borrower-by-borrower basis, with an estimated
fair value in excess of outstanding advances. As a result, we do not expect to incur any credit losses on our advances.

We believe that we
have policies and procedures in place to appropriately manage credit risk on advances, including requirements for physical possession or control of pledged collateral, restrictions on borrowing, specific review of each advance request, verifications
of collateral, and continuous monitoring of borrowings and the members financial condition. The physical possession collateral arrangement reduces our credit risk and allows us to continue lending to members whose financial condition may have
weakened. We continue to monitor collateral and credit-worthiness of our members. Accordingly, we have not provided any allowances for losses on advances.

Concentration Risk

As of March 31, 2009, five borrowers held 70.6% of the par value of our outstanding
advances, with two borrowers holding 55.5% (JPMorgan Chase Bank N.A., formerly Washington Mutual Bank, F.S.B., with 34.2% and Bank of America Oregon, N.A. with 21.3%). As of December 31, 2008, five borrowers held 68.4% of the par value of our
outstanding advances, with three borrowers holding 56.7% (JPMorgan Chase Bank with 35.0%, Bank of America Oregon, N.A. with 11.4%, and Merrill Lynch Bank USA with 10.3%). No other member institutions held advances in excess of 10% of our total
advances outstanding as of March 31, 2009 or December 31, 2008.

Although the long-term impact of the BofA/Merrill Lynch merger
on membership and advance levels is unknown at this time, Merrill Lynch prepaid its $2.9 billion of outstanding advances during March 2009 and had no outstanding advances as of March 31, 2009. Further, we expect that advance volumes and
associated advance interest income that began to decline in the fourth quarter of 2008 will be further negatively impacted as a result of the acquisition of our formerly largest member, Washington Mutual Bank, F.S.B. by JPMorgan Chase Bank N.A., a
non-member institution. The majority of this former members advances mature during 2009 and it is unknown whether we will be able to replace these advances or reinvest the proceeds of the maturing advances into similarly yielding investments.
Because a large concentration of our advances is held by only a few members and a non-member shareholder, changes in this groups borrowing decisions can significantly affect the amount of our advances outstanding. We expect that the
concentration of advances with our largest borrowers will remain significant for the foreseeable future. In addition, the ability of our members to issue FDIC-insured unsecured debt under the TLGP, as well as expanded lending activities by the
Federal Reserve, may also adversely impact demand for our advances.



|Note 4. | Mortgage Loans Held for Portfolio
|------- | ---------------------------------

For accounting
policies and additional information concerning mortgage loans held for portfolio, see Note 7 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

As of March 31, 2009 and December 31, 2008, 87.1% and 87.0% of our outstanding mortgage loans held for portfolio had been purchased from
JPMorgan Chase Bank, N.A. (formerly Washington Mutual Bank, F.S.B.). This former member owned more than 10% of our total outstanding capital stock and mandatorily redeemable capital stock as of March 31, 2009 and December 31, 2008.



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##### Table of Contents

The following table summarizes information on our mortgage loans held for portfolio as of March 31,
2009 and December 31, 2008.



|                                                                |  |                     |           |   |                        |   |           |  
|--------------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loans Held for Portfolio                               |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands)                                                  |  |                     |           |   |                        |  
|Real Estate                                                     |  |                     |           |   |                        |   |           |  
|Fixed interest-rate, medium-term*,
single-family mortgage loans |  | $                   | 695,746   |   |                        | $ | 732,644   |  
|Fixed interest-rate, long-term*,
single-family mortgage loans   |  |                     | 4,195,089 |   |                        |   | 4,345,197 |  
|                                                                |  |                     |           |   |                        |   |           |  
|Total loan principal                                            |  |                     | 4,890,835 |   |                        |   | 5,077,841 |  
|Premiums                                                        |  |                     | 36,211    |   |                        |   | 40,823    |  
|Discounts                                                       |  |                     | (28,160   | ) |                        |   | (31,341   | )
|                                                                |  |                     |           |   |                        |   |           |  
|Total                                                           |  | $                   | 4,898,886 |   |                        | $ | 5,087,323 |  
|                                                                |  |                     |           |   |                        |   |           |  



|* | Medium-term is defined as a term of 15 years or less while long-term is defined as a term greater than 15 years.
|- | ----------------------------------------------------------------------------------------------------------------

We have never experienced a credit loss and our former supplemental mortgage insurance provider experienced only two
loss claims on our mortgage loans (for which it was reimbursed from the lender risk accounts) prior to the cancellation of our supplemental mortgage insurance policies. Under the Mortgage Purchase Program (MPP), we previously 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 $4.9 billion and $5.1 billion as of March 31, 2009
and December 31, 2008, which was comprised of $4.7 billion and $4.9 billion in conventional mortgage loans and $197.1 million and $205.4 million in government-insured mortgage loans. The conventional mortgage loans were credit-enhanced at the
time of purchase by our participating members to a level equivalent to at least an investment-grade rating through the lender risk account and, prior to April 25, 2008, supplemental mortgage insurance. On April 8, 2008, S&P lowered its
counterparty credit and financial strength ratings on Mortgage Guaranty Insurance Corporation (MGIC), our MPP supplemental mortgage insurance provider, from AA- to A with a negative outlook. On April 25, 2008, we
exercised our contractual right and notified MGIC of our intent to cancel our policies with MGIC. The policies were cancelled as of that date.

We conduct a loss reserve analysis on a quarterly basis and have determined that, based on our analysis of our mortgage loan portfolio as of March 31, 2009, the credit enhancement provided by our members in the form of the lender risk
account is sufficient to absorb inherent credit losses, that an allowance for credit loss is unnecessary, and that we have the policies and procedures in place to appropriately manage this credit risk.

Credit Risk

The following table presents our
mortgage loans past due 90 days or more or in foreclosure and still accruing interest, as a percentage of par, as of March 31, 2009 and December 31, 2008.



|                                                             |  |                     |           |   |                        |   |           |  
|------------------------------------------------------------ |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loans 90-Days Delinquent or in Foreclosure          |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands, except percentages)                           |  |                     |           |   |                        |  
|Total conventional mortgage loan delinquencies, at par       |  | $                   | 12,620    |   |                        | $ | 8,898     |  
|Total conventional mortgage loans outstanding, at par        |  |                     | 4,693,705 |   |                        |   | 4,872,474 |  
|Percent of delinquent conventional mortgage loans            |  |                     | 0.27      | % |                        |   | 0.18      | %
|Percent of conventional mortgage loans in foreclosure        |  |                     | 0.11      | % |                        |   | 0.08      | %
|Total government-insured mortgage loan delinquencies, at par |  | $                   | 30,067    |   |                        | $ | 27,540    |  
|Total government-insured mortgage loans outstanding, at par  |  |                     | 197,130   |   |                        |   | 205,367   |  
|Percent of delinquent government-insured mortgage loans      |  |                     | 15.3      | % |                        |   | 13.4      | %

As of March 31, 2009, we had no real-estate owned. As of December 31, 2008, the Seattle
Bank had one mortgage loan totaling $126,000 classified as real-estate owned.



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##### Table of Contents

|Note 5. | Consolidated Obligations
|------- | ------------------------

For accounting policies
and additional information concerning consolidated obligations, see Note 11 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

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 book value, net of discounts and concessions, par value, and weighted-average interest rate for our consolidated
obligation discount notes as of March 31, 2009 and December 31, 2008.



|                                       |  |            |            |           |   |                               |  |     
|-------------------------------------- |  | ---------- | ---------- | --------- | - | ----------------------------- |  | ----
|Consolidated Obligation Discount Notes |  | Book Value |            | Par Value |   | Weighted-AverageInterestRate*
|(in thousands, except interest rates)  |  |            |            |           |   |                              
|As of March 31, 2009                   |  | $          | 22,023,488 |           | $ | 22,066,052                    |  | 0.67
|                                       |  |            |            |           |   |                               |  |     
|As of December 31, 2008                |  | $          | 15,878,281 |           | $ | 15,899,022                    |  | 1.14
|                                       |  |            |            |           |   |                               |  |     



|* | The consolidated obligation discount notes weighted-average interest rate represents an implied rate.
|- | ------------------------------------------------------------------------------------------------------

Consolidated Obligation Bonds

Redemption Terms

The following table summarizes our participation in consolidated obligation bonds
outstanding by year of contractual maturity as of March 31, 2009 and December 31, 2008.



|                                                         |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|-------------------------------------------------------- |  | -------------------- | ---------- | ----------------------- | ---------------------------- | ---- | ------ | - | ---------- | ---------------------------- |  | ----
|                                                         |  | As of March 31, 2009 |            | As of December 31, 2008
|Contractual Maturity and Weighted-Average Interest Rates |  | Amount               |            |                         | Weighted-AverageInterestRate |      | Amount |   |            | Weighted-AverageInterestRate
|(in thousands, except interest rates)                    |  |                      |            |                         |                              |      |        |   |            |                             
|Due in one year or less                                  |  | $                    | 16,738,835 |                         |                              | 1.74 |        | $ | 22,821,835 |                              |  | 3.01
|Due after one year through two years                     |  |                      | 1,510,985  |                         |                              | 3.97 |        |   | 1,904,000  |                              |  | 3.84
|Due after two years through three years                  |  |                      | 1,859,310  |                         |                              | 4.28 |        |   | 2,176,535  |                              |  | 4.27
|Due after three years through four years                 |  |                      | 2,866,500  |                         |                              | 4.54 |        |   | 2,609,000  |                              |  | 4.96
|Due after four years through five years                  |  |                      | 2,249,000  |                         |                              | 3.91 |        |   | 2,598,000  |                              |  | 4.25
|Thereafter                                               |  |                      | 5,862,940  |                         |                              | 5.10 |        |   | 6,028,195  |                              |  | 5.40
|                                                         |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|Total par value                                          |  |                      | 31,087,570 |                         |                              | 3.05 |        |   | 38,137,565 |                              |  | 3.72
|Premiums                                                 |  |                      | 14,524     |                         |                              |      |        |   | 15,800     |                              |  |     
|Discounts                                                |  |                      | (28,516    | )                       |                              |      |        |   | (29,981    | )                            |  |     
|SFAS 133 hedging adjustments                             |  |                      | 383,886    |                         |                              |      |        |   | 467,015    |                              |  |     
|                                                         |  |                      |            |                         |                              |      |        |   |            |                              |  |     
|Total                                                    |  | $                    | 31,457,464 |                         |                              |      |        | $ | 38,590,399 |                              |  |     
|                                                         |  |                      |            |                         |                              |      |        |   |            |                              |  |     

The amounts in the above table reflect certain consolidated obligation bond transfers from and to
other FHLBanks as of March 31, 2009 and December 31, 2008. The Seattle Bank becomes the primary obligor on consolidated obligation bonds transferred to it. We account for consolidated obligation bonds transferred out as debt
extinguishments, as the receiving FHLBank becomes the primary obligor. The following table summarizes our consolidated obligation bond transfers from and to other FHLBanks as of March 31, 2009 and December 31, 2008.



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##### Table of Contents

|                                         |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|---------------------------------------- |  | -------------------- | --------- | -------------------- | ----------------------- | ------- | --------- |  | -------------------- | --------- |  | - | ------- | -
|                                         |  | As of March 31, 2009 |           |                      | As of December 31, 2008 |        
|Other FHLBanks Consolidated Obligations |  | Par Value            |           | Net(Discount)Premium |                         |         | Par Value |  | Net(Discount)Premium |          
|(in thousands)                           |  |                      |           |                      |                         |         |           |  |                      |          
|Transfers In                             |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|FHLBank of Chicago                       |  | $                    | 1,074,000 |                      | $                       | (19,602 | )         |  | $                    | 1,074,000 |  | $ | (19,602 | )
|                                         |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|Total                                    |  | $                    | 1,074,000 |                      | $                       | (19,602 | )         |  | $                    | 1,074,000 |  | $ | (19,602 | )
|                                         |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|Transfers Out                            |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|FHLBank of San Francisco                 |  | $                    | 145,000   |                      | $                       | 94      |           |  | $                    | 145,000   |  | $ | 94      |  
|FHLBank of Dallas                        |  |                      | 135,880   |                      |                         | 620     |           |  |                      | 135,880   |  |   | 620     |  
|                                         |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  
|Total                                    |  | $                    | 280,880   |                      | $                       | 714     |           |  | $                    | 280,880   |  | $ | 714     |  
|                                         |  |                      |           |                      |                         |         |           |  |                      |           |  |   |         |  

The following table summarizes the par value of consolidated obligation bonds outstanding by
callable and putable terms as of March 31, 2009 and December 31, 2008.



|                                           |  |                     |            |                        |   |           
|------------------------------------------ |  | ------------------- | ---------- | ---------------------- | - | ----------
|Par Value of Consolidated Obligation Bonds |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)                             |  |                     |            |                       
|Non-callable and non-putable               |  | $                   | 24,363,570 |                        | $ | 29,609,310
|Callable                                   |  |                     | 6,724,000  |                        |   | 8,528,255 
|                                           |  |                     |            |                        |   |           
|Total par value                            |  | $                   | 31,087,570 |                        | $ | 38,137,565
|                                           |  |                     |            |                        |   |           

The following table summarizes the par value of consolidated obligation bonds outstanding by year
of contractual maturity or next call date as of March 31, 2009 and December 31, 2008.



|                                         |  |                     |            |                        |   |           
|---------------------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Contractual Maturity or Next Call Date   |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)                           |  |                     |            |                       
|Due in one year or less                  |  | $                   | 22,267,835 |                        | $ | 29,220,090
|Due after one year through two years     |  |                     | 2,115,985  |                        |   | 2,174,000 
|Due after two years through three years  |  |                     | 1,019,310  |                        |   | 1,036,535 
|Due after three years through four years |  |                     | 1,411,500  |                        |   | 1,234,000 
|Due after four years through five years  |  |                     | 1,118,000  |                        |   | 1,217,000 
|Thereafter                               |  |                     | 3,154,940  |                        |   | 3,255,940 
|                                         |  |                     |            |                        |   |           
|Total par value                          |  | $                   | 31,087,570 |                        | $ | 38,137,565
|                                         |  |                     |            |                        |   |           

Interest-Rate Payment Terms

The following table summarizes the par value of consolidated obligation bonds outstanding by interest-rate payment terms as of March 31, 2009 and December 31, 2008.



|                            |  |                     |            |                        |   |           
|--------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Interest-Rate Payment Terms |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)              |  |                     |            |                       
|Fixed interest rate         |  | $                   | 25,123,570 |                        | $ | 24,856,565
|Step-up interest rate       |  |                     | 50,000     |                        |   | 50,000    
|Variable interest rate      |  |                     | 5,894,000  |                        |   | 13,171,000
|Range interest rate         |  |                     | 20,000     |                        |   | 60,000    
|                            |  |                     |            |                        |   |           
|Total par value             |  | $                   | 31,087,570 |                        | $ | 38,137,565
|                            |  |                     |            |                        |   |           



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|Note 6. | Capital
|------- | -------

For accounting policies and additional
information concerning capital, including applicable regulatory capital requirements, see Note 14 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

Capital Requirements

As of March 31, 2009 and December 31, 2008, due to increases
in the market-risk and credit-risk components of our risk-based capital, we were out of compliance with our risk-based capital requirement. Under Finance Agency regulations, an FHLBank that fails to meet any regulatory capital requirement may not
declare a dividend or redeem or repurchase capital stock. The following table shows our statutory and regulatory capital requirements compared to our actual position.



|                                  |  |                      |           |   |                         |   |           |          |  |   |           |   |  |   |           |  
|--------------------------------- |  | -------------------- | --------- | - | ----------------------- | - | --------- | -------- |  | - | --------- | - |  | - | --------- | -
|                                  |  | As of March 31, 2009 |           |   | As of December 31, 2008 |  
|Regulatory Capital Requirements   |  | Required             |           |   | Actual                  |   |           | Required |  |   | Actual    |  
|(in thousands, except for ratios) |  |                      |           |   |                         |   |           |          |  |   |           |  
|Risk-based capital                |  | $                    | 3,295,374 |   |                         | $ | 2,828,650 |          |  | $ | 2,707,000 |   |  | $ | 2,547,811 |  
|Total capital-to-assets ratio     |  |                      | 4.00      | % |                         |   | 5.24      | %        |  |   | 4.00      | % |  |   | 4.60      | %
|Total regulatory capital*         |  | $                    | 2,277,897 |   |                         | $ | 2,986,799 |          |  | $ | 2,334,468 |   |  | $ | 2,687,140 |  
|Leverage capital-to-assets ratio  |  |                      | 5.00      | % |                         |   | 7.73      | %        |  |   | 5.00      | % |  |   | 6.79      | %
|Leverage capital                  |  | $                    | 2,847,371 |   |                         | $ | 4,401,124 |          |  | $ | 2,918,085 |   |  | $ | 3,961,046 |  



|* | Total regulatory capital is defined as the sum of permanent capital, the amounts paid for Class A capital stock,
any general allowance for losses and any other amount from sources available to absorb losses that the Finance Agency has determined to be appropriate to include in determining total capital. Total regulatory capital also includes mandatorily
redeemable capital stock. Permanent capital is defined as retained earnings and Class B capital stock.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The increase in
our risk-based capital requirement as of March 31, 2009, compared to December 31, 2008, primarily reflects the increased market-risk capital required as a result of the declining values of our private-label mortgage-backed securities and
the increased credit-risk capital required as a result of credit rating downgrades on a significant number of our private-label mortgage-backed securities during the first quarter of 2009.

Mandatorily Redeemable Capital Stock

As of
March 31, 2009 and December 31, 2008, 31 and 27 members and former members had requested redemptions of $897.2 million and $896.4 million in Class B capital stock, which is subject to mandatory redemption with a five-year waiting period
from the time of the request and $23.7 million and $21.5 million in Class A capital stock subject to mandatory redemption with payment subject to a six-month waiting period from the time of the request (assuming we would meet all capital
requirements following the redemption). These amounts have been classified as mandatorily redeemable capital stock in the Statements of Condition. Although we reported a risk-based capital deficiency as of December 31, 2008, a
subsequent increase in market values on our private-label mortgage-backed securities corrected our risk-based capital deficiency as of January 31, 2009, and in February 2009, we redeemed $669,000 in Class B capital stock from a former member
following the five-year redemption period. Subsequent increases in the market-risk and credit-risk components of our risk-based capital resulted in a risk-based capital deficiency as of March 31, 2009, and we are currently unable to redeem
capital stock and do not know when we will be able to redeem capital stock in the future.

Dividends

Generally, under the Seattle Banks Capital Plan (Capital Plan), our Board can declare and pay dividends, in either cash or capital stock, from
retained earnings or current net earnings. Due to our risk-based capital deficiency, we are currently precluded from declaring or paying dividends. In addition, to meet the Finance Boards conditions for the acceptance of our business plan
following execution of a written agreement with the Finance Board in December 2004, 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 Finance Agency. In April 2008, the Finance Board notified the Seattle Bank of its decision to allow resumption of quarterly dividends provided that dividend payments did
not exceed 75% of year-to-date net income calculated in accordance with GAAP. The dividend limitations will remain in effect until we receive written approval from the Finance Agency removing such limitations. There can be no assurance of when or if
the Finance Agency will allow us to resume dividend payments or if or when our Board would declare dividends in the future.



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For additional information on dividends, see Part II. Item 7. Managements Discussion and
Analysis of Financial Condition and Results of OperationsCapital Resources and LiquidityCapital Resources of our 2008 annual report on Form 10-K.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was $1.1 billion as of March 31,
2009, compared to $2.9 million as of December 31, 2008. As a result of our adoption of FSP FAS 115-2 as of January 1, 2009, we recognized the $293.4 million cumulative effect of initially applying FSP FAS 115-2 as an increase to our
retained earnings as of January 1, 2009, with a corresponding increase to accumulated other comprehensive loss. In addition, for the three months ended March 31, 2009, we recognized total OTTI charges of $895.2 million on our private-label
mortgage-backed securities, of which $823.5 million were related to non-credit losses, and which are reported in our Statement of Condition in other comprehensive loss as non-credit portion of OTTI loss on held-to-maturity securities.

Capital Concentration

As of
March 31, 2009, two members, Bank of America Oregon, N.A. and Merrill Lynch Bank USA, and one non-member, JPMorgan Chase Bank N.A. (formerly Washington Mutual Bank, F.S.B.) collectively held 49.3% of our total outstanding capital stock,
including mandatorily redeemable capital stock. As of December 31, 2008, one member and one former member, Merrill Lynch Bank USA and JPMorgan Chase Bank N.A. held 40.7% of our total outstanding capital stock, including mandatorily redeemable
capital stock. No other member held more than 10% of our outstanding capital stock, including mandatorily redeemable capital stock, as of these dates. See Note 10 for additional information.



|Note 7. | Derivatives and Hedging Activities
|------- | ----------------------------------

Accounting for
derivatives is addressed in SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities(SFAS 133), as amended and interpreted. We recognize derivatives on the Statement of Condition at their fair values, including net
cash collateral and accrued interest from counterparties. In accordance with SFAS 133, we designate each derivative as one of the following:



| | (i) | a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment (a fair value hedge);
| | --- | ---------------------------------------------------------------------------------------------------------------------



| | (ii) | a non-qualifying hedge of an asset or liability for asset/liability management purposes (an economic hedge); or
| | ---- | ---------------------------------------------------------------------------------------------------------------



| | (iii) | a non-qualifying hedge of another derivative that is used to offset other derivatives with non-member counterparties (an intermediary hedge).
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in our Statement of Operations within other loss as net (loss) gain on derivatives and hedging
activities. For fair value hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item attributable to the hedged risk) is
recorded in net (loss) gain on derivatives and hedging activities.

An economic hedge is defined as a derivative hedging
specific or non-specific underlying assets, liabilities, or firm commitments that does not qualify or was not designated for hedge accounting, but that is an acceptable hedging strategy under our risk management program. These economic hedging
strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge by definition introduces the potential for earnings variability caused by the changes in the fair value of the
derivatives that are recorded in our income but that are not offset by corresponding changes in the fair value of the economically hedged assets, liabilities, or firm commitments. As a result, we recognize only the net interest and the change in
fair value of these derivatives in other loss as net (loss) gain on derivatives and hedging activities with no offsetting fair value adjustments for the assets, liabilities, or firm commitments. Cash flows associated with such standalone
derivatives (derivatives not qualifying for hedge accounting) are reflected as cash flows from operating activities in the Statement of Cash Flows.

In addition to the disclosures provided herein, see Note 8 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K for additional information concerning our derivatives and hedging activities.

Nature of Business Activity

We are exposed to
interest-rate risk primarily from the effect of interest-rate changes on our interest-earning assets and the funding sources that finance these assets. Consistent with Finance Agency policy, we enter into interest-rate exchange agreements
(derivatives) only to reduce the interest-rate exposures inherent in otherwise unhedged assets and funding positions, to achieve our



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risk-management objectives, and to reduce our cost of funds. Finance Agency regulation and our risk management policy
prohibit trading in or the speculative use of these derivative instruments and limit credit risk arising from these instruments.

We
generally use derivatives to:



| |  |  | reduce the interest-rate sensitivity and repricing gaps of assets and liabilities;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | reduce funding costs by combining a derivative with a consolidated obligation as the cost of a combined funding structure can be lower than the cost of a comparable
consolidated obligation bond (structured funding);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preserve an interest-rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation bond used
to fund the advance). Without the use of derivatives, this interest-rate spread could be reduced or eliminated when a change in the interest rate on the advance does not match a change in the interest rate on the bond;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | mitigate the adverse earnings effects of the shortening or extension of expected lives of certain assets (e.g., mortgage assets) and liabilities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | protect the value of existing asset or liability positions;
| | - |  | -----------------------------------------------------------



| |  |  | manage embedded options in assets and liabilities; and
| | - |  | ------------------------------------------------------



| |  |  | enhance our overall asset/liability management.
| | - |  | -----------------------------------------------

Types of Interest-Rate Exchange Agreements

Our risk management policy establishes guidelines for the use of
derivatives, including the amount of exposure to interest-rate changes we are willing to accept. The goal of our interest-rate risk management strategy is not to eliminate interest-rate risk, but to manage it within appropriate limits. We use
derivatives when they are considered the most cost-effective alternative to achieve our financial- and risk-management objectives. Accordingly, we may enter into derivatives that do not necessarily qualify for hedge accounting under SFAS 133 (i.e.,
economic hedges). We use the following types of derivatives in our interest-rate risk management.

Interest-Rate Swaps

An interest-rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows
will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest-rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a
predetermined fixed rate for a given period of time. In return for this promise, this party receives cash flows equivalent to the interest on the same notional principal amount based on a variable interest-rate index for the same period of time. The
variable interest-rate index in most of our interest-rate exchange agreements is the London Interbank Offered Rate (LIBOR).

Swaptions

A swaption is an option on an interest-rate swap that gives the buyer the right to enter into a specified interest-rate swap at a
certain time in the future. When used as a hedge, a swaption can protect an entity that is planning to lend or borrow funds in the future against future interest-rate changes. We purchase both payer swaptions and receiver swaptions. A payer swaption
is the option to make fixed interest payments at a later date and a receiver swaption is the option to receive fixed interest payments at a later date.

Interest-Rate Caps and Floors

In an interest-rate cap agreement, a cash flow is generated if the
price or interest rate of an underlying variable rises above a certain threshold (cap) price. In an interest-rate floor agreement, a cash flow is generated if the price or rate of an underlying variable falls below a certain threshold (floor) price.
We use caps in conjunction with liabilities and floors in conjunction with assets. Caps and floors are designed as protection against the interest rate on a variable interest-rate asset or liability rising above or falling below a certain level.

Interest-rate swaps are generally used to manage interest-rate exposures and swaptions, caps, and floors are generally used to manage
interest-rate and volatility exposures.

Types of Hedged Items

We incur interest-rate risk on advances, mortgage loans held for portfolio, investments, consolidated obligations, and intermediary positions.



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Advances

We offer a wide variety of advance structures to meet members funding needs. These advances may have maturities up to 30 years with variable or fixed interest rates and may include early termination
features or options. The repricing characteristics and optionality embedded in certain advances can create interest-rate risk. We may use derivatives to adjust the repricing and/or option characteristics of certain advances to more closely match the
characteristics of our funding. In general, fixed interest-rate advances or variable interest-rate advances with embedded options are hedged with an interest-rate exchange agreement with terms offsetting the advances terms and options. For
example, we may hedge a fixed interest-rate advance with an interest-rate swap where we pay a fixed rate of interest and receive a variable rate of interest, effectively converting the advance from a fixed to a variable rate of interest. This type
of hedge is treated as a fair value hedge under SFAS 133.

When issuing a convertible advance, we purchase an option from a member that
allows us to convert the advance from a fixed interest rate to a variable interest rate or to terminate on a specified date(s). The initial interest rate on a convertible advance is lower than a comparable maturity fixed interest-rate advance that
does not have the conversion feature. When we make a putable advance, we effectively purchase a put option from the member, allowing us the right to terminate the advance at our discretion. We generally hedge a putable advance by entering into a
cancelable interest-rate exchange agreement where we pay a fixed interest rate and receive a variable interest rate based on a market index, typically LIBOR. The swap counterparty can cancel the interest-rate exchange agreement on the put dates,
which would normally occur in a rising interest-rate environment, at which time we would generally terminate the advance. This type of hedge is accounted for as a fair value hedge under SFAS 133.

We also offer our members capped advances, which are variable interest-rate advances with a maximum interest rate. When we make a capped advance, we
typically purchase an offsetting interest-rate cap from a broker. This type of hedge is accounted for as a fair value hedge under SFAS 133.

We may hedge a firm commitment for a forward starting advance through the use of an interest-rate swap. In this case, the interest-rate swap functions as the hedging instrument for both the firm commitment and the subsequent advance. The
basis movement associated with the firm commitment is rolled into the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment is then amortized into interest income over the life of the advance.

Mortgage Loans Held for Portfolio

The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these assets, depending on changes in estimated prepayment speeds. In addition, to the extent
that we purchased mortgage loans at premiums or discounts, net income is affected by extensions or contractions in the expected maturities of these assets. We seek to manage the interest-rate and prepayment risk associated with mortgage loans
primarily through debt issuance. We use both callable and noncallable debt to attempt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. We may also purchase interest-rate exchange agreements, such
as swaptions, to manage the prepayment risk embedded in the mortgage loans. Although these derivatives are valid economic hedges against the prepayment risk of the mortgage loans, they are not specifically linked to individual mortgage loans, and we
account for these instruments as freestanding derivatives pursuant to SFAS 133. Since 2006, we have purchased no mortgage loans under the MPP.



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Investments

We currently invest in U.S. agency and GSE mortgage-backed securities, U.S. agency and GSE obligations, TLGP securities, and the taxable portion of state or local housing finance agency securities, which are
classified as held-to-maturity securities. The interest-rate and prepayment risks associated with these investment securities are managed through a combination of callable and non-callable debt issuance and derivatives, such as swaptions.
Derivatives used to manage these risks are considered freestanding pursuant to SFAS 133.

Consolidated Obligations

We manage the risk arising from changing market prices of a consolidated obligation by matching the cash outflows on the consolidated obligation with the
cash inflows on an interest-rate exchange agreement. In a typical transaction, the Office of Finance issues a fixed interest-rate consolidated obligation for the Seattle Bank, and we concurrently enter into a matching interest-rate exchange
agreement in which the counterparty pays fixed cash flows, designed to mirror in timing and amount the cash outflows we pay on the consolidated obligation. The net result of this transaction is that we pay a variable interest rate that closely
matches the interest rates we receive on short-term or variable interest-rate advances. These transactions are accounted for as fair value hedges under SFAS 133. This intermediation within the financial markets permits us to raise funds at lower
costs than would otherwise be available through the issuance of simple fixed or variable interest-rate consolidated obligations in the financial markets.

Intermediation

We may enter into interest-rate exchange agreements to offset the economic effect of
other derivatives that are no longer designated in a hedge transaction of one or more advances, investments, or consolidated obligations. In these intermediary transactions, maturity dates, call dates, and fixed interest rates match, as do the
notional amounts on the de-designated portion of the interest-rate exchange agreement and the intermediary derivative. The net result of the accounting for these derivatives does not significantly affect our operating results.

Derivative Credit-Risk Exposure and Counterparty Ratings

The Seattle Bank is subject to credit risk because of the potential nonperformance by a counterparty to our interest-rate exchange agreement. The degree of counterparty risk on interest-rate exchange agreements
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 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 additional credit losses
on our interest-rate exchange agreements.

The contractual notional amount of derivatives reflects our involvement in the various classes
of financial instruments and serves as a factor in determining periodic interest payments or cash flows received and paid. The notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Seattle
Bank to credit and market risk. The overall amount that could potentially be subject to credit loss is much smaller. Notional values are not meaningful measures of the risks associated with derivatives. The risks of derivatives are more
appropriately measured on a hedging relationship or portfolio basis, taking into account the derivatives, the item(s) being hedged, and any offsets between the two.

Our maximum counterparty credit risk equals the estimated cost of replacing favorable interest-rate swaps, forward agreements, and purchased caps and floors, if the counterparty defaults and the related collateral, if
any, is of no value to us. As of March 31, 2009 and December 31, 2008, our maximum credit risk, taking into consideration master netting arrangements, was approximately $37.8 million and $32.0 million. In determining maximum credit risk,
we consider accrued interest receivables and payables and the legal right to offset derivative assets and liabilities by counterparty. Our maximum credit risk as of March 31, 2009 and December 31, 2008 include $20.4 million and $11.0
million of net accrued interest receivable. We held no cash collateral from our counterparties as of March 31, 2009 or December 31, 2008. We held investment-grade securities from our counterparties with a fair value of $20.8 million and
$9.0 million, which are not included in our derivative asset or liability balances as of March 31, 2009 and December 31, 2008. Additionally, collateral with respect to derivatives with member institutions includes collateral assigned to us
as evidenced by a written security agreement and held by the member institution for our benefit. 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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Certain of our interest-rate exchange agreements include provisions that require Federal Home Loan Bank
System (FHLBank System) debt to maintain an investment-grade rating from each of the major credit rating agencies. If the FHLBank System debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties
to the interest-rate exchange agreements could request immediate and ongoing full overnight collateralization on derivatives in net liability positions. The aggregate fair value of all derivative instruments with credit-risk contingent features that
were in a liability position as of March 31, 2009 was $301.1 million, for which we have posted collateral of $37.6 million in the normal course of business. If the Seattle Banks individual credit rating was lowered by one rating level, we
would not have been required to deliver any additional collateral to our derivative counterparties as of March 31, 2009. Our credit rating has not changed since 2008.

We transact our interest-rate exchange agreements with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates
buy, sell, and distribute consolidated obligations. We are not a derivatives dealer and do not trade derivatives for short-term profit.

Financial
Statement Effect and Additional Financial Information

The following table summarizes the notional amounts and the fair values of
our derivative instruments, including the effect of netting arrangements and collateral as of March 31, 2009. For purposes of this disclosure, the derivative values include both the fair value of derivatives and related accrued interest.



|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ---------------- | - | -------- | --------------------- |  | - | -------- | -
|                                                                                       |  | As of March 31, 2009 |           
|Fair Value of Derivative Instruments                                                   |  | NotionalAmount       |            | DerivativeAssets |   |          | DerivativeLiabilities | 
|(in thousands)                                                                         |  |                      |            |                  |   |          |                       | 
|Derivatives designated as hedging instruments under SFAS 133                           |  |                      |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  | $                    | 39,939,698 |                  | $ | 353,071  |                       |  | $ | (616,724 | )
|Interest-rate caps or floors                                                           |  |                      | 45,000     |                  |   | 3        |                       |  |   |          |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives designated as hedging instruments under SFAS 133                     |  |                      | 39,984,698 |                  |   | 353,074  |                       |  |   | (616,724 | )
|Derivatives not designated as hedging instruments under SFAS 133                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  |                      | 718,700    |                  |   | 17,792   |                       |  |   | (17,498  | )
|Interest-rate caps or floors                                                           |  |                      | 240,000    |                  |   | 22       |                       |  |   |          |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives not designated as hedging instruments under SFAS 133                 |  |                      | 958,700    |                  |   | 17,814   |                       |  |   | (17,498  | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  | $                    | 40,943,398 |                  | $ | 370,888  |                       |  | $ | (634,222 | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Netting adjustments(1)                                                                 |  |                      |            |                  |   | (333,057 | )                     |  |   | 333,057  |  
|Cash collateral and related accrued interest                                           |  |                      |            |                  |   |          |                       |  |   | 37,582   |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  |                      |            |                  |   | (333,057 | )                     |  |   | 370,639  |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Derivative assets and derivative liabilities as reported on the Statement of Condition |  |                      |            |                  | $ | 37,831   |                       |  | $ | (263,583 | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  



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|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---------------- | - | -------- | --------------------- |  | - | -------- | -
|                                                                                       |  | As of December 31, 2008 |           
|Fair Value of Derivative Instruments                                                   |  | NotionalAmount          |            | DerivativeAssets |   |          | DerivativeLiabilities | 
|(in thousands)                                                                         |  |                         |            |                  |   |          |                       | 
|Derivatives designated as hedging instruments under SFAS 133                           |  |                         |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  | $                       | 29,604,444 |                  | $ | 390,117  |                       |  | $ | (675,723 | )
|Interest-rate caps or floors                                                           |  |                         | 65,000     |                  |   | 19       |                       |  |   |          |  
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives designated as hedging instruments under SFAS 133                     |  |                         | 29,669,444 |                  |   | 390,136  |                       |  |   | (675,723 | )
|Derivatives not designated as hedging instruments under SFAS 133                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  |                         | 716,000    |                  |   | 18,992   |                       |  |   | (18,469  | )
|Interest-rate caps or floors                                                           |  |                         | 260,000    |                  |   | 206      |                       |  |   |          |  
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives not designated as hedging instruments under SFAS 133                 |  |                         | 976,000    |                  |   | 19,198   |                       |  |   | (18,469  | )
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  | $                       | 30,645,444 |                  | $ | 409,334  |                       |  | $ | (694,192 | )
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Netting adjustments(1)                                                                 |  |                         |            |                  |   | (377,350 | )                     |  |   | 377,350  |  
|Cash collateral and related accrued interest                                           |  |                         |            |                  |   |          |                       |  |   | 81,425   |  
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  |                         |            |                  |   | (377,350 | )                     |  |   | 458,775  |  
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  
|Derivative assets and derivative liabilities as reported on the Statement of Condition |  |                         |            |                  | $ | 31,984   |                       |  | $ | (235,417 | )
|                                                                                       |  |                         |            |                  |   |          |                       |  |   |          |  



|(1) | Amounts represent the effect of legally enforceable master netting agreements that allow the Seattle Bank to
settle positive and negative positions.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

The following table presents the components of net (loss) gain on derivatives
and hedging activities as presented in the Statement of Operations for the three months ended March 31, 2009 and 2008.



|                                                                                                  |  |                                      |        |   |      |   |       |  
|------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ----- | -
|                                                                                                  |  | For the Three Months Ended March 31, |       
|Components of Net (Loss) Gain on Derivatives and Hedging Activities                               |  | 2009                                 |        |   | 2008 |  
|(in thousands)                                                                                    |  |                                      |        |   |      |  
|Derivatives and hedged items in SFAS 133 fair value hedging relationships                         |  |                                      |        |   |      |   |       |  
|Interest-rate swaps                                                                               |  | $                                    | (2,869 | ) |      | $ | 2,603 |  
|                                                                                                  |  |                                      |        |   |      |   |       |  
|Total net (loss) gain related to fair value hedge ineffectiveness                                 |  |                                      | (2,869 | ) |      |   | 2,603 |  
|Derivatives not designated as hedging instruments under SFAS 133                                  |  |                                      |        |   |      |   |       |  
|Economic hedges                                                                                   |  |                                      |        |   |      |   |       |  
|Interest-rate swaps                                                                               |  |                                      | 2      |   |      |   | (10   | )
|Interest-rate swaptions                                                                           |  |                                      |        |   |      |   | 1,629 |  
|Interest-rate caps or floors                                                                      |  |                                      | (184   | ) |      |   | 1,259 |  
|Net interest settlements                                                                          |  |                                      | 128    |   |      |   | 522   |  
|Intermediary transactions                                                                         |  |                                      |        |   |      |   |       |  
|Interest-rate swaps                                                                               |  |                                      | (18    | ) |      |   | (2    | )
|                                                                                                  |  |                                      |        |   |      |   |       |  
|Total net (loss) gain related to derivatives not designated as hedging instruments under SFAS 133 |  |                                      | (72    | ) |      |   | 3,398 |  
|                                                                                                  |  |                                      |        |   |      |   |       |  
|Net (loss) gain on derivatives and hedging activities                                             |  | $                                    | (2,941 | ) |      | $ | 6,001 |  
|                                                                                                  |  |                                      |        |   |      |   |       |  

The following table presents, by type of hedged item, the gains (losses) on derivatives and the
related hedged items in fair value hedging relationships and the impact of those derivatives on our net interest income for the three months ended March 31, 2009 and 2008.



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|                                                                                              |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | -------------------------- | - | -------- | ----------------------------------- |  | - | ----------------------------------------------- | - |  | - | ------- | -
|                                                                                              |  | Three Months Ended March 31, 2009 |        
|Gain (Loss) on Derivatives and on theRelated Hedged Items in Fair Value Hedging
Relationships |  | Gain/(Loss) onDerivatives         |         |   | Gain/(Loss) on HedgedItems |   |          | Net Fair Value HedgeIneffectiveness |  |   | Effect of Derivatives onNet Interest Income(1)  |  
|(in thousands)                                                                                |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |  
|Advances                                                                                      |  | $                                 | 4,282   |   |                            | $ | (8,445   | )                                   |  | $ | (4,163                                          | ) |  | $ | (55,491 | )
|Consolidated obligation bonds                                                                 |  |                                   | (58,897 | ) |                            |   | 58,843   |                                     |  |   | (54                                             | ) |  |   | 58,102  |  
|Consolidated obligation discount notes                                                        |  |                                   | (6,878  | ) |                            |   | 8,226    |                                     |  |   | 1,348                                           |   |  |   | 3,931   |  
|                                                                                              |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|Total                                                                                         |  | $                                 | (61,493 | ) |                            | $ | 58,624   |                                     |  | $ | (2,869                                          | ) |  | $ | 6,542   |  
|                                                                                              |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|                                                                                              | 
|                                                                                              |  | Three Months Ended March 31, 2008 |        
|Gain (Loss) on Derivatives and on theRelated Hedged Items in Fair Value Hedging
Relationships |  | Gain/(Loss) onDerivatives         |         |   | Gain/(Loss) on HedgedItems |   |          | Net Fair Value HedgeIneffectiveness |  |   | Effect of Derivatives onNet Interest Income (1) |  
|(in thousands)                                                                                |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |  
|Advances                                                                                      |  | $                                 | (15,413 | ) |                            | $ | 16,723   |                                     |  | $ | 1,310                                           |   |  | $ | (2,416  | )
|Consolidated obligation bonds                                                                 |  |                                   | 128,956 |   |                            |   | (127,663 | )                                   |  |   | 1,293                                           |   |  |   | 28,494  |  
|                                                                                              |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|Total                                                                                         |  | $                                 | 113,543 |   |                            | $ | (110,940 | )                                   |  | $ | 2,603                                           |   |  | $ | 26,078  |  
|                                                                                              |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  



|(1) | The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item
of the respective hedged item.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 8. | Employee Retirement Plans
|------- | -------------------------

For accounting policies
and additional information concerning employee retirement plans, see Note 15 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

The Seattle Bank offers to certain highly compensated employees non-qualified supplemental retirement plans, including the Thrift Plan Benefit Equalization Plan (Thrift BEP), a defined-contribution pension plan, and
the Retirement Fund Benefit Equalization Plan (Retirement BEP) and the Executive Supplemental Retirement Plan (SERP) defined-benefit pension plans.

The net periodic pension cost for the defined benefit plans were as follows for the three months ended March 31, 2009 and 2008.



|                                                          |  |                              |     |      |   |    
|--------------------------------------------------------- |  | ---------------------------- | --- | ---- | - | ---
|                                                          |  | Three Months Ended March 31,
|Net Periodic Pension Cost for the Retirement BEP and SERP |  | 2009                         |     | 2008
|(in thousands)                                            |  |                              |     |     
|Service costs                                             |  | $                            | 80  |      | $ | 78 
|Interest costs                                            |  |                              | 73  |      |   | 69 
|Amortization of prior service cost                        |  |                              | 39  |      |   |    
|                                                          |  |                              |     |      |   |    
|Net periodic pension cost                                 |  | $                            | 192 |      | $ | 147
|                                                          |  |                              |     |      |   |    



|Note 9. | Estimated Fair Value
|------- | --------------------

For accounting policies and
additional information concerning estimated fair values, see Note 16 in our 2008 Audited Financials included in our 2008 annual report on Form 10-K.

Financial Asset and Financial Liability Valuation Methodologies

Outlined below are the valuation methodologies for
our financial assets and financial liabilities.

Cash and Due From Banks

The estimated fair value approximates the recorded carrying value.



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Federal Funds Sold

The estimated fair value of overnight Federal funds sold approximates the recorded carrying value. The estimated fair value of term Federal funds sold is determined by calculating the present value of the expected
future cash flows. The discount rates used in these calculations are the rates for federal funds with similar terms.

Held-to-Maturity
Securities

We use prices from independent pricing services (such as Reuters) and, to a lesser extent, non-binding dealer quotes, to
determine the fair values of substantially all of our held-to-maturity securities, for disclosure and non-recurring fair value measurements. For fair values based on prices from independent pricing services, we generally receive two prices.
Pricing reviews are performed by Seattle Bank personnel with knowledge of liquidity and other current conditions in the market. We have gained an understanding of the information used by these third party pricing sources to develop these
estimated values.

Generally, pricing services values and broker quotes
obtained on level 3 instruments are indications of value based on price indications, market intelligence, and proprietary cash flow modeling techniques. These values were evaluated in relation to other securities and their related characteristics
(e.g. underlying product, vintage, FICO®, geographical information, etc.), other broker indications, pricing trends, as well as our independent knowledge of the securitys collateral
characteristics (e.g. geographical information, delinquencies, foreclosures and real-estate owned).

Securities Sold Under Agreements to
Repurchase and Securities Purchased Under Agreements to Resell

The fair value of overnight agreements approximates the recorded
carrying value. The estimated fair value for agreements with terms to maturity in excess of one day is determined by calculating the present value of the expected future cash flows. The discount rates used in these calculations are the rates for
agreements with similar terms.

Advances

The estimated fair value of advances is determined by calculating the present value of expected future cash flows from the advances excluding the amount of the accrued interest receivable. For advances with embedded
options, additional market-based inputs are obtained from derivatives dealers. The discount rates used in these calculations are the consolidated obligation rates for instruments with similar terms as of the last business day of the period, adjusted
for a target spread.

In accordance with Finance Agency regulation, advances with a maturity and repricing period greater than six months
require a prepayment fee sufficient to make us financially indifferent to the borrowers decision to prepay the advances. Therefore, the estimated fair value of advances does not assume prepayment risk.

Mortgage Loans Held for Portfolio

The estimated fair values for mortgage loans are determined based on quoted market prices for similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying
prepayment assumptions priced in the secondary market. Changes in prepayment rates often have a material effect on the fair value estimates. Since these underlying prepayment assumptions are made at a specific point in time, they are susceptible to
material changes in the near term.

Accrued Interest Receivable and Payable

The estimated fair value approximates the recorded carrying value.

Derivative Assets and Liabilities

We base the estimated fair values of interest-rate exchange
agreements on instruments with similar terms or available market prices excluding accrued interest receivable and payable. However, active markets do not exist for certain types of financial instruments. Consequently, fair values for these
instruments must be estimated using techniques such as discounted cash flow analysis and comparisons to similar instruments. Estimates developed using these methods are highly subjective and require judgment regarding significant matters such as the
amount and timing of future cash flows, volatility of interest rates, and the selection of discount rates that appropriately reflect market and credit risks. Changes in judgment often have a material effect on the fair value estimates. Because these
estimates are made at a specific point in time, they are susceptible to material near-term changes.



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We are subject to credit risk on derivatives due to nonperformance by the derivatives counterparties. To
mitigate this risk, we enter into master netting agreements for interest-rate-exchange agreements with highly-rated institutions. In addition, we enter into bilateral security exchange agreements with all our derivatives dealer counterparties that
provide for delivery of collateral at specified levels tied to long-term counterparty credit ratings to limit our net unsecured credit exposure to these counterparties. We have evaluated the potential for the fair value of the instruments to be
impacted by counterparty nonperformance risk, including credit risk, and have determined that no adjustments were significant or necessary to our overall fair value measurements. The fair values are netted by counterparty where such legal right
exists and offset against amounts recognized for collateral arrangements related to that counterparty. If these netted amounts are positive, they are classified as an asset and if negative, a liability.

Deposits

We determine the estimated
fair values of member institution deposits by calculating the present value of expected future cash flows from the deposits and reducing this amount for accrued interest payable. The discount rates used in these calculations are the cost of deposits
with similar terms.

Consolidated Obligations

We estimate the fair values of our consolidated obligations using internal valuation models with market observable inputs. We calculate the fair value of consolidated obligations without embedded options using
market-based yield curve inputs obtained from the Office of Finance. For consolidated obligations with embedded options, market-based inputs are obtained from the Office of Finance and derivatives dealers. We then calculate the fair value of the
consolidated obligations using the present value of expected cash flows using discount rates that are based on replacement funding rates for liabilities with similar terms.

Mandatorily Redeemable Capital Stock

The fair value of capital stock subject to mandatory redemption generally approximates par value as indicated by member contemporaneous purchases and sales at par value. Fair value also includes estimated dividends earned at the time of
reclassification from equity to liabilities, until such amount is paid, and any subsequently declared stock dividend. Capital stock can only be acquired by members at par value and redeemed at par value (plus any declared but unpaid dividends).
Capital stock is not traded and no market mechanism exists for the exchange of capital stock outside our cooperative.

Commitments

The estimated fair value of our commitments to extend credit is determined using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The estimated fair value of these fixed interest-rate commitments also takes into account the difference between current
and committed interest rates. The estimated fair value of standby letters of credit is based on the present value of fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the
counterparties.

Fair Value Hierarchy

SFAS 157 established a fair value hierarchy to prioritize the inputs of valuation techniques used to measure fair value. The inputs are evaluated and an overall level for the measurement is determined. This overall level is an indication of
the market observablility of the inputs to the fair value measurement. SFAS 157 clarifies fair value in terms of the price in an orderly transaction between market participants for selling an asset or transferring a liability in the principal (or
most advantageous) market for the asset or liability. In order to determine the fair value, or exit price, entities must determine the unit of account, highest and best use, principal market, and market participants. These determinations allow the
reporting entity to define the inputs for fair value and level of hierarchy.

The fair value hierarchy prioritizes the inputs used in
valuation techniques to measure fair value into three broad levels:



| |  |  | Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market for
the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. We have classified certain money market funds that are held in a
rabbi trust as level 1 assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and model-based techniques for
which all significant inputs are observable, either directly or indirectly, for substantially the full term of the asset or liability. We have classified our derivatives as level 2 assets and liabilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Level 3  inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are typically
supported by little or no market activity and reflect the entitys own assumptions. We have classified certain held-to-maturity securities, for which we have recorded other-than-temporary impairment charges on a non-recurring basis, as level 3
assets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs. Fair value is first based on quoted market prices or market-based prices, where available. If quoted market prices or market-based prices are not available, fair value is determined based on valuation models that use market-based information
available to us as inputs to our models.

Fair Value on a Recurring Basis

The following tables present for each SFAS 157 hierarchy level, our financial assets and liabilities that are measured at fair value on a recurring basis
on our Statement of Condition as of March 31, 2009 and December 31, 2008.



|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|-------------------------------- |  | ----------------------- | -------- | - | ------- | - | ------- |  | - | -------- | - | ------------------ | - |  |  | - | -------- | -
|                                 |  | As of March 31, 2009    |         
|Recurring Fair Value Measurement |  | Total                   |          |   | Level 1 |   | Level 2 |  |   | Level 3  |   | NettingAdjustment* |  
|(in thousands)                   |  |                         |          |   |         |   |         |  |   |          |   |                    |  
|Derivative assets                |  | $                       | 37,831   |   |         | $ |         |  | $ | 370,888  |   |                    | $ |  |  | $ | (333,057 | )
|Other assets (rabbi trust)       |  |                         | 3,896    |   |         |   | 3,896   |  |   |          |   |                    |   |  |  |   |          |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Total assets at fair value       |  | $                       | 41,727   |   |         | $ | 3,896   |  | $ | 370,888  |   |                    | $ |  |  | $ | (333,057 | )
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Derivative liabilities           |  | $                       | (263,583 | ) |         | $ |         |  | $ | (634,222 | ) |                    | $ |  |  | $ | 370,639  |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Total liabilities at fair value  |  | $                       | (263,583 | ) |         | $ |         |  | $ | (634,222 | ) |                    | $ |  |  | $ | 370,639  |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|                                 | 
|                                 |  | As of December 31, 2008 |         
|Recurring Fair Value Measurement |  | Total                   |          |   | Level 1 |   | Level 2 |  |   | Level 3  |   | NettingAdjustment* |  
|(in thousands)                   |  |                         |          |   |         |   |         |  |   |          |   |                    |  
|Derivative assets                |  | $                       | 31,984   |   |         | $ |         |  | $ | 409,536  |   |                    | $ |  |  | $ | (377,552 | )
|Other assets (rabbi trust)       |  |                         | 3,247    |   |         |   | 3,247   |  |   |          |   |                    |   |  |  |   |          |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Total assets at fair value       |  | $                       | 35,231   |   |         | $ | 3,247   |  | $ | 409,536  |   |                    | $ |  |  | $ | (377,552 | )
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Derivative liabilities           |  | $                       | (235,417 | ) |         | $ |         |  | $ | (694,192 | ) |                    | $ |  |  | $ | 458,775  |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  
|Total liabilities at fair value  |  | $                       | (235,417 | ) |         | $ |         |  | $ | (694,192 | ) |                    | $ |  |  | $ | 458,775  |  
|                                 |  |                         |          |   |         |   |         |  |   |          |   |                    |   |  |  |   |          |  



|* | Amounts represent the effect of legally enforceable master netting agreements that allow the Seattle Bank to settle positive and negative positions with cash collateral held or
placed with the same counterparties. The total cash collateral was $37.6 million as of March 31, 2009 and $81.4 million as of December 31, 2008.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For instruments carried at fair value, we review the fair value hierarchy classification on a quarterly basis. Changes in the observability of the valuation attributes may result in a reclassification of certain
financial assets or liabilities.

Fair Value on a Nonrecurring Basis

We measure certain held-to-maturity securities and real-estate owned at fair value on a nonrecurring basis. These assets are subject to fair value
adjustments only in certain circumstances (i.e., when there is evidence of OTTI). For the three months ended March 31, 2009, we recorded an OTTI credit loss of $71.7 million in earnings and an $823.5 million OTTI loss related to all other
factors in other comprehensive loss on certain of our held-to-maturity securities.

The following table presents, by SFAS 157 hierarchy
level, held-to-maturity securities as of March 31, 2009 for which a nonrecurring change in fair value has been recorded for the three months ended March 31, 2009. We held no real-estate owned as of March 31, 2009.



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|                                     |  |                      |         |         |   |        
|------------------------------------ |  | -------------------- | ------- | ------- | - | -------
|                                     |  | As of March 31, 2009
|Non-Recurring Fair Value Measurement |  | Total                |         | Level 3
|(in thousands)                       |  |                      |         |        
|Held-to-maturity securities          |  | $                    | 579,226 |         | $ | 579,226
|                                     |  |                      |         |         |   |        
|Total assets at fair value           |  | $                    | 579,226 |         | $ | 579,226
|                                     |  |                      |         |         |   |        

The fair values of the private-label mortgage-backed securities in our held-to-maturity portfolio
have been determined on the basis of market-based information provided by third-party pricing services. Prior to September 30, 2008, these assets were classified as level 2, as evidenced by observable trades in the market and similar prices
obtained from multiple sources. Beginning in late 2007 and continuing into 2008, the divergence among prices obtained from these sources increased, and became significant in the third quarter of 2008. The significant reduction in transaction volumes
and widening credit spreads led us to conclude that the prices received from pricing services, which are derived from the third partys proprietary models, are reflective of significant unobservable inputs. Because of the significant
unobservable inputs used by the pricing services, effective September 30, 2008 we consider these to be level 3 inputs. See Financial Asset and Financial Liability Valuation MethodologiesHeld-to-Maturity Securities above
for additional information.

Fair Value Summary Tables

The following table summarizes the carrying value and estimated fair values of our financial instruments as of March 31, 2009 and December 31, 2008.



|                                                |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|----------------------------------------------- |  | -------------------- | ----------- | - | ----------------------- | - | ----------- | ------------- |  | - | ------------------- | - |  | - | ----------- | -
|                                                |  | As of March 31, 2009 |             |   | As of December 31, 2008 |  
|Estimated Fair Values                           |  | CarryingValue        |             |   | Estimated FairValue     |   |             | CarryingValue |  |   | Estimated FairValue |  
|(in thousands)                                  |  |                      |             |   |                         |   |             |               |  |   |                     |  
|Financial Assets                                |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|Cash and due from banks                         |  | $                    | 1,423       |   |                         | $ | 1,423       |               |  | $ | 1,395               |   |  | $ | 1,395       |  
|Deposit with other FHLBanks                     |  |                      | 65          |   |                         |   | 65          |               |  |   |                     |   |  |   |             |  
|Securities purchased under agreements to resell |  |                      | 5,000,000   |   |                         |   | 4,999,993   |               |  |   | 3,900,000           |   |  |   | 3,900,096   |  
|Federal funds sold                              |  |                      | 4,191,500   |   |                         |   | 4,191,526   |               |  |   | 2,320,300           |   |  |   | 2,320,300   |  
|Held-to-maturity securities                     |  |                      | 10,771,909  |   |                         |   | 9,470,236   |               |  |   | 9,784,891           |   |  |   | 7,857,197   |  
|Advances                                        |  |                      | 31,848,395  |   |                         |   | 31,851,512  |               |  |   | 36,943,851          |   |  |   | 37,110,844  |  
|Mortgage loans held for portfolio               |  |                      | 4,898,886   |   |                         |   | 5,069,181   |               |  |   | 5,087,323           |   |  |   | 5,207,494   |  
|Accrued interest receivable                     |  |                      | 141,903     |   |                         |   | 141,903     |               |  |   | 241,124             |   |  |   | 241,124     |  
|Derivative assets                               |  |                      | 37,831      |   |                         |   | 37,831      |               |  |   | 31,984              |   |  |   | 31,984      |  
|Financial Liabilities                           |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|Deposits                                        |  |                      | (671,446    | ) |                         |   | (671,650    | )             |  |   | (582,258            | ) |  |   | (582,804    | )
|Securities sold under agreements to repurchase  |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|Consolidated obligations, net:                  |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|Discount notes                                  |  |                      | (22,023,488 | ) |                         |   | (22,014,513 | )             |  |   | (15,878,281         | ) |  |   | (15,859,873 | )
|Bonds                                           |  |                      | (31,457,464 | ) |                         |   | (31,768,839 | )             |  |   | (38,590,399         | ) |  |   | (39,073,154 | )
|Mandatorily redeemable capital stock            |  |                      | (920,972    | ) |                         |   | (920,972    | )             |  |   | (917,876            | ) |  |   | (917,876    | )
|Accrued interest payable                        |  |                      | (218,073    | ) |                         |   | (218,073    | )             |  |   | (337,303            | ) |  |   | (337,303    | )
|Derivative liabilities                          |  |                      | (263,583    | ) |                         |   | (263,583    | )             |  |   | (235,417            | ) |  |   | (235,417    | )
|Other                                           |  |                      |             |   |                         |   |             |               |  |   |                     |   |  |   |             |  
|Commitments to extend credit for advances       |  |                      | 765         |   |                         |   | 765         |               |  |   | (803                | ) |  |   | (803        | )
|Commitments to issue consolidated obligations   |  |                      |             |   |                         |   | 1,006       |               |  |   |                     |   |  |   | 35,190      |  

Note 10. Transactions with Related Parties and other FHLBanks

Transactions with Members



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We are a cooperative whose members own our capital stock and may receive dividends on their investments
in our stock. Virtually all our advances are initially issued to members, and all mortgage loans held for portfolio were purchased from members or former members. We also maintain demand deposit accounts for members, primarily to facilitate
settlement activities that are directly related to advances and mortgage loans purchased. Such transactions with members are entered into during the normal course of business.

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.

For member
transactions related to concentration of investments in held-to-maturity securities purchased from members or affiliates of certain members, see Note 2; concentration associated with advances, see Note 3; concentration associated with mortgage loans
held for portfolio, see Note 4; and concentration associated with capital stock, see Note 6.

The following tables set forth information
with respect to the Seattle Banks outstanding transactions with members and their affiliates as of March 31, 2009 and December 31, 2008 and for the three months ended March 31, 2009 and 2008. Certain disclosures concerning the
December 31, 2008 held-to-maturity securities purchased from members and their affiliates have been corrected from amounts previously disclosed. Specifically, we have increased held-to-maturity securities purchased from members and their affiliates
by $88.9 million to $3.3 billion as of December 31, 2008.



|                                                                                          |  |                     |            |                        |   |           
|----------------------------------------------------------------------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Assets and Liabilities with Members and Affiliates                                        |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)                                                                            |  |                     |            |                       
|Assets                                                                                    |  |                     |            |                        |   |           
|Cash and due from banks                                                                   |  | $                   | 320        |                        | $ | 386       
|Securities purchased under agreements to resell                                           |  |                     | 1,000,000  |                        |   |           
|Federal funds sold                                                                        |  |                     | 469,000    |                        |   | 195,300   
|Held-to-maturity securities                                                               |  |                     | 3,648,116  |                        |   | 3,260,810 
|Advances*                                                                                 |  |                     | 21,093,104 |                        |   | 24,152,434
|Mortgage loans held for portfolio                                                         |  |                     | 610,370    |                        |   | 653,712   
|Accrued interest receivable                                                               |  |                     | 58,318     |                        |   | 112,372   
|                                                                                          |  |                     |            |                        |   |           
|Total assets                                                                              |  | $                   | 26,879,228 |                        | $ | 28,375,014
|                                                                                          |  |                     |            |                        |   |           
|Liabilities                                                                               |  |                     |            |                        |   |           
|Deposits                                                                                  |  | $                   | 664,699    |                        | $ | 569,088   
|Mandatorily redeemable capital stock                                                      |  |                     | 126,874    |                        |   | 126,874   
|Derivative liabilities                                                                    |  |                     | 123,476    |                        |   | 95,066    
|Other liabilities                                                                         |  |                     | 2,036      |                        |   | 2,096     
|                                                                                          |  |                     |            |                        |   |           
|Total liabilities                                                                         |  | $                   | 917,085    |                        | $ | 793,124   
|                                                                                          |  |                     |            |                        |   |           
|Capital                                                                                   |  |                     |            |                        |   |           
|Accumulated other comprehensive loss:                                                     |  |                     |            |                        |   |           
|Non-credit portion of other-than-temporary impairment loss on held-to-maturity securities |  | $                   | 659,910    |                        | $ |           
|                                                                                          |  |                     |            |                        |   |           
|Total Capital                                                                             |  | $                   | 659,910    |                        | $ |           
|                                                                                          |  |                     |            |                        |   |           
|Other                                                                                     |  |                     |            |                        |   |           
|Notional amount of derivatives                                                            |  | $                   | 18,518,532 |                        | $ | 12,431,629
|Letters of credit                                                                         |  | $                   | 1,234,931  |                        | $ | 913,858   



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



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|                                                                        |  |                                      |         |   |      |   |         |  
|----------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                        | 
|                                                                        |  | For the Three Months Ended March 31, |        
|Income and Expense with Members and Affiliates                          |  | 2009                                 |         |   | 2008 |  
|(in thousands)                                                          |  |                                      |         |   |      |  
|Interest Income                                                         |  |                                      |         |   |      |   |         |  
|Advances*                                                               |  | $                                    | 129,932 |   |      | $ | 424,212 |  
|Prepayment fees on advances, net                                        |  |                                      | 3,558   |   |      |   | 14,471  |  
|Securities purchased under agreements to resell                         |  |                                      | 364     |   |      |   |         |  
|Federal funds sold                                                      |  |                                      | 230     |   |      |   | 3,080   |  
|Held-to-maturity securities                                             |  |                                      | 23,103  |   |      |   | 27,446  |  
|Mortgage loans held for portfolio                                       |  |                                      | 7,572   |   |      |   | 68,218  |  
|Other income                                                            |  |                                      |         |   |      |   | 14      |  
|                                                                        |  |                                      |         |   |      |   |         |  
|Total interest income                                                   |  |                                      | 164,759 |   |      |   | 537,441 |  
|                                                                        |  |                                      |         |   |      |   |         |  
|Interest Expense                                                        |  |                                      |         |   |      |   |         |  
|Deposits                                                                |  |                                      | 479     |   |      |   | 9,096   |  
|Consolidated obligations*                                               |  |                                      | (22,859 | ) |      |   | (9,510  | )
|Mandatorily redeemable capital stock                                    |  |                                      |         |   |      |   | 202     |  
|                                                                        |  |                                      |         |   |      |   |         |  
|Total interest expense                                                  |  |                                      | (22,380 | ) |      |   | (212    | )
|                                                                        |  |                                      |         |   |      |   |         |  
|Net Interest Income                                                     |  | $                                    | 187,139 |   |      | $ | 537,653 |  
|                                                                        |  |                                      |         |   |      |   |         |  
|Other Income (Loss)                                                     |  |                                      |         |   |      |   |         |  
|Service fees                                                            |  | $                                    | 555     |   |      | $ | 449     |  
|Net other-than-temporary impairment loss on held-to-maturity securities |  |                                      | (40,643 | ) |      |   |         |  
|Net (loss) gain on derivatives and hedging activities                   |  |                                      | (1,957  | ) |      |   | 2,822   |  
|Other loss                                                              |  |                                      |         |   |      |   | 7       |  
|                                                                        |  |                                      |         |   |      |   |         |  
|Total other income (loss)                                               |  | $                                    | (42,045 | ) |      | $ | 3,278   |  
|                                                                        |  |                                      |         |   |      |   |         |  



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

Transactions with Related Parties

For
purposes of these financial statements, we define related parties as those members and former members with capital stock outstanding in excess of 10% of our total outstanding capital stock and mandatorily redeemable capital stock. We also consider
instances where a member or an affiliate of a member has an officer or director who is a director of the Seattle Bank to meet the definition of a related party. Transactions with such members are subject to the same eligibility and credit criteria,
as well as the same terms and conditions, as other similar transactions, although the Board has imposed certain restrictions on the repurchase of stock held by members who have officers or directors on our Board.

The following tables set forth information as of March 31, 2009 and December 31, 2008, and for the three months ended March 31, 2009 and
2008 with respect to transactions with related parties. Certain disclosures concerning the December 31, 2008 held-to-maturity securities purchased from related parties and their affiliates have been corrected from amounts previously disclosed.
Specifically, we have increased held-to-maturity securities purchased from related parties and their affiliates by $701.7 million to $938.8 billion as of December 31, 2008.



34



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|                                                                                         |  |                                      |            |   |                        |   |            |  
|---------------------------------------------------------------------------------------- |  | ------------------------------------ | ---------- | - | ---------------------- | - | ---------- | -
|Assets and Liabilities with Related Parties                                              |  | As ofMarch 31, 2009                  |            |   | As ofDecember 31, 2008 |  
|(in thousands)                                                                           |  |                                      |            |   |                        |  
|Assets                                                                                   |  |                                      |            |   |                        |   |            |  
|Cash and due from banks                                                                  |  | $                                    | 320        |   |                        | $ |            |  
|Securities purchased under agreements to resell                                          |  |                                      | 3,500,000  |   |                        |   |            |  
|Held-to-maturity securities                                                              |  |                                      | 1,969,450  |   |                        |   | 938,784    |  
|Advances*                                                                                |  |                                      | 19,396,249 |   |                        |   | 18,923,217 |  
|Mortgage loans held for portfolio                                                        |  |                                      | 4,270,745  |   |                        |   | 4,421,078  |  
|Accrued interest receivable                                                              |  |                                      | 84,038     |   |                        |   | 142,242    |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total assets                                                                             |  | $                                    | 29,220,802 |   |                        | $ | 24,425,321 |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Liabilities                                                                              |  |                                      |            |   |                        |   |            |  
|Deposits                                                                                 |  | $                                    | 31,915     |   |                        | $ | 8,676      |  
|Mandatorily redeemable capital stock                                                     |  |                                      | 772,259    |   |                        |   | 772,259    |  
|Derivative liabilities                                                                   |  |                                      | 73,867     |   |                        |   | 24,119     |  
|Other liabilities                                                                        |  |                                      | 17,732     |   |                        |   | 16,978     |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total liabilities                                                                        |  | $                                    | 895,773    |   |                        | $ | 822,032    |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Capital                                                                                  |  |                                      |            |   |                        |   |            |  
|Accumulated other comprehensive loss:                                                    |  |                                      |            |   |                        |   |            |  
|Non-credit portion of other-than-temporary impairment loss on held-to-maturity securites |  | $                                    | 533,548    |   |                        | $ |            |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total Capital                                                                            |  | $                                    | 533,548    |   |                        | $ |            |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Other                                                                                    |  |                                      |            |   |                        |   |            |  
|Notional amount of derivatives                                                           |  | $                                    | 15,151,140 |   |                        | $ | 6,977,797  |  
|Letters of credit                                                                        |  | $                                    | 779,875    |   |                        | $ | 699,176    |  
|*       Includes the effect of associated derivatives with members or their affiliates.  |  |                                      |            |   |                        |   |            |  
|                                                                                         | 
|                                                                                         |  | For the Three Months Ended March 31, |           
|Income and Expense with Related Parties                                                  |  | 2009                                 |            |   | 2008                   |  
|(in thousands)                                                                           |  |                                      |            |   |                        |  
|Interest Income                                                                          |  |                                      |            |   |                        |   |            |  
|Advances*                                                                                |  | $                                    | 106,371    |   |                        | $ | 199,598    |  
|Prepayment fees on advances, net                                                         |  |                                      | 2,721      |   |                        |   | 13,777     |  
|Securities purchased under agreements to resell                                          |  |                                      | 1,085      |   |                        |   |            |  
|Federal funds sold                                                                       |  |                                      | 95         |   |                        |   | 55         |  
|Held-to-maturity securities                                                              |  |                                      | 11,322     |   |                        |   | 2,830      |  
|Mortgage loans held for portfolio                                                        |  |                                      | 55,864     |   |                        |   | 59,156     |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total interest income                                                                    |  |                                      | 177,458    |   |                        |   | 275,416    |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Interest Expense                                                                         |  |                                      |            |   |                        |   |            |  
|Deposits                                                                                 |  |                                      | 13         |   |                        |   | 372        |  
|Consolidated obligations*                                                                |  |                                      | (24,451    | ) |                        |   | (1,818     | )
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total interest expense                                                                   |  |                                      | (24,438    | ) |                        |   | (1,446     | )
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Net Interest Income                                                                      |  | $                                    | 201,896    |   |                        | $ | 276,862    |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Other Income (Loss)                                                                      |  |                                      |            |   |                        |   |            |  
|Service fees                                                                             |  | $                                    | 43         |   |                        | $ |            |  
|Net other-than-temporary impairment loss on held-to-maturity securities                  |  |                                      | (29,866    | ) |                        |   |            |  
|Net (loss) gain on derivatives and hedging activities                                    |  |                                      | (2,617     | ) |                        |   | 397        |  
|                                                                                         |  |                                      |            |   |                        |   |            |  
|Total other income (loss)                                                                |  | $                                    | (32,440    | ) |                        | $ | 397        |  
|                                                                                         |  |                                      |            |   |                        |   |            |  



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

Transactions Affecting Related Parties



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In September 2008, Bank of America Corporation (BofA) announced that it had agreed to purchase Merrill
Lynch & Co. (Merrill Lynch). The transaction closed on January 1, 2009. Bank of America Oregon, N.A., a wholly owned subsidiary of BofA, and Merrill Lynch Bank USA, a wholly owned subsidiary of Merrill Lynch, are both members of the
Seattle Bank. In March 2009, Merrill Lynch Bank USA prepaid its outstanding advances totaling $2.9 billion and had no outstanding advances as of March 31, 2009.

In September 2008, in a transaction facilitated by the FDIC, Washington Mutual Bank, F.S.B. was acquired by JPMorgan Chase, a non-member. In early October 2008, JPMorgan Chase notified the Seattle Bank that it had
merged Washington Mutual Bank, F.S.B. into a non-member entity, JPMorgan Chase Bank, N.A., that assumed the fully collateralized, related advances and capital stock of the Seattle Bank. Effective October 7, 2008, we reclassified the membership
to that of a non-member shareholder that is no longer able to enter into new borrowing arrangements with the Seattle Bank and transferred its Class A capital stock and Class B capital stock to mandatorily redeemable capital stock on
the Statement of Condition. Per our Capital Plan, Class A capital stock is redeemable six months after notification and Class B capital stock is redeemable five years after notification, subject to certain requirements. As a non-member,
JPMorgan Chase Bank, N.A. is not eligible to initiate new advances or renew maturing advances. Approximately 83.0% of the advances outstanding as of December 31, 2008 with JPMorgan Chase Bank, N.A. mature by the end of 2009.

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 to or from other
FHLBanks, see Note 5.



|Note 11. | Commitments and Contingencies
|-------- | -----------------------------

For accounting
policies and additional information concerning commitments and contingencies, see Note 17 in our 2008 Audited Financials included in our 2008 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 March 31, 2009 and December 31, 2008. The par amounts of all the
FHLBanks outstanding consolidated obligations for which we are jointly and severally liable, net of interbank holdings, were $1.1 trillion and $1.3 trillion as of March 31, 2009 and December 31, 2008.

During the third quarter of 2008, the Seattle Bank and each of the other 11 FHLBanks entered into lending agreements with the U.S. Treasury in connection
with the U.S. Treasurys establishment of a Government-Sponsored Enterprise Credit Facility (GSECF), as authorized by the Housing Act (each, a Lending Agreement). The GSECF is designed to serve as a contingent source of liquidity for the
housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated
obligations. The terms of any borrowing are agreed to at the time of issuance. Loans under a Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members and mortgage-backed
securities issued by Fannie Mae or Freddie Mac. Each FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of March 31,
2009, the Seattle Bank had provided the U.S. Treasury with a listing of advance collateral totaling $31.3 billion, which provides for maximum borrowings of $27.2 billion. The amount of collateral can be increased or decreased (subject to the
approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of March 31, 2009, no FHLBank had drawn on this available source of liquidity. For additional information regarding the Lending Agreements,
see Part I. Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsCapital Resources and LiquidityLiquidity in this report.

Commitments that legally bind and unconditionally obligate us for additional advances totaled $12.5 million and $20.8 million as of March 31, 2009
and December 31, 2008. Commitments generally are for periods of up to 12 months. Standby letters of credit were approximately $1.2 billion and $913.9 million as of March 31, 2009 and December 31, 2008. Standby letters of credit as of
March 31, 2009 had original terms of 34 days to 10 years, with a final expiration in 2012. 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 2011.
Total commitments for standby bond purchases were $51.2 million and $52.7 million as of March 31, 2009 and December 31, 2008.



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As of March 31, 2009, we had $382.0 million of investments that had been traded but not settled. As
of December 31, 2008, we had no investment that had been traded but not settled. As of March 31, 2009, we had $221.3 million in agreements outstanding to issue consolidated obligation bonds and discount notes. As of December 31, 2008,
we had entered into agreements to issue $1.1 billion par value of consolidated obligation bonds.

As of March 31, 2009, we have a
fully reserved receivable of $10.4 million from Lehman Brothers Special Financing, Inc. (LBSF) recorded on our Statement of Condition. In September 2008, Lehman Brothers Holdings, Inc. (LBHI), the parent company of LBSF and a guarantor of
LBSFs obligations, filed for bankruptcy protection. LBSF was our counterparty on multiple derivative transactions under International Swap Dealers Association, Inc. master agreements with a total notional amount of $3.5 billion at the time of
the LBHI bankruptcy filing. As a result, we notified LBSF of our intent to early terminate all outstanding derivative positions with LBSF, unwound such positions, and established a receivable position, netting the value of the collateral due to be
returned to us with all other amounts due, which resulted in the establishment of a $10.4 million net receivable from LBSF (before provision) included in other assets in the Statement of Condition. We also established an offsetting provision for
credit loss on receivable based on managements current estimate of the probable amount that will be realized in settling our derivative transactions with LBSF.

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.



|Note 12. | Subsequent Events
|-------- | -----------------

Between March 31, 2009 and
May 8, 2009, three of our AAA-rated private-label mortgage-backed securities were downgraded by one or more NRSROs, including one investment with a par value of $15.6 million to A and two securities with a total par
value of $268.2 million to BBB. Each of these securities was evaluated for other-than-temporary impairment using cash flow analysis as discussed in Note 2. In addition, four AAA-rated private-label mortgage-backed securities
with a total par value of $191.3 million were placed on watch for possible downgrade.

On May 12, 2009, our Board suspended the
issuance of Class A capital stock to support new advances, effective June 1, 2009. New advances will have to be supported by Class B capital stock, which can be used to reduce the Seattle Banks risk-based capital deficiency.

The Capital Plan provides that we may impose a redemption cancellation fee upon a member or a successor to a former member that has given
notice of its intent to redeem Class A or Class B capital stock and subsequently revokes or cancels such redemption request. On May 12, 2009, the Board determined that, effective immediately, any member that had previously notified us of
its intent to withdraw its membership and rescinds its notice of intent to withdraw from membership on or before December 31, 2009, shall not be subject to a redemption cancellation fee. The Board also determined that any redemption
cancellation fees applicable to the transfer of excess Class A or Class B capital stock from a member or successor to a another member shall also be waived. Currently, ten members holding $58.9 million of mandatorily redeemable capital stock
are eligible for the cancellation fee waiver should they rescind their notices of intent to withdraw from membership.



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|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 (Seattle Bank) regarding future events and developments, including future operating results, changes in asset levels, and continued use 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 which 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 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:



| |  |  | adverse changes in the market prices or credit quality of our financial instruments, particularly our private-label mortgage-backed securities, that could cause us
to record additional other-than-temporary impairment (OTTI) charges;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in assumptions used to calculate estimates, particularly those related to OTTI charges, recorded in our financial statements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our members willingness to do business with us despite our inability, as a result of our risk-based capital deficiency, to redeem or repurchase capital stock
or pay dividends;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse change in our capital classification by the Federal Housing Finance Agency (Finance Agency) under its interim final rule implementing the prompt corrective
action (PCA) provisions of the Housing and Economic Recovery Act of 2008 (Housing Act);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse changes in investor demand for consolidated obligations or increased competition from the Federal National Mortgage Association (Fannie Mae), the Federal
Home Loan Mortgage Corporation (Freddie Mac), and other government-sponsored enterprises (GSEs), including other Federal Home Loan Banks (FHLBanks), as well as corporate, sovereign, and supranational entities, including entities issuing debt under
the Federal Deposit Insurance Corporation (FDIC) Temporary Liquidity Guarantee Program (TLGP);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | legislative or regulatory changes or actions initiated by the U.S. Congress, including the American Recovery and Reinvestment Act of 2009 (Stimulus Package), the
Housing Act, and the Emergency Economic Stabilization Act of 2008 (Stabilization Act), or other regulatory changes by any other body, that could cause us to modify our current structure, policies, or business operations;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | actions taken by the U.S. Department of the Treasury (U.S. Treasury), the Federal Reserve System (Federal Reserve), or the FDIC to stabilize the capital and credit
markets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | withdrawal of one or more large members or consolidation or institutional failures among our membership, including the effects of the loss of our then-largest
member, Washington Mutual Bank, F.S.B., in October 2008;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant increases or decreases in business from or changes in business of our members, including unexpected demand for liquidity from our large members;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse changes in the market value or credit quality of mortgage-related assets used as collateral for advances by our members;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | significant or rapid changes in market conditions, including fluctuations in interest rates, shifts in yield curves, and spreads on mortgage-related assets relative
to other financial instruments, or our failure to effectively hedge these instruments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in global, national, and local economic conditions;
| | - |  | -----------------------------------------------------------



| |  |  | negative changes in our credit agency ratings or ratings applicable to the FHLBanks or the Federal Home Loan Bank System (FHLBank System);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | failure to satisfy hedge accounting criteria under accounting principles generally accepted in the United States (GAAP) in hedging our interest-rate risk;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in bankruptcy laws or other regulation that could result in modification of the terms or principal balances of mortgage loans that we own or that are
collateral underlying our mortgage-backed securities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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

This discussion and
analysis reviews our financial condition as of March 31, 2009 and December 31, 2008 and our results of operations for the three months ended March 31, 2009 and 2008. This discussion should be read in conjunction with our unaudited
financial statements and related condensed notes for the three months ended March 31, 2009 in Part I. Item 1. Financial Statements in this report and with our audited financial statements and related notes for the year ended
December 31, 2008 (2008 Audited Financials) included in our 2008 annual report on Form 10-K.

Our financial condition as of
March 31, 2009 and our results of operations for the three months ended March 31, 2009 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,
2009 or for any other future dates or periods.

General

The Seattle Bank is a federally chartered corporation and one of 12 FHLBanks, which along with the Finance Agency (prior to July 30, 2008, the Federal Housing Finance Board (Finance Board)) and the Office of
Finance comprise the FHLBank System. The Seattle Bank 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 and Guam and the Commonwealth of the Northern Mariana Islands. All federally insured depository institutions, community development financial institutions, and insurance companies engaged in residential housing
finance located in the Seattle Banks district are eligible to apply for membership. Our primary business activity is providing loans (advances) to our members and eligible housing associates. We also work with our members and a variety of
other entities, including nonprofit 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 (AHP) and the Community Investment Program (CIP).

Our revenues derive primarily
from interest income from advances, investments, and mortgage loans held for portfolio. 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. We believe many variables influence our financial performance, including market interest-rate changes,
yield-curve shifts, availability of credit, and general economic conditions.

Market Conditions

The turmoil in the global financial markets that began in mid-2007 and intensified during 2008 continued to negatively impact borrowing and lending
activities during the first quarter of 2009. Although interbank lending began to increase somewhat during the first quarter of 2009, indicating a slight improvement in market liquidity, concerns regarding the creditworthiness and nonperformance
risks of trade counterparties adversely affected the market value and capitalization of many financial institutions and in turn resulted in additional institutional failures and mergers.

Although applications for mortgage loan refinancings significantly increased in the first quarter of 2009, the U.S. mortgage market continued to
deteriorate during this period, with delinquency and foreclosure rates on mortgage loans increasing nationwide. The private-label mortgage-backed securities market, which had for the most part ceased operating during much of 2008, continued its lack
of activity as uncertainty over the impact of new or proposed governmental actions (including mortgage loan modification programs), further home-price deterioration, and changes in borrower, lender, and investor behavior depressed and complicated
the pricing of private-label mortgage-backed securities. The uncertainty as to the depth and duration of these



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trends has resulted in a change in the market for private-label mortgage-backed securities, such that what had been a
generally functioning market in early- to mid-2007 became highly illiquid, with prices reflecting a lack of dealer and investor sponsorship.

Specifically, the significant reduction in the market value and demand for private-label mortgage-backed securities continued to adversely impact the market value of investments for a number of FHLBanks, and as a result of the accounting
rules in place in 2008, several FHLBanks, including the Seattle Bank, were forced to record losses in 2008 on these securities in excess of their expected credit losses. For the Seattle Bank, the OTTI charges recorded in 2008 resulted in an
accumulated deficit and contributed to a risk-based capital deficiency, which in turn, required the suspension of dividend payments and repurchases and redemptions of capital stock. In the first quarter of 2009 (as in 2008), the credit-rating
agencies downgraded a significant number of private-label mortgage-backed securities, including some owned by the Seattle Bank, which further adversely impacted the market values of these securities. As of the end of the first quarter of 2009, we
continued to have a risk-based capital deficiency.

These and other factors prompted significant actions by governments, regulatory
agencies, and other credit market participants around the world, including in the United States, in 2008 and 2009. During this period, the U.S. Treasury, the Federal Reserve, the FDIC, and the Finance Agency announced a number of major initiatives,
including new measures impacting the FHLBank System, our members, and the financial markets, to address liquidity pressures and increase confidence among credit market participants, including, for example, passing the 2009 Stimulus Package. See
Recent Regulatory Developments below for more information.

It is unclear how long it will take for recent legislative
and regulatory initiatives to be fully implemented and, once implemented, what affect they will ultimately have on the U.S. economy. During the first quarter of 2009, the Seattle Banks advances continued to be a primary source of liquidity to
our members, although our advance balances continued to decline as many of our members further reduced their asset balances. Demand for short-term, fixed interest-rate advances was particularly strong and we were generally able to fund these
advances with short-term funding at favorable interest rates.

In April 2009, the Financial Accounting Standards Board (FASB) issued a new
accounting rule for other-than-temporary impairments of securities, which is intended to provide greater clarity about OTTI and to more effectively communicate when an OTTI event has occurred. This rule requires, among other things, the separation
of an OTTI charge into (a) the amount of the total impairment related to credit loss and (b) the amount of the total impairment related to all other factors. The amount of the total OTTI charge related to credit is recognized in earnings
in the statement of income. The amount of the total OTTI charge related to all other factors is recognized in other comprehensive income in the statement of condition. The Seattle Bank adopted this rule, FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2), effective January 1, 2009 (see Financial Condition for additional information). Although we recognized a cumulative effect adjustment of
$293.4 million in initially applying FSP FAS 115-2 as an adjustment to our retained earnings as of January 1, 2009, with a corresponding adjustment to accumulated other comprehensive loss, adoption of FSP FAS 115-2 did not affect the market
value of our private-label mortgage-backed securities or our total amount of capital. For the three months ended March 31, 2009, we recorded additional total OTTI charges of $895.2 million ($71.7 million of which related to the credit
losses on certain private-label mortgage-backed securities in our held-to-maturity portfolio, as reported in our Statement of Operations, and $823.5 million of which related to all other factors, as reflected in our Statement of Condition in
accumulated other comprehensive loss).

Members

So far in 2009, the Seattle Bank experienced some significant changes in our membership.



| |  |  | In September 2008, Bank of America (BofA) announced that it had agreed to purchase Merrill Lynch, which transaction closed on January 1, 2009. Bank of America
Oregon, N.A., a wholly owned subsidiary of BofA, and Merrill Lynch Bank USA, a wholly owned subsidiary of Merrill Lynch, are both members of the Seattle Bank. In March 2009, Merrill Lynch Bank USA prepaid its outstanding advances of $2.9 billion.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Five member institutions failed. Advances to these members were fully collateralized, and all outstanding advances were prepaid by the acquiring institution or the
FDIC, and their outstanding capital stock was transferred to mandatorily redeemable capital stock. We believe that the continued volatility of the markets may result in additional member institution failures during 2009.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial Results and Condition

The Seattle Bank recorded a net loss of $16.2 million for the three months ended March 31, 2009, a decrease of $47.7 million from net income of $31.5 million for the same period in 2008. The decrease in net
income for the three months ended March 31, 2009 was primarily due to $71.7 million in OTTI credit losses on certain of our held-to-maturity securities (further discussed below), a decrease of $10.5 million in net prepayment fee income on
advances, and an increased net loss on derivatives



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and hedging activities of $8.9 million. This decrease in net income was partially offset by a $9.6 million increase in
net interest income and a decreased net realized loss on debt retirements of $11.7 million.

As of March 31, 2009, we had total assets
of $56.9 billion, total outstanding capital stock (including mandatorily redeemable capital stock) of $2.8 billion, and retained earnings of $198.3 million, compared to total assets of $58.4 billion, total outstanding capital stock (including
mandatorily redeemable stock) of $2.8 billion, and an accumulated deficit of $78.9 million as of December 31, 2008. The slight decrease in assets was due primarily to a lower advance balance, partially offset by increased short-term
investments, including securities purchased under agreements to resell and federal funds sold. The change from our accumulated deficit as of December 31, 2008 to retained earnings as of March 31, 2009 primarily resulted from our adoption
of FSP FAS 115-2, under which we recognized a cumulative-effect adjustment of $293.4 million as an increase to our retained earnings as of January 1, 2009, with a corresponding adjustment to accumulated other comprehensive loss.

As a result of our quarterly reviews of our held-to-maturity securities, including adoption of FSP FAS 115-2, we recorded OTTI charges of $895.2 million
(of which $71.7 million was credit-related and recorded in earnings and $823.5 was non-credit related and recorded in other comprehensive loss) relating to certain of our private-label mortgage-backed securities for the three months ended
March 31, 2009. We could recognize additional OTTI charges on our private-label mortgage-backed securities if, among other things, delinquency or loss rates on mortgages continue to increase beyond our forecasted levels or residential real
estate values continue to decline beyond our forecasted levels as of March 31, 2009, further negatively impacting our earnings, other comprehensive loss, and total GAAP capital. See Financial ConditionInvestments, Note 2
in Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements, and Part II. Item 1A. Risk Factors, for more information.

Changes in market interest rates and the considerable decline in activity in the mortgage-backed securities market since mid-2007 has had a significant
net unfavorable impact on the fair value of our assets and liabilities, particularly our mortgage-backed securities. As of March 31, 2009 and December 31, 2008, our net unrealized market value losses were $1.4 billion and $2.1 billion,
which, in accordance with GAAP, are not reflected in our financial position and operating results. The decrease in our unrealized market value loss is primarily the result of the recognition of $895.2 million in other-than-temporary impairment
charges for the three months ended March 31, 2009. Because of our net unrealized market value losses, the ratio of the market value to the book value of our equity was estimated at 24.0% and 22.9% as of March 31, 2009 and December 31,
2008. Our unrealized market value losses as of March 31, 2009 and December 31, 2008 were primarily due to our investments in private-label mortgage-backed securities collateralized by Alt-A mortgage loans, the market value of which has
significantly declined since mid-2007. We believe that the overall intrinsic value of our private-label mortgage-backed securities, which we have determined using third-party pricing services, is generally not represented by the current market
value. See Note 9 in Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements, for additional information on the estimation of fair values.

Primarily as a result of the decline in the market value of our private-label mortgage-backed securities, we reported a risk-based capital deficiency as
of March 31, 2009. Because an FHLBank that fails to meet any regulatory capital requirement may not declare a dividend or redeem or repurchase capital stock, we are unable to redeem or repurchase any outstanding Class A or Class B stock
until this deficiency is corrected and we comply with all of our regulatory capital requirements. Because of the instability in the mortgage-backed securities market and its impact on our risk-based capital, we cannot predict when we will or be able
to resume dividend payments and stock repurchases or redemptions, and the Finance Agency or other regulatory or legislative body could, among other things, require us to take specified actions relating to any capital deficiencies.

We have elected not to hedge the basis risk of our mortgage-related assets (i.e., the spread at which our mortgage-backed securities and mortgage loans
held for portfolio may be purchased relative to other financial instruments) due to the cost and lack of available derivatives that we believe can effectively hedge this risk. We expect that our market-value-of-equity ratio will continue to be
depressed until the difference between the market value of our assets and liabilities improves and conditions more consistent with past experiences return to the credit markets. For additional information, see Financial Condition,
Part I. Item 3. Quantitative and Qualitative Disclosures about Market Risk, and Part II. Item 1A. Risk Factors in this report.

We believe the condition of the U.S. economy will continue to affect and be affected by liquidity issues in the global financial markets and the deterioration in the U.S. housing market, through at least 2009. Going
forward, we expect to continue to manage our business in order to meet members needs, particularly for liquidity, in varying market conditions. However, the actions that we have taken and continue to take to manage these needs may negatively
impact our financial condition and results of operations. For example, in September 2008, we shifted our short-term investment strategy from investing in higher-yielding unsecured investments to investing in lower-yielding secured investments in
order to reduce our counterparty credit risk. In March 2009, as a result of modest improvements in the U.S. credit markets, on a limited basis, we have extended unsecured credit to a select group of financial institutions and slightly increased our
unsecured short-term investment balance. However, we expect that this investment strategy will continue to negatively impact interest income from investments for the remainder of 2009. In addition, while we continue to assess the impact of
legislative, regulatory, and membership changes, we believe that these changes



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may negatively affect advance volumes, our cost of funds, and our flexibility in managing our business, further affecting
our financial condition and results of operations.

Recent Regulatory Developments

On January 30, 2009, the Finance Agency published an interim final rule that implements the prompt corrective action (PCA) provisions of the Housing
Act. The interim rule establishes four capital classifications for FHLBanks and implements the PCA provisions that apply to FHLBanks that are not deemed to be adequately capitalized. Once an FHLBank is determined by the Finance Agency to be other
than adequately capitalized, the FHLBank will become subject to additional supervisory authority by the Finance Agency, and a range of mandatory or discretionary restrictions may be imposed. For example, an FHLBank would need to review its operating
and financial contracts and counterparty agreements to determine whether a capital deficiency or the application of the PCA requirements to the FHLBank will trigger defaults or otherwise impact the terms of those contracts and agreements.

The PCA provisions include four capital classifications for the FHLBanks:



| |  |  | Adequately capitalized (meets or exceeds all of its risk-based and leverage capital requirements)
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Undercapitalized (does not meet one or more of its capital requirements, but it is not significantly or critically undercapitalized)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Significantly undercapitalized (permanent or total capital is less than 75% of its capital requirements, but it is not critically undercapitalized)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Critically undercapitalized (total capital is less than or equal to 2% of total assets)
| | - |  | ---------------------------------------------------------------------------------------

The Director of the Finance Agency may at any time downgrade an FHLBank by one capital category based on specified conduct, decreases in the value of
collateral pledged to it, or a determination by the Director of the Finance Agency that the FHLBank is engaging in unsafe and unsound practices or is in an unsafe and unsound condition. Before implementing a reclassification, the Director of the
Finance Agency is required to provide the FHLBank with written notice of the proposed action and an opportunity to submit a response. As of May 18, 2009, we had received no notification from the Finance Agency regarding our capital adequacy
classification. See Part I. Item 1. BusinessStatutory Capital Requirements in our 2008 annual report on Form 10-K for additional information on consequences for FHLBanks that are not determined to be adequately capitalized.

In February 2009, the Stimulus Package was signed into law. The Stimulus Package does not contain any provisions that directly impact the
Seattle Bank, and its indirect effects on the Seattle Bank are currently unclear. The legislation includes spending designed to increase employment, prevent home foreclosures, and increase mortgage loan refinancing.

The Seattle Bank is continuing to evaluate the implications of the new legislation and regulatory developments, including the 2009 Stimulus Package, the
PCA interim final rule, and other regulations, orders, and reports on our members and the Seattle Banks businesses. See Part II. Item 1A. Risk Factors in this report.



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Financial Highlights

The following table presents a summary of selected financial information for the Seattle Bank for the periods indicated.



|                                                        |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|------------------------------------------------------- |  | ------------- | ------ | - | ---------------- | - | ------ | ----------------- |  | - | ------------ | - |  | ------------- | ------ | - |  | - | ------ | -
|Selected Financial Data                                 |  | March 31,2009 |        |   | December 31,2008 |   |        | September 30,2008 |  |   | June 30,2008 |   |  | March 31,2008 |       
|(in millions, except ratios)                            |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |       
|Statements of Condition (at period end)                 |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Total assets                                            |  | $             | 56,947 |   |                  | $ | 58,362 |                   |  | $ | 76,195       |   |  | $             | 66,431 |   |  | $ | 68,826 |  
|Cash and investments(1)                                 |  |               | 19,965 |   |                  |   | 16,006 |                   |  |   | 24,369       |   |  |               | 24,127 |   |  |   | 25,173 |  
|Advances                                                |  |               | 31,848 |   |                  |   | 36,944 |                   |  |   | 46,331       |   |  |               | 36,635 |   |  |   | 37,748 |  
|Mortgage loans held for portfolio                       |  |               | 4,899  |   |                  |   | 5,087  |                   |  |   | 5,211        |   |  |               | 5,355  |   |  |   | 5,521  |  
|Deposits and other borrowings                           |  |               | 671    |   |                  |   | 582    |                   |  |   | 1,434        |   |  |               | 832    |   |  |   | 1,288  |  
|Consolidated obligations                                |  |               | 53,481 |   |                  |   | 54,469 |                   |  |   | 70,875       |   |  |               | 62,390 |   |  |   | 64,103 |  
|Affordable Housing Program (AHP)                        |  |               | 15     |   |                  |   | 16     |                   |  |   | 23           |   |  |               | 27     |   |  |   | 25     |  
|Payable to Resolution Funding Corporation (REFCORP)     |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               | 7      |   |  |   | 8      |  
|Class A stock - putable                                 |  |               | 134    |   |                  |   | 118    |                   |  |   | 396          |   |  |               | 317    |   |  |   | 444    |  
|Class B stock - putable                                 |  |               | 1,733  |   |                  |   | 1,730  |                   |  |   | 2,480        |   |  |               | 2,149  |   |  |   | 2,145  |  
|Retained earnings(2)                                    |  |               | 198    |   |                  |   | (79    | )                 |  |   | 162          |   |  |               | 191    |   |  |   | 173    |  
|Accumulated other comprehensive loss(2)                 |  |               | (1,105 | ) |                  |   | (3     | )                 |  |   | (1           | ) |  |               | (1     | ) |  |   | (1     | )
|Total capital                                           |  |               | 961    |   |                  |   | 1,766  |                   |  |   | 3,037        |   |  |               | 2,655  |   |  |   | 2,759  |  
|                                                        |  |               |        |   |                 
|Statements of Income (for the three month period ended) |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Interest income                                         |  | $             | 315    |   |                  | $ | 485    |                   |  | $ | 523          |   |  | $             | 533    |   |  | $ | 706    |  
|Net interest income                                     |  |               | 74     |   |                  |   | 21     |                   |  |   | 43           |   |  |               | 50     |   |  |   | 65     |  
|Other (loss) income                                     |  |               | (79    | ) |                  |   | (264   | )                 |  |   | (47          | ) |  |               | 2      |   |  |   | (10    | )
|Other expense                                           |  |               | 12     |   |                  |   | 13     |                   |  |   | 22           |   |  |               | 12     |   |  |   | 12     |  
|(Loss) income before assessments                        |  |               | (16    | ) |                  |   | (256   | )                 |  |   | (26          | ) |  |               | 40     |   |  |   | 43     |  
|AHP and REFCORP assessments                             |  |               |        |   |                  |   | (15    | )                 |  |   | (7           | ) |  |               | 11     |   |  |   | 11     |  
|Net (loss) income                                       |  |               | (16    | ) |                  |   | (241   | )                 |  |   | (19          | ) |  |               | 29     |   |  |   | 32     |  
|                                                        |  |               |        |   |                 
|Dividends (for the three month period ended)            |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Dividends paid in cash and stock                        |  | $             |        |   |                  | $ |        |                   |  | $ | 9            |   |  | $             | 11     |   |  | $ | 8      |  
|Annualized dividend rate                                |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Class A stock - putable                                 |  |               | 0.00   | % |                  |   | 0.00   | %                 |  |   | 2.09         | % |  |               | 3.21   | % |  |   | 4.56   | %
|Class B stock - putable                                 |  |               | 0.00   | % |                  |   | 0.00   | %                 |  |   | 1.40         | % |  |               | 1.40   | % |  |   | 1.00   | %
|Dividend payout ratio                                   |  |               | 0.00   | % |                  |   | 0.00   | %                 |  |   | -49.38       | % |  |               | 36.37  | % |  |   | 26.60  | %
|                                                        |  |               |        |   |                 
|Financial Statistics (for the three month period ended) |  |               |        |   |                  |   |        |                   |  |   |              |   |  |               |        |   |  |   |        |  
|Return on average equity                                |  |               | -3.64  | % |                  |   | -45.58 | %                 |  |   | -2.75        | % |  |               | 4.39   | % |  |   | 4.71   | %
|Return on average assets                                |  |               | -0.11  | % |                  |   | -1.41  | %                 |  |   | -0.11        | % |  |               | 0.18   | % |  |   | 0.19   | %
|Equity-to-assets ratio(3)                               |  |               | 3.54   | % |                  |   | 4.43   | %                 |  |   | 4.13         | % |  |               | 3.99   | % |  |   | 3.98   | %
|Total capital-to-assets ratio(4)                        |  |               | 5.24   | % |                  |   | 4.60   | %                 |  |   | 4.18         | % |  |               | 4.12   | % |  |   | 4.13   | %
|Net interest margin(5)                                  |  |               | 0.49   | % |                  |   | 0.12   | %                 |  |   | 0.25         | % |  |               | 0.30   | % |  |   | 0.39   | %



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

|(2) | As a result of our adoption of FSP FAS 115-2 effective January 1, 2009, we recognized a cumulative effect
adjustment of $293.4 million as an increase to our retained earnings as of January 1, 2009, with a corresponding adjustment to accumulated other comprehensive loss.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Equity-to-assets ratio is average capital stock, retained earnings, and accumulated other comprehensive loss, divided by
the total average assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Total capital-to-assets ratio is regulatory capital stock plus retained earnings, divided by the total assets at the end
of the period.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(5) | Net interest margin is net interest income divided by the average earning assets.
|--- | ---------------------------------------------------------------------------------

Financial Condition

Our assets principally consist
of advances, investments, and mortgage loans held for portfolio. Our advance balance and our advances as a percentage of total assets as of March 31, 2009 declined from December 31, 2008, to $31.8 billion from $36.9 billion and to 55.9%
from 63.3%. This decline primarily resulted from prepayments of $2.9 billion in advances by Merrill Lynch Bank USA, advance maturities, and an increase in our short-term investments portfolio, which includes federal funds sold and securities sold
under agreements to repurchase. The increase in our short-term investments is intended to provide sufficient liquidity to meet members demand for advances, as well as to provide additional investment income.

The following table summarizes our major categories of assets as a percentage of total assets as of March 31, 2009 and December 31, 2008.



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|                                                           |  |                     |  |                       
|---------------------------------------------------------- |  | ------------------- |  | ----------------------
|Major Categories of Assets as a Percentage of Total Assets |  | As ofMarch 31, 2009 |  | As ofDecember 31, 2008
|(in percentages)                                           |  |                     |  |                       
|Advances                                                   |  | 55.9                |  | 63.3                  
|Investments                                                |  | 35.1                |  | 27.4                  
|Mortgage loans held for portfolio                          |  | 8.6                 |  | 8.7                   
|Other assets                                               |  | 0.4                 |  | 0.6                   
|                                                           |  |                     |  |                       
|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. To a significantly lesser extent, 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. In addition, during the third quarter of 2008, the Seattle Bank entered into a lending agreement with the U.S. Treasury (Lending Agreement) to serve as a contingent source of liquidity. As of March 31, 2009, we had
not drawn on this available liquidity source. For additional information regarding the Lending Agreement, see Capital Resources and LiquidityLiquidity.

The following table summarizes our major categories of liabilities and total capital as a percentage of total liabilities and capital as of
March 31, 2009 and December 31, 2008.



|                                                                                                   |  |                     |  |                       
|-------------------------------------------------------------------------------------------------- |  | ------------------- |  | ----------------------
|Major Categories of Liabilities and Total Capital as a Percentage of Total Liabilities and
Capital |  | As ofMarch 31, 2009 |  | As ofDecember 31, 2008
|(in percentages)                                                                                   |  |                     |  |                       
|Consolidated obligations                                                                           |  | 93.9                |  | 93.3                  
|Deposits                                                                                           |  | 1.2                 |  | 1.0                   
|Other liabilities*                                                                                 |  | 3.2                 |  | 2.7                   
|Total capital                                                                                      |  | 1.7                 |  | 3.0                   
|                                                                                                   |  |                     |  |                       
|Total                                                                                              |  | 100.0               |  | 100.0                 
|                                                                                                   |  |                     |  |                       



|* | Mandatorily redeemable capital stock, representing 1.6% as of total liabilities and capital as of
March 31, 2009 and December 31, 2008, is recorded in other liabilities.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We report our assets, liabilities, and
commitments in accordance with 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 March 31, 2009 and December 31, 2008, we had net unrealized market value losses of $1.4 billion and $2.1 billion. Because of these net unrealized market-value
losses, the ratio of the market value to book value of our equity was 24.0% and 22.9% as of March 31, 2009 and December 31, 2008. We expect that our market value of equity will continue to be depressed until the difference in the market
value of our assets (most significantly our mortgage-related assets) and liabilities improve and conditions more consistent with past experience return to the credit markets. We have elected not to hedge our mortgage-related asset basis risk due to
the cost and lack of effective means of hedging this risk.

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 decreased by 13.8%, or $5.1 billion, to $31.8 billion, as of March 31, 2009, compared to December 31, 2008. This decline primarily
resulted from prepayments of $2.9 billion in advances by Merrill Lynch Bank USA and maturing advances, and generally lower advance activity across our membership.

As of March 31, 2009, five borrowers held 70.6% of the par value of our outstanding advances, with two borrowers holding 55.5% (JPMorgan Chase Bank N.A. (formerly Washington Mutual Bank, F.S.B.) with 34.2% and
Bank of America Oregon, N.A. with 21.3%). As of December 31, 2008, five borrowers held 68.4% of the par value of our outstanding advances, with three borrowers holding 56.7% (JPMorgan Chase Bank N.A. with 35.0%, Bank of America Oregon, N.A.
with 11.4%, and Merrill Lynch Bank USA with 10.3%). No other borrower held over 10% of our outstanding advances as of March 31, 2009 or December 31, 2008.



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Although the long-term impact of the BofA/Merrill Lynch merger on membership and advance levels is
unknown at this time, Merrill Lynch prepaid $2.9 billion of advances during March 2009 and had no outstanding advances as of March 31, 2009. Further, we expect that advance volumes and associated advance interest income which began to decline
in the fourth quarter of 2008, will be further negatively impacted as a result of the acquisition of our former largest member, Washington Mutual Bank, F.S.B. by JPMorgan Chase Bank N.A., a non-member institution. The majority of this former
members advances mature during 2009, and it is unknown whether we will be able to replace these advances or reinvest the proceeds of the maturing advances into similarly yielding investments. Because a large concentration of our advances is
held by only a few members and a non-member shareholder, changes in this groups borrowing decisions can significantly affect the amount of our advances outstanding. We expect that the concentration of advances with our largest borrowers will
remain significant for the foreseeable future. In addition, the ability of our members to issue FDIC-insured unsecured debt under the TLGP, as well as expanded lending activities by the Federal Reserve, may also adversely impact demand for our
advances.

The percentage of advances maturing in one year or less slightly decreased to 63.2% as of March 31, 2009, from 66.2% as of
December 31, 2008, while the percentage of variable interest-rate advances (including floating-to-fixed convertible advances) as a portion of our total advance portfolio decreased to 24.5% as of March 31, 2009, compared to 31.6% as of
December 31, 2008. These changes reflect our members preference for short-term, fixed interest-rate liquidity given the continued volatile market conditions.

The total weighted-average interest rate on our advance portfolio declined to 2.51% as of March 31, 2009 from 3.02% as of December 31, 2008. The weighted-average interest rate on our portfolio is dependent
upon the term-to-maturity and type of advances within the portfolio at the time of measurement, as well as on our cost of funds (which is the basis for our advance pricing). The lower prevailing market interest rates, as well as our overall lower
cost of funds, contributed to significantly lower yields on our advances across all terms-to-maturity.

The following table summarizes our
advance portfolio by remaining term-to-maturity and weighted-average interest rates as of March 31, 2009 and December 31, 2008.



|                                                     |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|---------------------------------------------------- |  | -------------------- | ---------- | ----------------------- | ----------------------------- | ---- | ------ | - | ---------- | ----------------------------- |  | ----
|                                                     |  | As of March 31, 2009 |            | As of December 31, 2008
|Term-to-Maturity and Weighted-Average Interest Rates |  | Amount               |            |                         | Weighted-AverageInterest Rate |      | Amount |   |            | Weighted-AverageInterest Rate
|(in thousands, except interest rates)                |  |                      |            |                         |                               |      |        |   |            |                              
|Due in one year or less                              |  | $                    | 19,777,475 |                         |                               | 1.96 |        | $ | 24,014,584 |                               |  | 2.65
|Due after one year through two years                 |  |                      | 3,798,963  |                         |                               | 2.76 |        |   | 4,540,058  |                               |  | 3.34
|Due after two years through three years              |  |                      | 2,076,538  |                         |                               | 3.34 |        |   | 1,679,058  |                               |  | 3.83
|Due after three years through four years             |  |                      | 1,542,572  |                         |                               | 3.39 |        |   | 1,440,120  |                               |  | 3.89
|Due after four years through five years              |  |                      | 828,311    |                         |                               | 3.24 |        |   | 1,353,482  |                               |  | 3.32
|Thereafter                                           |  |                      | 3,251,513  |                         |                               | 4.40 |        |   | 3,268,677  |                               |  | 4.41
|                                                     |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total par value                                      |  |                      | 31,275,372 |                         |                               | 2.51 |        |   | 36,295,979 |                               |  | 3.02
|Commitment fees                                      |  |                      | (765       | )                       |                               |      |        |   | (803       | )                             |  |     
|Discount on AHP advances                             |  |                      | (114       | )                       |                               |      |        |   | (126       | )                             |  |     
|Discount on advances                                 |  |                      | (4,963     | )                       |                               |      |        |   | (5,030     | )                             |  |     
|SFAS 133 hedging adjustments                         |  |                      | 578,865    |                         |                               |      |        |   | 653,831    |                               |  |     
|                                                     |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total                                                |  | $                    | 31,848,395 |                         |                               |      |        | $ | 36,943,851 |                               |  |     
|                                                     |  |                      |            |                         |                               |      |        |   |            |                               |  |     

For additional information on advances, see Note 3 in Part I. Item 1. Financial
StatementsCondensed Notes to Financial Statements in this report.

Member Demand for Advances

Many factors affect the demand for advances, including changes in credit markets, interest rates, collateral availability, and member funding needs.
Members regularly evaluate financing options relative to our advance products and pricing. For example, as a result of the continuing significant volatility in the global capital markets, including the U.S. credit markets, the availability of many
sources of wholesale funding such as repurchase agreements, commercial paper, and certain other commercial lending arrangements were either constrained or more expensive than FHLBank advances during the first quarter of 2009. However, as member
banks continued to reduce their asset balances during the first quarter of 2009, we experienced a further reduction in demand for advances (following a similar decline in the fourth quarter of 2008).



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The Seattle Banks advance pricing alternatives include differential pricing, daily market-based
pricing, and auction pricing (which is generally offered two times per week and for limited terms). We may also offer featured advances from time to time, where advances of specific maturities are offered at lower rates than our daily market-based
pricing. The following table summarizes our advance pricing as a percentage of new advance activity, excluding cash management advances.



|                           |  |                                      |  |      
|-------------------------- |  | ------------------------------------ |  | -----
|                           |  | For the Three Months Ended March 31,
|Advance Pricing            |  | 2009                                 |  | 2008 
|(in percentages)           |  |                                      |  |      
|Differential pricing       |  | 62.2                                 |  | 58.3 
|Daily market-based pricing |  | 36.8                                 |  | 34.2 
|Auction pricing            |  | 1.0                                  |  | 7.5  
|                           |  |                                      |  |      
|Total                      |  | 100.0                                |  | 100.0
|                           |  |                                      |  |      

We believe that the use of differential pricing gives us greater flexibility to compete for
advance business. The use of differential pricing means that interest rates on our advances may be lower for some members requesting advances within specified criteria than for others, so that we can compete with lower interest rates available to
those members that have alternative wholesale or other funding sources. Although the percentage of differentially priced advances was slightly higher in the first quarter of 2009 than for the same period in 2008, differentially priced advance
activity increased significantly in the first quarter of 2009 compared to the fourth quarter of 2008, indicating increased alternative wholesale funding sources for our members. In general, our larger members have more alternative funding sources
and are able to access funding at lower interest rates than our smaller members. Overall, we believe that the use of differential pricing has helped to increase our advance balance and improve our ability to generate net income and lending capacity
for the benefit of all our members.

The demand for advances also may be affected by the manner in which members support their advances
with capital stock, the dividends we pay on our capital stock, and our members ability to have capital stock repurchased or redeemed by us. In December 2006, we implemented amendments to our Capital Plan, including the ability to issue
Class A stock. Overall, we believe that the availability of the Class A stock, which has a six-month redemption period, as well as our resumption of quarterly dividend payments in December 2006, contributed to our members use of our
advances in 2008, particularly those that required new stock purchases. However, as a result of OTTI charges recorded in the third and fourth quarters of 2008 and a risk-based capital deficiency as of December 31, 2008, we suspended dividend
payments and capital stock repurchases and redemptions in late 2008. We recorded additional OTTI charges and also had a risk-based capital deficiency for the period ended March 31, 2009. Because an FHLBank that fails to meet any regulatory
capital requirement may not declare a dividend or redeem or repurchase capital stock, we are unable to declare a dividend or to redeem or repurchase any outstanding Class A or Class B stock until this deficiency is corrected and we comply with
all of our regulatory capital requirements. Although we do not believe that these suspensions have thus far significantly adversely affected our advance volumes, we cannot predict when we will or be able to resume dividend payments and stock
repurchases or redemptions or how the continuance of these suspensions will affect future advance demand.

In March 2009, the FDIC issued a
final rule to raise an insured institutions base assessment rate based upon the institutions ratio of secured liabilities to domestic deposits. Under the rule, an institutions ratio of secured liabilities to domestic deposits (if
greater than 25%) would increase the assessment rate, with the resulting base assessment rate after any such increase never being more than 50% greater than it was before the adjustment. Because our advances are considered secured liabilities by our
members, the rule will have the effect of increasing the all-in borrowing costs for our members and may tend to reduce member demand for our advances.

On May 12, 2009, the Board of Directors (Board) of the Seattle Bank suspended the issuance of Class A capital stock to support new advances, effective June 1, 2009. New advances will have to be
supported by Class B capital stock, which unlike Class A capital stock, can be used to reduce the Seattle Banks risk-based capital deficiency.

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 2008 annual report on Form 10-K for additional information.

Credit Risk

Our credit risk from advances is concentrated in commercial banks and savings institutions. As of March 31, 2009, we had advances of
$17.3 billion outstanding to two borrowers, which represented 55.5% (34.2% and 21.3%) of our total par value of



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advance outstanding. As of December 31, 2008 we had advances of $20.6 billion outstanding to three borrowers, which represented 56.7% (35.0%, 11.4%, and
10.3%) of our total par value of advances outstanding. As of March 31, 2009 and December 31, 2008, we had rights to collateral, either loans or securities, on a borrower-by-borrower basis, with an estimated fair value in excess of
outstanding advances. As a result, we do not expect to incur any credit losses on our advances.

We have never experienced a credit loss on
an advance. Given the current economic environment, some of our borrowers may experience financial difficulties, including failure, and our credit protection may not be sufficient to protect our security interest. For example, the number of
borrowers on our internal credit watch list has trended sharply upward over the past year, generally as a result of increases in non-performing assets and the need for additional capital. Further, so far in 2009, five of our member institutions have
failed. All outstanding advances to these members were collateralized and were prepaid by the acquiring institution or the FDIC. We actively monitor our borrowers financial condition. Should the financial condition of a borrower decline or
become otherwise impaired, we may take possession of a borrowers collateral, or require that the borrower provide additional collateral to us. In the first quarter of 2009 and during the second half of 2008, due to deteriorating market
conditions and pursuant to our advance agreements, we moved a number of borrowers from blanket collateral arrangements to physical possession. The physical possession collateral arrangement reduces our credit risk and allows us to continue lending
to borrowers whose financial condition may have weakened. See Part I. Item 1. BusinessOur BusinessProducts and ServicesAdvances, in our 2008 annual report on Form 10-K for additional information on advances
and credit risk management.

Investments

We maintain portfolios of short- and long-term investments for liquidity purposes and to generate returns on our capital. Short-term investments generally include federal funds sold, certificates of deposit, TLGP securities, and securities
purchased under agreements to resell, while long-term investments generally include mortgage-backed securities and agency obligations. Investment levels generally depend upon our liquidity and leverage needs, including demand for our advances.

The following table summarizes the carrying values of our investments as of March 31, 2009 and December 31, 2008.



|                                                |  |                     |            |                        |   |          
|----------------------------------------------- |  | ------------------- | ---------- | ---------------------- | - | ---------
|Short- and Long-Term Investments                |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)                                  |  |                     |            |                       
|Short-Term Investments                          |  |                     |            |                        |   |          
|Federal funds sold                              |  | $                   | 4,191,500  |                        | $ | 2,320,300
|Certificates of deposit                         |  |                     | 2,377,000  |                        |   |          
|Securities purchased under agreements to resell |  |                     | 5,000,000  |                        |   | 3,900,000
|Other (TLGP securities)                         |  |                     | 1,100,000  |                        |   | 1,250,000
|                                                |  |                     |            |                        |   |          
|Total short-term investments                    |  |                     | 12,668,500 |                        |   | 7,470,300
|                                                |  |                     |            |                        |   |          
|Long-Term Investments                           |  |                     |            |                        |   |          
|Mortgage-backed securities                      |  |                     | 6,550,143  |                        |   | 7,589,423
|Other U.S. agency obligations                   |  |                     | 60,311     |                        |   | 64,164   
|Government-sponsored enterprise obligations     |  |                     | 678,895    |                        |   | 875,604  
|State or local housing agency obligations       |  |                     | 5,560      |                        |   | 5,700    
|                                                |  |                     |            |                        |   |          
|Total long-term investments                     |  | $                   | 7,294,909  |                        | $ | 8,534,891
|                                                |  |                     |            |                        |   |          

In September 2008, in order to reduce our unsecured counterparty exposure, we modified our
investment strategy and began replacing our unsecured short-term investments with secured short-term investments and overnight federal funds sold. In March 2009, as a result of modest improvements in the U.S. credit markets, on a limited basis, we
have extended unsecured credit to a select group of financial institutions and slightly increased our unsecured short-term investment balance. In addition, we are currently purchasing only GSE or U.S. agency mortgage-backed securities for our
long-term investment portfolio. Because our secured short-term investments and GSE and U.S. agency mortgage-backed securities earn lower yields than many of the unsecured short-term investments and private-label mortgage-backed securities we
previously invested in, we expect our investment interest income to continue the decline that began in 2008. Further, because we were unable to fully replace the unsecured short-term investments as they matured with secured investments, our
capital-to-assets ratio increased to 5.24% as of March 31, 2009. Until the capital markets begin to operate more normally, we expect to continue to manage our business to a capital-to-assets ratio target higher than our previously
Board-approved 4.05%, although our actual capital-to-assets ratio will vary, possibly significantly.

Between December 31, 2008 and
March 31, 2009, we significantly increased our short-term investment portfolio to provide for sufficient liquidity to meet members potential demand for advances by leveraging our members capital stock purchases and



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reinvesting funds from prepaid advances and maturing investments. As a result, as of March 31, 2009, our short-term investments increased by 69.6%, to
$12.7 billion, from $7.5 billion as of December 31, 2008. Our long-term investment portfolio declined by 14.5%, to $7.3 billion, primarily due to principal payments. We expect that our short-term investment portfolio will continue to fluctuate
based on the Seattle Banks liquidity and leverage needs and market conditions.

Mortgage-Backed Securities

Previously, each FHLBanks investment in mortgage-backed securities was limited at the time a security was purchased, to 300% of the FHLBanks
regulatory capital, which in our case is comprised of capital stock, retained earnings, and mandatorily redeemable capital stock. In March 2008, the Finance Board adopted a resolution authorizing the FHLBanks to increase their purchases of agency
mortgage-backed securities, effective immediately, from 300% to 600% of an FHLBanks regulatory capital. This resolution, which remains in effect for two years, requires an FHLBank to notify the Finance Agency prior to its first acquisition
under the expanded authority and to include in its notification a description of the risk management principles underlying the additional purchases. At this time, we do not expect to utilize this increased authority.

Our investment in mortgage-backed securities represented 219.3% and 282.4% of our regulatory capital as of March 31, 2009 and December 31,
2008. Mortgage-backed securities as of March 31, 2009 and December 31, 2008 included $1.4 billion and $1.3 billion in Fannie Mae mortgage-backed securities and $704.3 million and $728.0 million in Freddie Mac mortgage-backed securities. As
of March 31, 2009, the carrying value of our investments in mortgage-backed securities rated AAA (or its equivalent) by a nationally recognized statistical rating organization (NRSRO), such as Moodys Investor Service
(Moodys) and Standard & Poors (S&P), totaled $5.0 billion. See Credit Risk below for credit ratings relating to our mortgage-backed securities.

Other U.S. Agency Obligations

Our
investments in other U.S. agency obligations consist primarily of debt securities of government agencies whose debt is guaranteed, directly or indirectly, by the U.S. government. Our investments in other U.S. agency obligations declined slightly as
of March 31, 2009 from December 31, 2008, primarily due to principal repayments.

Government-Sponsored Enterprise (GSE)
Obligations

Our held-to-maturity investments in GSEs consist primarily of unsecured debt securities of Fannie Mae and Freddie Mac.
Fannie Mae securities totaled $104.9 million and $300.9 million and Freddie Mac securities totaled $274.8 million and $275.6 million as of March 31, 2009 and December 31, 2008. These securities represented 1.9% and 3.6% of total
investments as of such dates. Finance Agency 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.

Credit Risk

We are subject to credit risk on some of our 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 March 31, 2009, our unsecured credit exposure was $8.1
billion, primarily consisting of $4.2 billion of federal funds sold, $1.1 billion in TLGP securities, and $2.4 billion in certificates of deposit. As of December 31, 2008, our unsecured credit exposure was $4.5 billion, primarily consisting of
$2.3 billion in federal funds sold and $1.3 billion in TLGP securities. The increase in unsecured credit exposure primarily resulted from our investment in certificates of deposit and federal funds sold. For the near term, we continue to limit our
investments in unsecured short-term investments to limit our counterparty credit exposure.

Our mortgage-backed security investments
consist of agency guaranteed securities and senior tranches of privately issued prime or Alt-A (including, among others, hybrid adjustablerate mortgages (ARMs) and option-ARMs) residential mortgage-backed securities. We have increased exposure
to the risk of loss on our investments in mortgage-backed securities when the loans backing the mortgage-backed securities exhibit high rates of delinquency and foreclosures, as well as when there are losses on the sale of foreclosed properties. In
order to reduce our risk of loss on these investments, all of the mortgage-backed securities owned by the Seattle Bank contain one or more of the following forms of credit protection:



| |  |  | Subordination  where the mortgage-backed security is structured such that payments to junior classes are subordinated to senior classes to ensure cash flows
to the senior classes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excess spread  where the weighted-average coupon rate of the underlying mortgage loans in the pool is higher than the weighted-average coupon rate on the
mortgage-backed security. The spread differential may be used to cover any losses that may occur.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Over-collateralization  where the total outstanding balance on the underlying mortgage loans in the pool is greater than the outstanding mortgage-backed
security balance. The excess collateral is available to cover any losses that may occur.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insurance wrap  where a third-party bond insurance company (e.g., a monoline insurer) guarantees timely payment of principal and interest on the
mortgage-backed security. The bond insurance company is obligated to cover any losses that occur. As of March 31, 2009, the Seattle Bank held $3.6 million in investments with unrealized losses of $2.4 million that had been credit-enhanced by a
monoline insurer, MBIA. Although we expect the insurer to be able to meet its contractual obligations, we have additional credit enhancements on these securities such that we expect to collect all amounts due according to their contractual terms.
The Seattle Bank does not anticipate investing in any material amount of securities where the primary credit protection is provided by monoline insurers for the foreseeable future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the carrying value of our long-term investments and their various credit ratings as of March 31, 2009 and
December 31, 2008.



|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|---------------------------------------------------- |  | ----------------------- | --------- | -- | - | ------- |  | -------------------- | ------ | -------------------- | - | ------- |  | ----- | --------- |  | - | ------- |  | - | ---------
|                                                     |  | As of March 31, 2009   
|Long-Term Investments by Credit Rating               |  | AAA orGovernmentAgency  |           | AA |   | A       |  | BBB                  |        | BelowInvestmentGrade |   | Unrated |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|U.S. agency obligations                              |  | $                       | 725,579   |    | $ |         |  | $                    |        |                      | $ |         |  | $     |           |  | $ | 13,627  |  | $ | 739,206  
|State or local housing investments                   |  |                         | 380       |    |   | 5,180   |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 5,560    
|Residential mortgage-backed securities               |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Government-sponsored enterprise                      |  |                         | 2,083,660 |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 2,083,660
|Private-label                                        |  |                         | 2,904,002 |    |   | 96,621  |  |                      | 93,483 |                      |   | 338,799 |  |       | 1,033,578 |  |   |         |  |   | 4,466,483
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total long-term investment securities                |  | $                       | 5,713,621 |    | $ | 101,801 |  | $                    | 93,483 |                      | $ | 338,799 |  | $     | 1,033,578 |  | $ | 13,627  |  | $ | 7,294,909
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|                                                     |  |                         |           |   
|                                                     |  |                         |           |    |   |         |  | As of March 31, 2009
|Long-Term Investments below Investment Grade         |  |                         |           |    |   |         |  | BB                   |        | B                    |   | CCC     |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|Private-label residential mortgage-backed securities |  |                         |           |    |   |         |  |                      |        |                      | $ | 357,943 |  | $     | 305,947   |  | $ | 369,688 |  | $ | 1,033,578
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total securities below investment grade              |  |                         |           |    |   |         |  |                      |        |                      | $ | 357,943 |  | $     | 305,947   |  | $ | 369,688 |  | $ | 1,033,578
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|                                                     | 
|                                                     |  | As of December 31, 2008
|Long-Term Investments by Credit Rating               |  | AAA orGovernmentAgency  |           | AA |   | A       |  | BBB                  |        | CCC                  |   | Unrated |  | Total
|(in thousands)                                       |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |      
|U.S. agency obligations                              |  | $                       | 925,771   |    | $ |         |  | $                    |        |                      | $ |         |  | $     |           |  | $ | 13,997  |  | $ | 939,768  
|State or local housing investments                   |  |                         | 380       |    |   | 5,320   |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 5,700    
|Residential mortgage-backed securities               |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Government-sponsored enterprise                      |  |                         | 2,002,701 |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   | 2,002,701
|Private-label                                        |  |                         | 5,470,426 |    |   | 56,779  |  |                      | 38,905 |                      |   | 17,694  |  |       | 2,918     |  |   |         |  |   | 5,586,722
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          
|Total long-term investment securities                |  | $                       | 8,399,278 |    | $ | 62,099  |  | $                    | 38,905 |                      | $ | 17,694  |  | $     | 2,918     |  | $ | 13,997  |  | $ | 8,534,891
|                                                     |  |                         |           |    |   |         |  |                      |        |                      |   |         |  |       |           |  |   |         |  |   |          

Between March 31, 2009 and May 8, 2009, three of our AAA-rated private-label
mortgage-backed securities were downgraded by one or more NRSROs, including one investment with a par value of $15.6 million to A and two securities with a total par value of $268.2 million to BBB. Each of these securities
were evaluated for other-than-temporary impairment using cash flow analysis as discussed in Other-Than-Temporary Impairment Assessment below. In addition, four AAA-rated private-label mortgage-backed securities with a
total par value of $191.3 million were placed on watch for possible downgrade.

In evaluating our private-label mortgage-related securities
for other-than-temporary impairment (as discussed in more detail below), we consider credit-rating downgrades occurring after the end of the reporting period. Although ratings declined on certain of our securities during and after March 31,
2009, the ratings themselves are not determinative of an expected credit loss. While we consider credit ratings in our OTTI screens, we believe that our detailed security-by-security analyses provide a more thorough determination of the ultimate
collectibility of contractual amounts due to us. As such, we have impaired securities with current ratings ranging from CCC to AAA and have determined that other securities within the same ratings were not
other-than-temporarily impaired.

The following table summarizes the unpaid principal balance, carrying value, gross unrealized losses, and
fair value of our private-label mortgage-backed securities, as well as their credit ratings as of March 31, 2009.



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|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|------------------------------------------------ |  | ----------------------- | --------- | ------------- | - | -------------- |  | -------------------- | --------- |  | ----------------------------------------- | ---------- | - |  | ------
|                                                 |  | As of March 31, 2009   
|Private-Label Mortgage-Backed Securities Ratings |  | UnpaidPrincipal Balance |           | AmortizedCost |   | Carrying Value |  | GrossUnrealized Loss |           |  | CurrentWeighted-AverageCredit Enhancement
|(in thousands except percentages)                |  |                         |           |               |   |                |  |                      |           |  |                                          
|Prime                                            |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|AAA                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  | $                       | 1,180,085 |               | $ | 1,176,681      |  | $                    | 1,176,681 |  | $                                         | (79,810    | ) |  | 6.58  
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total prime                                      |  | $                       | 1,180,085 |               | $ | 1,176,681      |  | $                    | 1,176,681 |  | $                                         | (79,810    | ) |  | 6.58  
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Alt-A                                            |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|AAA                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  | $                       | 615,249   |               | $ | 613,804        |  | $                    | 613,804   |  | $                                         | (110,704   | ) |  | 6.25  
|2005                                             |  |                         | 46,700    |               |   | 46,726         |  |                      | 46,726    |  |                                           | (19,656    | ) |  | 22.21 
|2007                                             |  |                         | 471,046   |               |   | 468,255        |  |                      | 313,750   |  |                                           | (302,324   | ) |  | 45.86 
|2008                                             |  |                         | 753,392   |               |   | 753,041        |  |                      | 753,041   |  |                                           | (349,821   | ) |  | 34.93 
|AA                                               |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 8,031     |               |   | 8,031          |  |                      | 8,031     |  |                                           | (3,871     | ) |  | 28.94 
|2005                                             |  |                         | 48,101    |               |   | 48,097         |  |                      | 48,097    |  |                                           | (32,221    | ) |  | 46.74 
|2007                                             |  |                         | 40,493    |               |   | 40,493         |  |                      | 40,493    |  |                                           | (24,090    | ) |  | 39.94 
|A                                                |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 2,558     |               |   | 2,553          |  |                      | 2,553     |  |                                           | (1,646     | ) |  | 100.00
|2005                                             |  |                         | 7,948     |               |   | 7,948          |  |                      | 7,948     |  |                                           | (4,457     | ) |  | 32.35 
|2007                                             |  |                         | 82,982    |               |   | 82,982         |  |                      | 82,982    |  |                                           | (50,960    | ) |  | 43.82 
|BBB                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 70,516    |               |   | 70,552         |  |                      | 70,552    |  |                                           | (43,551    | ) |  | 46.50 
|2006                                             |  |                         | 85,123    |               |   | 85,123         |  |                      | 85,123    |  |                                           | (47,205    | ) |  | 51.09 
|2007                                             |  |                         | 183,193   |               |   | 183,124        |  |                      | 183,124   |  |                                           | (115,941   | ) |  | 40.66 
|BB                                               |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 16,895    |               |   | 16,895         |  |                      | 16,895    |  |                                           | (9,719     | ) |  | 27.31 
|2006                                             |  |                         | 248,632   |               |   | 239,748        |  |                      | 110,774   |  |                                           | (152,052   | ) |  | 45.44 
|2007                                             |  |                         | 444,743   |               |   | 441,615        |  |                      | 230,274   |  |                                           | (299,874   | ) |  | 41.97 
|B                                                |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2004 and earlier                                 |  |                         | 1,070     |               |   | 1,071          |  |                      | 1,071     |  |                                           | (720       | ) |  | 100.00
|2005                                             |  |                         | 49,447    |               |   | 49,436         |  |                      | 18,932    |  |                                           | (30,503    | ) |  | 42.68 
|2006                                             |  |                         | 322,613   |               |   | 306,571        |  |                      | 179,905   |  |                                           | (189,329   | ) |  | 46.24 
|2007                                             |  |                         | 263,285   |               |   | 254,820        |  |                      | 106,039   |  |                                           | (169,600   | ) |  | 40.98 
|CCC                                              |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|2005                                             |  |                         | 49,244    |               |   | 45,916         |  |                      | 32,223    |  |                                           | (25,335    | ) |  | 29.99 
|2006                                             |  |                         | 351,183   |               |   | 346,173        |  |                      | 247,402   |  |                                           | (223,785   | ) |  | 46.14 
|2007                                             |  |                         | 308,935   |               |   | 279,124        |  |                      | 90,063    |  |                                           | (189,062   | ) |  | 17.09 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total Alt-A                                      |  | $                       | 4,471,379 |               | $ | 4,392,098      |  | $                    | 3,289,802 |  | $                                         | (2,396,426 | ) |  | 35.21 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       
|Total                                            |  | $                       | 5,651,464 |               | $ | 5,568,779      |  | $                    | 4,466,483 |  | $                                         | (2,476,236 | ) |  | 29.23 
|                                                 |  |                         |           |               |   |                |  |                      |           |  |                                           |            |   |  |       



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|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|--------------------------------------- |  | --------------------------------------------------- | --------- | -------------------- | -------------------------------- | ---------- | ---------- |  | -------------------------- | --------- |  | ------------------------------ | ------- | - | ------------------ | - | -------- | - |  | - | -------- | - |  | -----
|                                        |  | As of and For the Three Months Ended March 31, 2009 |           |                      | CollateralDelinquency(60+Days) %
|Private-Label Mortgage-BackedSecurities |  | AmortizedCost                                       |           | Gross UnrealizedLoss |                                  |            | Fair Value |  | OTTI Related toCredit Loss |           |  | OTTI Related toNon-Credit Loss |         |   | YTD OTTIImpairment |   |         
|(in thousands, except percentages)      |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |  
|Prime - Year of Issuance:               |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|2004 and earlier                        |  | $                                                   | 1,176,681 |                      | $                                | (79,810    | )          |  | $                          | 1,096,871 |  | $                              |         |   |                    | $ |          |   |  | $ |          |   |  | 0.97 
|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|Total prime                             |  | $                                                   | 1,176,681 |                      | $                                | (79,810    | )          |  | $                          | 1,096,871 |  | $                              |         |   |                    | $ |          |   |  | $ |          |   |  | 0.97 
|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|Alt-A - Year of Issuance:               |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|2004 and earlier                        |  |                                                     | 625,459   |                      |                                  | (116,941   | )          |  |                            | 508,518   |  |                                |         |   |                    |   |          |   |  |   |          |   |  | 1.85 
|2005                                    |  |                                                     | 285,570   |                      |                                  | (165,442   | )          |  |                            | 120,128   |  |                                | (3,484  | ) |                    |   | (32,409  | ) |  |   | (35,893  | ) |  | 28.56
|2006                                    |  |                                                     | 977,615   |                      |                                  | (612,371   | )          |  |                            | 365,244   |  |                                | (24,219 | ) |                    |   | (272,801 | ) |  |   | (297,020 | ) |  | 41.78
|2007                                    |  |                                                     | 1,750,413 |                      |                                  | (1,151,851 | )          |  |                            | 598,562   |  |                                | (43,965 | ) |                    |   | (518,317 | ) |  |   | (562,282 | ) |  | 27.10
|2008                                    |  |                                                     | 753,041   |                      |                                  | (349,821   | )          |  |                            | 403,220   |  |                                |         |   |                    |   |          |   |  |   |          |   |  | 14.94
|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|Total Alt-A                             |  | $                                                   | 4,392,098 |                      | $                                | (2,396,426 | )          |  | $                          | 1,995,672 |  | $                              | (71,668 | ) |                    | $ | (823,527 | ) |  | $ | (895,195 | ) |  | 24.91
|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      
|Total                                   |  | $                                                   | 5,568,779 |                      | $                                | (2,476,236 | )          |  | $                          | 3,092,543 |  | $                              | (71,668 | ) |                    | $ | (823,527 | ) |  | $ | (895,195 | ) |  | 19.91
|                                        |  |                                                     |           |                      |                                  |            |            |  |                            |           |  |                                |         |   |                    |   |          |   |  |   |          |   |  |      

The following table summarizes the weighted average fair value of our private-label
mortgage-backed securities as a percentage of unpaid balance by year of issuance and type of underlying collateral as of March 31, 2009 and at each quarter-end in 2008.



|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|-------------------------------------------------------------------------------------------- |  | -------------- | - |  | ----------------- | - |  | ------------------ | - |  | ------------- | - |  | -------------- | -
|                                                                                             |  | As of          |  
|Private-Label Mortgage-Backed Securities                                                     |  | March 31, 2009 |   |  | December 31, 2008 |   |  | September 30, 2008 |   |  | June 30, 2008 |   |  | March 31, 2008 |  
|Prime - Year of Issuance                                                                     |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|2003 and earlier                                                                             |  | 93             | % |  | 91                | % |  | 92                 | % |  | 93            | % |  | 96             | %
|2004                                                                                         |  | 92             | % |  | 92                | % |  | 96                 | % |  | 96            | % |  | 98             | %
|2005                                                                                         |  |                |   |  |                   |   |  |                    |   |  |               |   |  | 98             | %
|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|Total prime weighted-average percentage of unpaid balance                                    |  | 93             | % |  | 91                | % |  | 93                 | % |  | 94            | % |  | 96             | %
|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|Alt-A - Year of Issuance                                                                     |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|2003 and earlier                                                                             |  | 81             | % |  | 84                | % |  | 93                 | % |  | 94            | % |  | 97             | %
|2004                                                                                         |  | 81             | % |  | 85                | % |  | 92                 | % |  | 94            | % |  | 96             | %
|2005                                                                                         |  | 42             | % |  | 47                | % |  | 67                 | % |  | 82            | % |  | 84             | %
|2006                                                                                         |  | 36             | % |  | 40                | % |  | 60                 | % |  | 75            | % |  | 79             | %
|2007                                                                                         |  | 33             | % |  | 37                | % |  | 61                 | % |  | 76            | % |  | 80             | %
|2008                                                                                         |  | 54             | % |  | 81                | % |  | 89                 | % |  | 95            | % |  | 96             | %
|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|Total Alt-A weighted-average percentage of unpaid balance                                    |  | 45             | % |  | 53                | % |  | 70                 | % |  | 82            | % |  | 84             | %
|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  
|Total private-label mortgage-backed securities weighted-average percentage of unpaid balance |  | 55             | % |  | 61                | % |  | 75                 | % |  | 85            | % |  | 87             | %
|                                                                                             |  |                |   |  |                   |   |  |                    |   |  |               |   |  |                |  

Other-Than-Temporary Impairment Assessment

Finance Agency Guidance on Other-than-Temporary Impairments

On April 28, 2009 and May 7, 2009, the Finance Agency provided us and the other 11 FHLBanks with guidance on the process for determining OTTI and our adoption of FSP FAS 115-2 with respect to our investments
in private-label mortgage-backed securities and our adoption of FSP FAS 115-2. The goal of the Finance Agency guidance is to promote consistency in the determination of OTTI for private-label mortgage-backed securities among all FHLBanks based on
the understanding that investors in the consolidated debt of the FHLBanks can better understand and utilize the information in the combined financial reports if it is prepared on a consistent basis. Recognizing that many of the FHLBanks desired to
early adopt FSP FAS 115-2, the Finance Agency guidance also requires that all FHLBanks early adopt FSP FAS 115-2 in order to achieve consistency among the 12 FHLBanks and to follow certain guidelines for determining OTTI.

Under the Finance Agency guidance, each FHLBank continues to identify the private-label mortgage-backed securities it holds that should be subject to a
cash flow analysis consistent with GAAP and other regulatory guidance. To effect consistency in the cash flow analysis by ensuring the use of consistent key modeling assumptions, the Finance Agency guidance requires that for the first quarter of
2009 the Federal Home Loan Bank of San Francisco (FHLBank of San Francisco) provide the other FHLBanks with assumptions to be used by all FHLBanks for purposes of producing cash flow analysis used in analyzing credit losses and determining OTTI for
residential private-label mortgage-backed securities other than subprime and home equity securities (the



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Seattle Bank does not own any subprime or home equity securities). The Finance Agency guidance requires the FHLBank of San Francisco to determine the FHLBank
System-wide modeling assumptions based upon the guidance in FSP FAS 115-2 and after consulting with the other FHLBanks and the Finance Agency. Each FHLBank will review the modeling assumptions developed by the FHLBank San Francisco for
reasonableness of the assumptions used in the cash flow analysis.

In addition to using the modeling assumptions provided by the FHLBank of
San Francisco, the Finance Agency guidance requires for the first quarter of 2009 that each FHLBank conduct its own OTTI analysis utilizing a specified third-party risk model and a specified third-party loan performance data source. Each FHLBank is
responsible for making its own determination of impairments, the reasonableness of assumptions, and performing the required present value calculations using appropriate historical cost bases and yields. FHLBanks that hold common private-label
mortgage-backed securities are required to consult with one another to ensure that any decision that a commonly held private-label mortgage-backed security is other-than-temporarily impaired, including the determination of fair value and the credit
loss component of the unrealized loss, are consistent among those FHLBanks.

As discussed below, for the three months ended March 31,
2009, we completed our OTTI analysis in accordance with the Finance Agency guidance and made our impairment determination utilizing the risk model and loan performance data source specified in the Finance Agency guidance, as well as assumptions
provided by the FHLBank of San Francisco.

OTTI Evaluation

We evaluate our individual held-to-maturity investments for OTTI on at least a quarterly basis. We
use indicators, or screens, to determine which impaired securities require additional quantitative evaluation using detailed cash flow analysis. These screens consider numerous factors, which include, but are not limited to, the credit rating; the
creditworthiness of the issuers of agency debt securities; the strength of the government-sponsored enterprises guarantees; the type of underlying collateral; the duration and severity of the unrealized loss; any credit enhancements or
insurance; and certain other collateral-related characteristics such as FICO® credit scores, delinquency rates, and the securitys performance. The relative importance of this
qualitative and quantitative information may vary based on the facts and circumstances surrounding each security, as well as the market and economic environment at the time of our assessment. As part of this process, we consider our intent to sell
each debt security and whether it is more likely than not that we would be required to sell such security before its anticipated recovery. If either of these conditions is met, we recognize an OTTI in earnings equal to the entire difference between
the securitys amortized cost and its fair value as of the statement of condition date. If neither condition is met, we consider whether or not we will recover the entire amortized cost of the security by comparing our best estimate of the
present value of the cash flows expected to be collected from the security with the amortized cost basis of the security. The difference between our best estimate of the present value of the cash flows expected to be collected and the amortized cost
basis is considered to be a credit loss, which is recorded in current earnings. The portion of an other-than-temporary impairment loss that is not attributable to the credit loss is recognized through other comprehensive loss.

We determined that for GSE residential mortgage-backed securities, the strength of the issuers guarantees through direct obligations or U.S.
government support is sufficient to protect us from losses based on current information. Further it is not more likely than not that the Seattle Bank will be required to sell impaired securities prior to their anticipated recovery. We expect to
recover the entire cost basis of these securities and have thus concluded that our gross unrealized losses on GSE residential mortgage-backed securities are temporary as of March 31, 2009.

Private-label securities identified as at risk of OTTI are subjected to a detailed cash flow analysis to determine the projected future cash flows that
more likely than not will be collected. Beginning in the first quarter of 2009, to ensure consistency in the determination of the OTTI for private-label mortgage-backed securities among all FHLBanks, the FHLBanks used the same key modeling
assumptions for purposes of their cash flow analyses. At-risk securities (including securities downgraded subsequent to period end) are evaluated by estimating projected cash that an FHLBank is likely to collect based on an assessment of all
available information about each individual security, the structure of the security and certain assumptions, such as the remaining payment terms of the security, prepayment speeds, default rates, loss severity on the collateral supporting the
FHLBanks security, based on underlying loan level borrower and loan characteristics, expected housing price changes, and future interest rates, to determine whether we will recover the entire amortized cost basis of the security. A significant
input to such analysis is the forecast of housing price changes, which are based on an assessment of the housing market. In response to the ongoing deterioration in housing prices, credit market stress, and weakness in the U.S. economy in the first
quarter of 2009, which continued to affect the credit quality of the collateral, the FHLBanks, including the Seattle Bank, modified certain assumptions in their cash flow analyses to reflect more adverse loss severities and more moderate rates of
housing price recovery than the FHLBanks used in their analyses as of December 31, 2008. The loan level cash flows and losses are allocated to various security classes, including the security classes owned by each FHLBank, based on the cash
flow and loss allocation rules of the individual security. In performing a cash flow analysis, an FHLBank identifies its best estimate of the cash flows expected to be collected. If this estimate results in a present value of expected cash flows
that is less than the amortized cost



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basis of a security (that is, a credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, any impairment is considered
temporary.

In accordance with the Finance Agency guidance, we contracted with the FHLBank of San Francisco to provide the key modeling
assumptions and certain cash flow analyses for certain of our private-label mortgage-backed securities. Because such assumptions are material to the determination of OTTI, we also established and performed procedures to review the documentation,
assumptions, and cash flow analyses provided by the FHLBank of San Francisco in order to ensure such assumptions are reasonable. We employ the third-party risk model and a third-party loan data source specified by the Finance Agency guidance to
project the lifetime cash flows that would be passed through to us from the at-risk securities.

As a result of our OTTI evaluation as of
March 31, 2009, we determined that the present value of the cash flows expected to be collected was less than the amortized cost basis of certain private-label mortgage-backed securities. These securities included nine securities that had
previously been identified as other-than-temporarily impaired in 2008 and 15 securities that were identified as other-than-temporarily impaired in the first quarter of 2009. Because of continued credit deterioration, we recorded additional
impairment charges of $42.4 million related to credit loss and an additional impairment of $30.5 million related to all other factors for the three months ended March 31, 2009 on the nine previously impaired private-label mortgage-backed
securities. For the newly identified private-label mortgage-backed securities with OTTI, we recorded OTTI charges of $29.3 million related to credit losses and $793.0 million related to all other factors. We do not intend to sell these securities
and it is not more likely than not that we will be required to sell these securities prior to recovery.

In accordance with FSP FAS 115-2,
for the three months ended March 31, 2009, we recognized OTTI charges of $71.7 million related to credit losses on our private-label mortgage-backed securities, which are reported in our Statement of Operations as net other-than-temporary
impairment loss on held-to-maturity securities and $823.5 million related to non-credit losses, which are reported in our Statement of Condition in other comprehensive loss as non-credit portion of OTTI loss on held-to-maturity
securities. The OTTI recognized in accumulated other comprehensive loss is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future cash flows, over the remaining life of each security.
The accretion increases the carrying value of each security and does not affect earnings unless the security is subsequently sold or has an additional OTTI charge that is recognized in earnings.

The following table summarizes key information as of March 31, 2009 on the private-label securities on which we recorded OTTI during the first
quarter of 2009.



|                                                |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               |  |   |          |   |  |   |          |  
|----------------------------------------------- |  | ---------------------- | --------- | ----------------------------------------- | - | --------------------- |  | - | ---------- | - | ------------------------- | - | ------- | ----------------------------- | - | ------- | ------------- |  | - | -------- | - |  | - | -------- | -
|                                                |  | As of March 31, 2009   |           | For the Three Months Ended March 31, 2009 |  
|Other-than-Temporarily Impaired Securities      |  | UnpaidPrincipalBalance |           | AmortizedCost                             |   | GrossUnrealizedLosses |  |   | FairValue  |   | OTTIRelated toCredit Loss |   |         | OTTIRelated toNon-Credit Loss |   |         | TotalOTTILoss | 
|(in thousands)                                  |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               | 
|Alt -A private-label mortgage-backed securities |  | $                      | 1,758,993 |                                           | $ | 1,681,522             |  | $ | (1,102,296 | ) |                           | $ | 579,226 |                               | $ | (71,668 | )             |  | $ | (823,527 | ) |  | $ | (895,195 | )

Key inputs and assumptions used to measure the amount of credit loss related to private-label
mortgage-backed securities include, among other things, prepayments, default rates, and loss severity. To discount expected cash flows, we use the interest rate in effect prior to other-than-temporary impairment.

Mortgage Loans Held for Portfolio

The par value of our mortgage loans held for portfolio consisted of $4.7 billion and $4.9 billion in conventional mortgage loans and $197.1 million and $205.4 million in government-insured mortgage loans as of March 31, 2009 and
December 31, 2008. The decrease for the three months ended March 31, 2009 was due to our receipt of $186.8 million in principal payments. As a result of our decision to exit the Mortgage Purchase Program (MPP) in 2005, we ceased entering
into new master commitment contracts and terminated all open contracts.

As of March 31, 2009 and December 31, 2008, 87.1% and
87.0% of our outstanding mortgage loan portfolio consisted of mortgage loans originally purchased from our then largest participating member, Washington Mutual Bank, F.S.B. We do not expect the acquisition of Washington Mutual Bank, F.S.B. by
JPMorgan Chase to impact the credit quality or otherwise impact our outstanding mortgage loans.

The following table summarizes the
activity and other information related to our mortgage loan portfolio as of March 31, 2009 and December 31, 2008.



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|                                                           |  |                     |           |   |                        |   |           |  
|---------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loan Portfolio Activity                           |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands, except percentages and FICO® scores)        |  |                     |           |   |                        |  
|Mortgage loan par balance at beginning of the year         |  | $                   | 5,077,841 |   |                        | $ | 5,642,177 |  
|Mortgage loans transferred to real-estate owned            |  |                     | (266      | ) |                        |   | (365      | )
|Maturities and principal amount sold                       |  |                     | (186,740  | ) |                        |   | (563,971  | )
|                                                           |  |                     |           |   |                        |   |           |  
|Mortgage loan par balance at period end                    |  |                     | 4,890,835 |   |                        |   | 5,077,841 |  
|                                                           |  |                     |           |   |                        |   |           |  
|Mortgage loan net premium balance at beginning of the year |  |                     | 9,481     |   |                        |   | 23,393    |  
|Net premium on loans transferred to real estate owned      |  |                     | (4        | ) |                        |   | (2        | )
|Net premium recovery from repurchases                      |  |                     |           |   |                        |   | (21       | )
|Net premium amortization                                   |  |                     | (1,426    | ) |                        |   | (13,888   | )
|                                                           |  |                     |           |   |                        |   |           |  
|Mortgage loan net premium balance at period end            |  |                     | 8,051     |   |                        |   | 9,482     |  
|                                                           |  |                     |           |   |                        |   |           |  
|Total mortgage loans held for portfolio                    |  | $                   | 4,898,886 |   |                        | $ | 5,087,323 |  
|                                                           |  |                     |           |   |                        |   |           |  
|Premium balance as a percent of mortgage loan par amounts  |  |                     | 0.16      | % |                        |   | 0.19      | %
|Average FICO score*at
origination                          |  |                     | 746       |   |                        |   | 746       |  
|Average loan-to-value ratio at origination                 |  |                     | 64.24     | % |                        |   | 64.26     | %



|* | FICO® score is a standardized, statistical credit score used as an indicator of borrower credit risk.
|- | -----------------------------------------------------------------------------------------------------

Credit Risk

We have never experienced a credit loss on our mortgage loans held for portfolio, and our former supplemental mortgage insurance provider experienced only two loss claims on our mortgage loans (for which it was reimbursed from the lender
risk accounts) prior to the cancellation of our supplemental mortgage insurance policies. Under the MPP, we previously purchased mortgage loans from members, and the participating members continue to bear a portion of the credit risk on the
outstanding 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, prior to April 25, 2008, supplemental mortgage
insurance. On April 8, 2008, S&P lowered its counterparty credit and financial strength ratings on Mortgage Guaranty Insurance Corporation (MGIC), our MPP supplemental mortgage insurance provider, from AA- to A with
a negative outlook. On April 25, 2008, we exercised our contractual right and notified MGIC of our intent to cancel our policies with MGIC. The policies were cancelled as of that date.

The following table presents our mortgage loans that are past due 90 days or more or in foreclosure and still accruing interest as a percentage of par as
of March 31, 2009 and December 31, 2008.



|                                                        |  |                     |           |   |                        |   |           |  
|------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loans 90-Days Delinquent or in Foreclosure     |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands, except percentages)                      |  |                     |           |   |                        |  
|Conventional mortgage loan delinquencies (at par)       |  | $                   | 12,620    |   |                        | $ | 8,898     |  
|Conventional mortgage loans outstanding (at par)        |  |                     | 4,693,705 |   |                        |   | 4,872,474 |  
|Conventional mortgage loan delinquencies                |  |                     | 0.27      | % |                        |   | 0.18      | %
|Conventional mortgage loan foreclosures                 |  |                     | 0.11      | % |                        |   | 0.08      | %
|Government-insured mortgage loan delinquencies (at par) |  | $                   | 30,067    |   |                        | $ | 27,540    |  
|Government-insured mortgage loans outstanding (at par)  |  |                     | 197,130   |   |                        |   | 205,367   |  
|Government-insured mortgage loan delinquencies          |  |                     | 15.3      | % |                        |   | 13.4      | %

As of March 31, 2009, we had no real-estate owned. As of December 31, 2008, we had one
mortgage loan totaling $126,000 classified as real-estate owned.

As part of our business plan, we have been exiting the MPP since early
2005. However, this decision has not impacted and we do not expect that this decision will impact the credit risk of our mortgage loans held for portfolio. We conduct a loss reserve analysis on a quarterly basis, and we believe that the credit
enhancement provided by our members in the form of the lender risk



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account is sufficient to absorb inherent credit losses, that an allowance for credit loss is unnecessary, and that we
have the policies and procedures in place to appropriately manage this credit risk. Based on our analysis of our mortgage loan portfolio as of March 31, 2009, we have determined that the credit enhancement provided by our members in the form of
the lender risk account is sufficient to absorb inherent credit losses and that an allowance for credit loss is unnecessary.

Derivative Assets and
Liabilities

We have traditionally used derivatives to hedge advances and consolidated obligations, as well as mortgage loans under
our MPP and intermediary swaps for members. The principal derivative instruments we use are interest-rate exchange agreements, such as interest-rate swaps, caps, floors, and swaptions. We classify these types of interest-rate exchange agreements as
derivative assets or liabilities according to the net fair value of the derivatives and associated accrued interest receivable, interest payable, and collateral by counterparty, under individual master netting agreements. Subject to a master netting
agreement, if the net fair value of our interest-rate exchange agreements by counterparty is positive, the net fair value is reported as an asset, and if negative, the net fair value is reported as a liability. Changes in the fair value of
interest-rate exchange agreements are recorded directly through earnings.

We transact our interest-rate exchange agreements with large
banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. We are not a derivatives dealer and do not trade derivatives for short-term profit.

As of March 31, 2009 and December 31, 2008, we held derivative assets, including associated accrued interest receivable and payable and cash
collateral from counterparties, of $37.8 million and $32.0 million and derivative liabilities of $263.6 million and $235.4 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 occurring during the first quarter of 2009. The differentials between interest receivable and interest payable
on some derivatives are recognized as adjustments to the income or expense of the designated underlying advances, consolidated obligations, or other financial instruments. We record all derivative financial instruments in the Statements of Condition
at fair value, with changes in the fair value reported in earnings. See Notes 7 and 9 in Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements and Results of OperationsOther Loss,
for additional information.

The following table summarizes the notional amounts and the fair values of our derivative instruments,
including the effect of netting arrangements and collateral as of March 31, 2009 and December 31, 2008. For purposes of this disclosure, the derivative values include both the fair value of derivatives and related accrued interest. Changes
in the notional amount of interest-rate exchange agreements generally reflect changes in our use of such agreements to reduce our interest-rate risk and lower our cost of funds.



|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ---------------- | - | -------- | --------------------- |  | - | -------- | -
|                                                                                       |  | As of March 31, 2009 |           
|Fair Value of Derivative Instruments                                                   |  | NotionalAmount       |            | DerivativeAssets |   |          | DerivativeLiabilities | 
|(in thousands)                                                                         |  |                      |            |                  |   |          |                       | 
|Derivatives designated as hedging instruments under SFAS 133                           |  |                      |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  | $                    | 39,939,698 |                  | $ | 353,071  |                       |  | $ | (616,724 | )
|Interest-rate caps or floors                                                           |  |                      | 45,000     |                  |   | 3        |                       |  |   |          |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives designated as hedging instruments under SFAS 133                     |  |                      | 39,984,698 |                  |   | 353,074  |                       |  |   | (616,724 | )
|Derivatives not designated as hedging instruments under SFAS 133                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                    |  |                      | 718,700    |                  |   | 17,792   |                       |  |   | (17,498  | )
|Interest-rate caps or floors                                                           |  |                      | 240,000    |                  |   | 22       |                       |  |   |          |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives not designated as hedging instruments under SFAS 133                 |  |                      | 958,700    |                  |   | 17,814   |                       |  |   | (17,498  | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  | $                    | 40,943,398 |                  | $ | 370,888  |                       |  | $ | (634,222 | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Netting adjustments(1)                                                                 |  |                      |            |                  |   | (333,057 | )                     |  |   | 333,057  |  
|Cash collateral and related accrued interest                                           |  |                      |            |                  |   |          |                       |  |   | 37,582   |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                            |  |                      |            |                  |   | (333,057 | )                     |  |   | 370,639  |  
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  
|Derivative assets and derivative liabilities as reported on the Statement of Condition |  |                      |            |                  | $ | 37,831   |                       |  | $ | (263,583 | )
|                                                                                       |  |                      |            |                  |   |          |                       |  |   |          |  



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|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ---------------- | - | -------- | --------------------- |  | - | -------- | -
|                                                                                      |  | As of December 31, 2008 |           
|Fair Value of Derivative Instruments                                                  |  | NotionalAmount          |            | DerivativeAssets |   |          | DerivativeLiabilities | 
|(in thousands)                                                                        |  |                         |            |                  |   |          |                       | 
|Derivatives designated as hedging instruments under SFAS 133                          |  |                         |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                   |  | $                       | 29,604,444 |                  | $ | 390,117  |                       |  | $ | (675,723 | )
|Interest-rate caps or floors                                                          |  |                         | 65,000     |                  |   | 19       |                       |  |   |          |  
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives designated as hedging instruments under SFAS 133                    |  |                         | 29,669,444 |                  |   | 390,136  |                       |  |   | (675,723 | )
|Derivatives not designated as hedging instruments under SFAS 133                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Interest-rate swaps                                                                   |  |                         | 716,000    |                  |   | 18,992   |                       |  |   | (18,469  | )
|Interest-rate caps or floors                                                          |  |                         | 260,000    |                  |   | 206      |                       |  |   |          |  
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives not designated as hedging instruments under SFAS 133                |  |                         | 976,000    |                  |   | 19,198   |                       |  |   | (18,469  | )
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                           |  | $                       | 30,645,444 |                  | $ | 409,334  |                       |  | $ | (694,192 | )
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Netting adjustments(1)                                                                |  |                         |            |                  |   | (377,350 | )                     |  |   | 377,350  |  
|Cash collateral and related accrued interest                                          |  |                         |            |                  |   |          |                       |  |   | 81,425   |  
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Total derivatives before netting and collateral adjustments                           |  |                         |            |                  |   | (377,350 | )                     |  |   | 458,775  |  
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  
|Derivative assets and derivative liabilities as reported on theStatement of Condition |  |                         |            |                  | $ | 31,984   |                       |  | $ | (235,417 | )
|                                                                                      |  |                         |            |                  |   |          |                       |  |   |          |  



|(1) | Amounts represent the effect of legally enforceable master netting agreements that allow the Seattle Bank to settle
positive and negative positions.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

For additional information, see Note 7 in Part I. Item 1. Financial
StatementsCondensed Notes to Financial Statements and Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk in this report.

Credit Risk

We are subject to credit
risk on our interest-rate exchange agreements, primarily 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
netting agreements to be in place for all counterparties. These agreements must include provisions for netting exposures across all transactions with that counterparty. These agreements also require a counterparty to deliver collateral to the
Seattle Bank if the total exposure to that counterparty exceeds a specific threshold limit as denoted in the agreement. Except for LBSF as discussed below, as a result of our risk mitigation initiatives, we do not currently anticipate any additional
credit losses on our interest-rate exchange agreements.

Our credit risk on our derivatives 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 counterparty credit risk on our derivatives equals the estimated cost of replacing
favorable interest-rate swaps, forward agreements, and purchased caps and floors, if the counterparty defaults and the related collateral, if any, is of no value to us. In determining the maximum credit risk on our derivatives, we consider accrued
interest receivables and payables and the legal right to offset derivative assets and liabilities by counterparty. As of March 31, 2009 and December 31, 2008, our maximum credit risk, taking into consideration master netting arrangements,
was approximately $37.8 million and $32.0 million and included $20.4 million and $11.0 million of net accrued interest receivable. We held no cash collateral from any of our counterparties as of March 31, 2009 or December 31, 2008.
However, we held securities from our counterparties with a fair value of $20.8 million and $9.0 million, which is not included in our derivative asset or liability balance as of March 31, 2009 and December 31, 2008. Additionally,
collateral with respect to derivatives with member institutions includes collateral assigned to us as evidenced by a written security agreement and held by the member institution for our benefit. Changes in credit risk and net exposure after
considering collateral on our derivatives are primarily due to changes in market conditions, including the level and slope of the yield curve.

Certain of our interest-rate exchange agreements include provisions that require FHLBank System debt to maintain an investment-grade rating from each of the major credit rating agencies. If the FHLBank System debt were to fall below
investment grade, it would be in violation of these provisions, and the counterparties to the interest-rate exchange agreements could request immediate and ongoing full overnight collateralization on derivatives in net liability positions. The
aggregate fair value of all derivative instruments with credit-risk contingent features that were in a liability position as of March 31, 2009 was $301.1 million, for which we have posted collateral of $37.6 million in the normal course of
business. Had the Seattle Banks individual



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credit rating been lowered by one rating level, we would not have been required to deliver additional collateral to our
derivative counterparties as of March 31, 2009. Our credit rating has not changed since 2008.

Our counterparty credit exposure, by
credit rating, was as follows as of March 31, 2009 and December 31, 2008.



|                                              |  |                         |            |                                |   |                |  |                             |        |  |   |       
|--------------------------------------------- |  | ----------------------- | ---------- | ------------------------------ | - | -------------- |  | --------------------------- | ------ |  | - | ------
|                                              |  | As of March 31, 2009   
|Counterparty Credit Exposure by Credit Rating |  | NotionalAmount          |            | Total NetExposure atFair Value |   | CollateralHeld |  | Net ExposureAfterCollateral
|(in thousands)                                |  |                         |            |                                |   |                |  |                            
|AA                                            |  | $                       | 9,942,712  |                                | $ |                |  | $                           |        |  | $ |       
|AA                                           |  |                         | 8,810,350  |                                |   |                |  |                             |        |  |   |       
|A+                                            |  |                         | 14,849,338 |                                |   | 34,614         |  |                             | 20,846 |  |   | 13,768
|A                                             |  |                         | 7,340,998  |                                |   | 3,217          |  |                             |        |  |   | 3,217 
|                                              |  |                         |            |                                |   |                |  |                             |        |  |   |       
|Total                                         |  | $                       | 40,943,398 |                                | $ | 37,831         |  | $                           | 20,846 |  | $ | 16,985
|                                              |  |                         |            |                                |   |                |  |                             |        |  |   |       
|                                              | 
|                                              |  | As of December 31, 2008
|Counterparty Credit Exposure by Credit Rating |  | NotionalAmount          |            | Total NetExposure atFair Value |   | CollateralHeld |  | Net ExposureAfterCollateral
|(in thousands)                                |  |                         |            |                                |   |                |  |                            
|AA+                                           |  | $                       | 6,524,654  |                                | $ |                |  | $                           |        |  | $ |       
|AA                                            |  |                         | 1,307,816  |                                |   |                |  |                             |        |  |   |       
|AA                                           |  |                         | 10,853,390 |                                |   |                |  |                             |        |  |   |       
|A+                                            |  |                         | 7,424,101  |                                |   | 31,418         |  |                             | 8,961  |  |   | 22,457
|A                                             |  |                         | 4,535,483  |                                |   | 566            |  |                             |        |  |   | 566   
|                                              |  |                         |            |                                |   |                |  |                             |        |  |   |       
|Total                                         |  | $                       | 30,645,444 |                                | $ | 31,984         |  | $                           | 8,961  |  | $ | 23,023
|                                              |  |                         |            |                                |   |                |  |                             |        |  |   |       

In September 2008, Lehman Brothers Holdings, Inc. (LBHI), the parent company of LBSF and a
guarantor of LBSFs obligations, filed for bankruptcy protection. LBSF was our counterparty on multiple derivative transactions under International Swap Dealers Association, Inc. master agreements with a total notional amount of $3.5 billion at
the time of the LBHI bankruptcy filing. As a result, we notified LBSF of our intent to early terminate all outstanding derivative positions with LBSF, unwound such positions, and established a receivable position, netting the value of the collateral
due to be returned to us with all other amounts due, which resulted in the establishment of a $10.4 million net receivable from LBSF (before provision) included in other assets in the Statement of Condition. We also established an offsetting
provision for credit loss on receivable based on managements current estimate of the probable amount that will be realized in settling our derivative transactions with LBSF.

Other than LBSF, 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 and also have collateral agreements in place with each counterparty. As of March 31, 2009 and December 31, 2008, 14
counterparties represented the total notional amount of our outstanding interest-rate exchange agreements. As of March 31, 2009 and December 31, 2008, 45.8% and 61.0% of the total notional amount of our outstanding interest-rate exchange
agreements was with five and six counterparties rated AA or higher from an NRSRO, such as S&P or Moodys. As of March 31, 2009 and December 31, 2008, 100.0% of the notional amount of our outstanding interest-rate
exchange agreements were with counterparties with credit ratings of at least A or equivalent.

Consolidated Obligations and Other Funding
Sources

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 on which we are the primary obligor. As of March 31, 2009, our S&P long-term counterparty credit rating was AA+ with a ratings outlook of
stable and our Moodys rating was Aaa with a ratings outlook of stable. On May 7, 2009, Moodys reaffirmed our long-term rating and outlook. For additional information on consolidated obligations, see Part I. Item 1.
BusinessDebt FinancingConsolidated Obligations in our 2008 annual report on Form 10-K.



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Consolidated Obligation Discount Notes

Our allocated portion of the FHLBank Systems combined consolidated obligation discount notes outstanding increased by 38.8%, to a par amount of
$22.1 billion as of March 31, 2009, from $15.9 billion as of December 31, 2008. During the three months ended March 31, 2009, market demand was primarily for short-term, high-quality financial instruments due to the continued
volatility and uncertainty in the global capital markets. As a result, we significantly increased the balance of our consolidated obligation discount notes as a proportion of our total consolidated obligations to fund short-term advances and
investments.

Consolidated Obligation Bonds

Our allocated portion of the par amount of FHLBank System combined consolidated obligation bonds outstanding decreased 18.5% to a par amount of $31.1 billion as March 31, 2009, from $38.1 billion as of
December 31, 2008. Due to the demand for short-term, high-quality financial instruments in the three months ended March 31, 2009 and the relatively higher cost of and lack of demand for longer-term funding, we significantly decreased our
issuances of longer-term fixed interest-rate consolidated obligation bonds as a proportion of our total consolidated obligations where possible, instead using short-term consolidated obligation discount notes.

The par amount of variable interest-rate consolidated obligation bonds decreased by $7.3 billion, or 55.3%, to $5.9 billion as of March 31, 2009
from December 31, 2008. The decrease in variable interest-rate consolidated obligation bonds generally corresponded to the decrease in variable interest-rate investments and fixed interest-rate advances swapped to variable interest rates made
during the three months ended March 31, 2009. The interest rates on these consolidated obligation bonds and advances are generally based on the London Interbank Offered Rate (LIBOR).

We seek to match, to the extent possible, the anticipated cash flows of our debt to the anticipated cash flows of our assets. The cash flows of
mortgage-related assets are largely dependent on the prepayment behavior of borrowers. When interest rates rise and all other factors remain unchanged, borrowers (and issuers of callable investments) tend to refinance their debts more slowly than
originally anticipated; when interest rates fall, borrowers tend to refinance their debts more rapidly than originally anticipated. We use a combination of bullet and callable debt in seeking to match the anticipated cash flows of our fixed
interest-rate mortgage-related assets and callable investments, using a variety of prepayment scenarios.

With callable debt, we have the
option to repay the obligation, without penalty, prior to the contractual maturity date of the debt obligation, while with bullet debt, we generally repay the obligation at maturity. Our callable debt is predominantly fixed interest-rate debt that
may be used to fund our fixed interest-rate mortgage-related assets or that may be swapped to LIBOR and used to fund variable interest-rate advances and investments. The call feature embedded in our debt is often matched with a call feature in the
interest-rate swap, giving the swap counterparty the right to cancel the swap under certain circumstances. In a falling interest-rate environment, the swap counterparty typically exercises its call option on the swap and we, in turn, generally call
the debt. To the extent we continue to have variable interest-rate advances or investments, or other short-term-to-maturity assets, we attempt to replace the called debt with new callable debt that is generally swapped to LIBOR. This strategy is
often less expensive than borrowing through the issuance of discount notes; however, in the market conditions that occurred in the first three months of 2009 and in 2008, issuance costs for discount notes were less expensive than structured funding
(i.e., interest-rate swapped consolidated obligations with option features).

Our callable consolidated obligation bonds decreased by $1.8
billion, or 21.2%, to $6.7 billion, as of March 31, 2009, compared to December 31, 2008, primarily due to shifts in our structured funding portfolio. When appropriate, we use structured funding to reduce funding costs and manage liquidity
and interest-rate risk. The relative changes in our use of callable debt reflects changes in the pricing of callable consolidated obligation bonds with associated interest-rate exchange agreements relative to unswapped consolidated obligation
discount notes.

During the three months ended March 31, 2009 and 2008, we called and extinguished certain high-cost debt primarily to
economically lower the relative cost of funds in future years, as the future yield of the replacement debt is expected to be lower than the yield for the called and extinguished debt. We continue to review our consolidated obligation portfolio for
opportunities to call or extinguish debt, lower our interest expense, and better match the duration of our liabilities to that of our assets.

The following table summarizes the par value and weighted-average interest rate of the consolidated obligations called and extinguished for the three months ended March 31, 2009 and 2008.



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|                                                 |  |                                      |           |   |      |   |            |  
|------------------------------------------------ |  | ------------------------------------ | --------- | - | ---- | - | ---------- | -
|                                                 |  | For the Three Months Ended March 31, |          
|Consolidated Obligations Called and Extinguished |  | 2009                                 |           |   | 2008 |  
|(in thousands, except interest rates)            |  |                                      |           |   |      |  
|Consolidated Obligations Called                  |  |                                      |           |   |      |   |            |  
|Par value                                        |  | $                                    | 4,967,255 |   |      | $ | 9,856,350  |  
|Weighted-average interest rate                   |  |                                      | 4.59      | % |      |   | 4.84       | %
|                                                 |  |                                     
|Consolidated Obligations Extinguished            |  |                                      |           |   |      |   |            |  
|Par value                                        |  |                                      |           |   |      |   | 189,390    |  
|Weighted-average interest rate                   |  |                                      |           |   |      |   | 5.29       | %
|                                                 |  |                                      |           |   |      |   |            |  
|Total par value                                  |  | $                                    | 4,967,255 |   |      | $ | 10,045,740 |  
|                                                 |  |                                      |           |   |      |   |            |  

Other Funding Sources

Deposits are a source of funds that give members a liquid, low-risk investment. We offer demand and term deposit programs to our members and to other
eligible depositors. There is no requirement for members or other eligible depositors to maintain balances with us, and, as a result, these balances fluctuate. Deposits increased by $89.2 million, to $671.4 million, as of March 31, 2009,
compared to December 31, 2008, primarily due to an increase in demand, overnight, and term deposits. Demand deposits comprised the largest percentage of deposits, representing 72.5% and 66.9% of deposits as of March 31, 2009 and
December 31, 2008. Deposit levels generally vary based on the interest rates paid to our members, as well as our members liquidity levels and market conditions. In addition, to provide short-term, low-cost liquidity, we sell securities
under agreements to repurchase those securities. We had not transactions outstanding under such agreements as of March 31, 2009 or December 31, 2008.

Other Liabilities

Other liabilities, primarily consisting of accounts and miscellaneous
payable balances, increased by $378.8 million, to $416.5 million as of March 31, 2009 compared to December 31, 2008, primarily due to $382.0 million in traded not settled securities recorded on our Statement of Condition.

Capital Resources and Liquidity

Our capital
resources consist of capital stock held by our members and nonmember shareholders, retained earnings, and other comprehensive loss. 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 Part I. Item 1. Financial StatementsCondensed Notes to 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 decreased by $805.7 million, to $960.6 million as of March 31, 2009 from December 31, 2008. This decrease was primarily
driven by other-than-temporary impairment charges on our held-to-maturity securities, partially offset by increases in outstanding Class A capital stock.

Seattle Bank Stock

The Seattle Bank has two classes of capital stock, Class A stock and Class B
stock as further described below. In accordance with SFAS 150, we reclassify capital stock subject to redemption from equity to liability once a member gives notice of intent to withdraw from membership or attains non-member status by merger or
acquisition, charter termination, or involuntary termination from membership. Written redemption requests of excess stock generally remain classified as equity because the penalty of rescission is not substantive as it is based on the forfeiture of
future dividends. If circumstances change, such that the rescission of an excess stock redemption request is subject to a substantive penalty, we would reclassify such stock as mandatorily redeemable capital stock. See Notes 1 and 14 in Part
IIItem 8. Financial Statements and Supplementary DataAudited Financial StatementsNotes to Financial Statements of our 2008 annual report on Form 10-K for additional information.

Class A Stock

Class A stock may be issued, redeemed, repurchased, or transferred between members only at a par value of $100 per share. Class A stock may only be issued to satisfy a members advance stock purchase requirement for a new
advance. Class A stock is generally redeemable in cash on six months written notice to the Seattle Bank and can be repurchased by the Seattle Bank,



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pursuant to the terms of the Capital Plan. The Board adopted a resolution limiting dividends on Class A stock, if any, to cash payments, subject to any
applicable restrictions, and dividends on Class A stock will not necessarily be paid at the same rate as dividends, if any, on Class B stock. A member can only use Class A stock to meet its member advance stock purchase requirement
and cannot use it to meet its other requirements relating to shareholdings. As of March 31, 2009 and December 31, 2008, our outstanding Class A stock totaled $158.1 million (of which $23.7 million was classified as mandatorily
redeemable capital stock) and $139.3 million (of which $21.5 million was classified as mandatorily redeemable capital stock). As of March 31, 2009, there were $572,000 in excess Class A capital stock redemption requests outstanding that is
not classified to mandatorily redeemable Class A stock. There were no excess Class A capital stock redemption requests outstanding as of December 31, 2008.

On May 12, 2009, the Board of Directors (Board) of the Seattle Bank suspended the issuance of Class A capital stock to support new advances, effective June 1, 2009. New advances will have to be
supported by Class B capital stock, which can be used to reduce the Seattle Banks risk-based capital deficiency.

Class B Stock

Class B stock can be issued, redeemed, repurchased, or transferred between members only at a par value of $100 per share.
Class B stock is generally redeemable five years after: (i) written notice from the member; (ii) consolidation or merger of a member with a non-member; or (iii) withdrawal or termination of membership. 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 March 31, 2009 and December 31, 2008, our outstanding Class B capital
stock totaled $2.6 billion (with $897.2 million classified as mandatorily redeemable capital stock) and $2.6 billion (including $896.4 million classified as mandatorily redeemable capital stock). In addition, as of March 31, 2009 and
December 31, 2008, outstanding excess Class B stock redemption requests that is not classified as mandatorily redeemable stock totaled $198.5 million and $195.2 million. All of the Class B stock related to member withdrawals, arising
from the acquisition of sixteen members by out-of-district institutions and 13 voluntary withdrawal requests, and two redemption requests have been classified as mandatorily redeemable capital stock on our Statements of Condition.

Effective October 7, 2008, we reclassified Washington Mutual Bank, F.S.B.s membership to that of a non-Seattle Bank member shareholder that is
no longer able to enter into new borrowing arrangements with us and transferred its $163.9 million in Class A stock and $750.8 million in Class B stock to mandatorily redeemable capital stock on the Statement of Condition.

Capital Plan Amendments and Board Policies Regarding Seattle Bank Stock

The Board approved the December 2006 amendments to our Capital Plan with the expectation that they would encourage new borrowing by members of the Seattle
Bank and simplify the terms and provisions of the Capital Plan. Key amendments made to the Capital Plan included provisions for Class A stock and members access to an excess stock pool (which expired in October 2008), which could be used
to support certain additional advances without requiring a member to purchase additional stock.

In December 2007, we requested approval
from the Finance Agency to remove the 50% dividend limitation and introduce a modest excess Class B stock repurchase program in 2008. In April 2008, the Finance Board notified the Seattle Bank of its decision to raise the ceiling on our permissible
dividend payments from 50% to 75% of year-to-date net income calculated in accordance with U.S. GAAP, but not to allow the bank to repurchase excess Class B stock at this time. We retained the ability to redeem Class B stock following the expiration
of the statutory five-year redemption period. During the first three months of 2009 and in 2008, the significant reduction in the market value and demand for mortgage-backed securities adversely impacted the unrealized market value loss of
investments for a number of banks in the FHLBank System, including the Seattle Bank, resulting in voluntary suspensions of dividends and stock repurchases in order to conserve capital. As a result of these market value declines, we reported
unrealized market value losses of $1.4 billion and $2.1 billion and a risk-based capital deficiency as of March 31, 2009 and December 31, 2008. A subsequent increase in market values on our private-label mortgage-backed securities
corrected our risk-based deficiency as of January 31, 2009, and in February 2009, we redeemed $669,000 in Class B capital stock from a former member following the five-year redemption period. Due to an increase in the credit-risk component as a
result of, among other things, rating agency downgrades in the first quarter of 2009 on a number of our private-label mortgage-backed securities, we again had a risk-based capital deficiency as of March 31, 2009 and continue to have such as
deficiency as of April 30, 2009. Because of the instability in the mortgage-backed securities market and its impact on our risk-based capital, we cannot predict when we will or be able to resume dividend payments and stock repurchases or
redemptions. Further, the Finance Agency or other regulatory or legislative body could require us to take specified actions relating to any capital deficiencies.

In February 2008, we amended our Capital Plan to (i) allow for transfers of excess stock at par value between unaffiliated members pursuant to the requirements of the Capital Plan; and (ii) increase the
range of the member advance stock purchase requirement to between 2.5% and 6.0% of a members outstanding principal balance of advances. The additional ability to transfer



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excess stock between unaffiliated members was designed to provide flexibility to members with excess stock, given the existing restrictions on repurchases of
Class B stock. Although we are not presently considering an increase in the member advance stock purchase requirement, the increased range of the member advance stock purchase requirement gives us greater flexibility in our capital management
practices, which is critical to effectively managing growth, changes in our advance business, or increasing capital. Changes to this requirement would only be applied prospectively to new or renewing advances.

The Capital Plan provides that we may impose a redemption cancellation fee upon a member or a successor to a former member that has given notice of its
intent to redeem Class A or Class B capital stock and subsequently revokes or cancels such redemption request. On May 12, 2009, the Board determined that, effective immediately, any member that had previously notified us of its intent to
withdraw its membership and rescinds its notice of intent to withdraw from membership on or before December 31, 2009, shall not be subject to a redemption cancellation fee. The Board also determined that any redemption cancellation fees
applicable to the transfer of excess Class A or Class B capital stock from a member or successor to a member shall also be waived. Currently, ten members holding $58.9 million of mandatorily redeemable capital stock are eligible for the
cancellation fee waiver should they rescind their notices of intent to withdraw from membership.

Dividends and Retained Earnings

In general, our retained earnings represent our accumulated net income after the payment of any dividends to our members. Our net loss was
$16.2 million for the three months ended March 31, 2009, compared to net income of $31.5 million for the three months ended March 31, 2008.

Dividends

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 March 31, 2009, the Seattle Bank had excess stock of $1.1 billion, or 1.9% of total assets.

In May 2005, the Finance Board accepted our business plan which was initially implemented under the terms of a written agreement with the Finance Board
in December 2004 and subject to our adoption of certain dividend and stock repurchase restrictions. To meet the Finance Board conditions, our Board adopted these policies:



| |  |  | suspending indefinitely the declaration or payment of any dividend and providing that any future dividend declaration or payment may be made only after prior
approval of the Finance Agency, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | suspending indefinitely the repurchase of any Class B stock, except for a limited amount of excess Class B stock repurchases that may be made after prior approval
of the Finance Agency.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Finance Boards termination of the written agreement in January 2007 did not affect the
above-described restrictions on Class B stock repurchases. However, in December 2006, the Finance Agency granted to the Seattle Bank a waiver of certain restrictions on the authority of the Seattle Bank to pay dividends. Under the December 2006
waiver from the Finance Agency, the Seattle Bank was given the ability to pay quarterly cash dividends within certain parameters, which generally limited dividends to 50% of current year net income. Under our Boards policy adopted in December
2006, we were limited to paying dividends no greater than 50% of our year-to-date earnings until, among other things, our retained earnings target had been met and the Finance Agency had removed our dividend restrictions. In April 2008, the Finance
Board notified the Seattle Bank of its decision to raise the ceiling on our permissible dividend payments from 50% to 75% of year-to-date net income calculated in accordance with GAAP. Prior to the receipt of the waiver described above, from
May 2005 to December 2006, our Board had indefinitely suspended the declaration and payment of dividends on capital stock without prior approval by the Finance Agency.

As a result of the decline in the market value of our private-label mortgage-backed securities, we reported a risk-based capital deficiency as of March 31, 2009. Because an FHLBank that fails to meet any
regulatory capital requirement may not declare a dividend or redeem or repurchase capital stock, we did not declare a dividend for the first quarter of 2009 and will not be able to redeem or repurchase any outstanding Class A or Class B stock
until this deficiency is corrected and we comply with all of our regulatory capital requirements. Because of the instability in the mortgage-backed securities market and its impact on our risk-based capital, we cannot predict when we will or be able
to resume dividend payments and stock repurchases or redemptions. The Finance Agency or other regulatory or legislative body could, among other things, require us to take specified actions relating to any capital deficiencies.

Retained Earnings/Accumulated Deficit



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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-risk, credit-risk, and operations-risk components. In April 2007, the Board approved a revised policy, which
added, among other things, a component based on our annual operating expenses, for determining the target level of retained earnings. In January 2009, the Board established a revised retained earnings target of $273.0 million. We reported retained
earnings of $198.3 million as of March 31, 2009, an increase of $277.2 million from the accumulated deficit of $78.9 million as of December 31, 2008, primarily resulting from our adoption of FSP FAS 115-2, under which we recognized a
cumulative effect adjustment of $293.4 million as an increase to our retained earnings as of January 1, 2009, with a related adjustment to accumulated other comprehensive loss.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss was $1.1 billion as of March 31, 2009, compared to $2.9 million as of December 31, 2008. As a result of our adoption of FSP FAS 115-2 as of January 1, 2009, we recognized the $293.4
million cumulative effect of initially applying FSP FAS 115-2 as an increase to our retained earnings at January 1, 2009, with a corresponding increase to accumulated other comprehensive loss. In addition, for the three months ended
March 31, 2009, we recognized total OTTI charges of $895.2 million on our private-label mortgage-backed securities, of which $823.5 million were related to non-credit losses, and which are reported in our Statement of Condition in other
comprehensive loss as non-credit portion of OTTI loss on held-to-maturity securities.

Statutory Capital Requirements

We are subject to three capital requirements under statutory and regulatory rules and regulations: (1) risk-based capital,
(2) capital-to-assets ratio, and (3) leverage capital ratio. With the exception of our risk-based capital requirement as of March 31, 2009 and December 31, 2008, we were in compliance with these statutory capital requirements,
which are described below, as of March 31, 2009 and December 31, 2008.

Risk-Based Capital

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.



| |  |  | Credit risk is the potential for financial loss because of the failure of a borrower or counterparty to perform on an obligation. The credit-risk requirement is
determined by adding the credit-risk capital charges for assets, off-balance sheet items, and derivative contracts based on, among other things, the credit percentages assigned to each item as required by Finance Agency regulations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Market risk is the potential for financial losses due to the increase or decrease in the value or price of an asset or liability resulting from broad movements in
prices, such as interest rates. The market-risk requirement is determined by adding the market value of the portfolio at risk from movements in interest-rate fluctuations and the amount, if any, by which the current market value of our total capital
is less than 85% of the book value of our total capital. We calculate the market value of our portfolio at risk and the current market value of our total capital by using an internal model. Our modeling approach and underlying assumptions are
subject to Finance Agency review and approval.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Operations risk is the potential for unexpected financial losses due to inadequate information systems, operational problems, breaches in internal controls, or
fraud. The operations risk requirement is determined as a percentage of the market risk and credit risk requirements. The Finance Agency has determined this risk requirement to be 30% of the sum of the credit-risk and market-risk requirements
described above.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Only permanent capital, defined as retained earnings and Class B stock (including mandatorily
redeemable Class B stock), can satisfy the risk-based capital requirement. Class A stock (including mandatorily redeemable Class A stock) and accumulated other comprehensive loss are not considered permanent capital and thus are excluded
when determining compliance with risk-based capital requirements. The Finance Agency 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.

The following table presents our permanent capital and risk-based capital requirements as of March 31, 2009 and
December 31, 2008.



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|                                                      |  |                     |           |   |                        |   |           |  
|----------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Permanent Capital and Risk-Based Capital Requirements |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands)                                        |  |                     |           |   |                        |  
|Permanent Capital                                     |  |                     |           |   |                        |   |           |  
|Class B stock                                         |  | $                   | 1,733,093 |   |                        | $ | 1,730,287 |  
|Mandatorily redeemable capital stock                  |  |                     | 897,243   |   |                        |   | 896,400   |  
|Retained earnings (accumulated deficit)               |  |                     | 198,314   |   |                        |   | (78,876   | )
|                                                      |  |                     |           |   |                        |   |           |  
|Permanent capital                                     |  | $                   | 2,828,650 |   |                        | $ | 2,547,811 |  
|                                                      |  |                     |           |   |                        |   |           |  
|Risk-Based Capital Requirement                        |  |                     |           |   |                        |   |           |  
|Credit risk                                           |  |                     | 281,370   |   |                        |   | 154,760   |  
|Market risk                                           |  |                     | 2,253,533 |   |                        |   | 1,927,548 |  
|Operations risk                                       |  |                     | 760,471   |   |                        |   | 624,692   |  
|                                                      |  |                     |           |   |                        |   |           |  
|Risk-based capital requirement                        |  | $                   | 3,295,374 |   |                        | $ | 2,707,000 |  
|                                                      |  |                     |           |   |                        |   |           |  
|Risk-based capital deficiency                         |  | $                   | (466,724  | ) |                        | $ | (159,189  | )
|                                                      |  |                     |           |   |                        |   |           |  

The increase in our risk-based capital requirement as of March 31, 2009, compared to
December 31, 2008, primarily reflected the increased market-risk capital due to further market value decreases in our private-label mortgage-backed securities, as well as the increased credit-risk capital required as a result of downgrades on
our private-label mortgage-backed securities. The operations risk component increased because it is calculated as a percentage of the sum of the market- and credit-risk components.

Capital-to-Assets Ratio

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 (including mandatorily redeemable Class A stock),, any general loss allowance,
if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the Finance Agency as available to absorb losses. Pursuant to action taken by our Board in January 2007, our minimum capital-to-assets
ratio has been set at 4.05%, with a current Board-set target of 4.10%.

In September 2008, in order to reduce our unsecured counterparty
exposure, we began, and expect to continue, to replace our higher-yielding, unsecured, short-term investments with lower-yielding, secured, short-term investments. In March 2009, as a result of modest improvements in the U.S. credit markets, on a
limited basis, we have extended unsecured credit to a select group of financial institutions and slightly increased our unsecured short-term investment balance. Because we were unable to fully replace the unsecured investments as they matured with
secured investments, our capital-to-assets ratio increased to 5.24% as of March 31, 2009. Until the capital markets begin to operate more normally, we expect to continue to manage our business to a capital-to-assets ratio target higher than
4.10%, although our actual capital-to-assets ratio may vary, possibly significantly.

The following table presents our capital-to-assets
ratios as of March 31, 2009 and December 31, 2008.



|                                                       |  |                     |           |   |                        |   |           |  
|------------------------------------------------------ |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Capital-to-Assets Ratios                               |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands, except percentages)                     |  |                     |           |   |                        |  
|Minimum Board-approved capital (4.05% of total assets) |  | $                   | 2,306,371 |   |                        | $ | 2,363,648 |  
|Total regulatory capital                               |  |                     | 2,986,799 |   |                        |   | 2,687,140 |  
|Capital-to-assets ratio                                |  |                     | 5.24      | % |                        |   | 4.60      | %

Leverage Capital Ratio

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 non-permanent capital. A minimum leverage ratio, which is defined as leverage capital divided by total assets, is intended to ensure that we maintain sufficient permanent capital. Primarily for the same reasons that resulted in the significant
increase in our capital-to-assets ratio, our leverage ratio also significantly increased as of March 31, 2009 from December 31, 2008.



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The following table presents our leverage ratios as of March 31, 2009 and December 31, 2008.



|                                                                                 |  |                     |           |   |                        |   |           |  
|-------------------------------------------------------------------------------- |  | ------------------- | --------- | - | ---------------------- | - | --------- | -
|Leverage Ratios                                                                  |  | As ofMarch 31, 2009 |           |   | As ofDecember 31, 2008 |  
|(in thousands, except percentages)                                               |  |                     |           |   |                        |  
|Minimum leverage capital (5.00% of total assets)                                 |  | $                   | 2,847,371 |   |                        | $ | 2,918,085 |  
|Leverage capital (includes 1.5 weighting factor applicable to permanent capital) |  |                     | 4,401,124 |   |                        |   | 3,961,046 |  
|Leverage ratio (leverage capital as a percentage of total assets)                |  |                     | 7.73      | % |                        |   | 6.79      | %

Capital Status Requirements

On January 30, 2009, the Finance Agency published an interim final rule that implements the PCA provisions of the Housing Act. The interim rule
establishes four capital classifications for FHLBanks and implements the PCA provisions that apply to FHLBanks that are not deemed to be adequately capitalized. Once an FHLBank is determined by the Finance Agency to be other than adequately
capitalized, the FHLBank will become subject to additional supervisory authority of the Finance Agency and a range of mandatory or discretionary restrictions may be imposed. For example, an FHLBank would need to review its operating and financial
contracts and counterparty agreements to determine whether a capital deficiency or the application of the PCA requirements to the FHLBank will trigger defaults or otherwise impact the terms of those contracts and agreements.

The PCA provisions include four capital classifications for the FHLBanks:



| |  |  | Adequately capitalized (meets or exceeds all of its risk-based and leverage capital requirements)
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Undercapitalized (does not meet one or more of its capital requirements, but it is not significantly or critically undercapitalized)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Significantly undercapitalized (permanent or total capital is less than 75% of its capital requirements, but it is not critically undercapitalized)
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Critically undercapitalized (total capital is less than or equal to 2% of total assets)
| | - |  | ---------------------------------------------------------------------------------------

The Director of the Finance Agency may at any time downgrade an FHLBank by one capital category based on specified conduct, decreases in the value of
collateral pledged to it, or a determination by the Director of the Finance Agency that the FHLBank is engaging in unsafe and unsound practices or is in an unsafe and unsound condition. Before implementing a reclassification, the Director of the
Finance Agency is required to provide the FHLBank with written notice of the proposed action and an opportunity to submit a response. See Part I. Item 1. BusinessRegulationsCapital Status Requirements, in our 2008 annual
report on Form 10-K for additional information on consequences for FHLBanks that are not determined to be adequately capitalized.

As of
May 18, 2009, we had received no notification from the Finance Agency regarding our capital adequacy classification.

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, many members 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.

Our primary sources of liquidity are the proceeds of new
consolidated obligation issuances and short-term investments. 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.



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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 March 31, 2009 and December 31, 2008.



|                            |  |                     |            |                        |   |           
|--------------------------- |  | ------------------- | ---------- | ---------------------- | - | ----------
|Unpledged Qualifying Assets |  | As ofMarch 31, 2009 |            | As ofDecember 31, 2008
|(in thousands)              |  |                     |            |                       
|Outstanding debt            |  | $                   | 53,480,952 |                        | $ | 54,468,680
|Aggregate qualifying assets |  |                     | 56,854,081 |                        |   | 58,278,884

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 disruptions in financial markets. In addition to the liquidity measures discussed above, the Finance Agency issued final guidance,
effective March 6, 2009, formalizing its request for increases in liquidity of FHLBanks that was provided to the FHLBanks in the fourth quarter 2008. This final guidance requires the FHLBanks to maintain sufficient liquidity, through short-term
investments, such as federal funds and securities sold under agreements to repurchase, in an amount at least equal to an FHLBanks anticipated cash outflows under two different scenarios. One scenario assumes that an FHLBank cannot access
the capital markets for 15 days and that during that time members do not renew any maturing, prepaid, or called advances. The second scenario assumes that an FHLBank cannot access the capital markets for five days and that during that period,
an FHLBank will automatically renew maturing or called advances for all members except very large, highly rated members. The new guidance is designed to enhance an FHLBanks protection against temporary disruptions in access to the FHLBank
System debt markets in response to a rise in capital market volatility. Beginning in the fourth quarter of 2008, we held larger-than-normal balances of overnight federal funds and lengthened the maturity of consolidated obligation discount
notes used to fund many of these investments in order to comply with the Finance Agencys liquidity guidance and ensure adequate liquidity availability for member advances.

As of March 31, 2009 and December 31, 2008, we 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 in our 2008 annual report on Form 10-K for additional information.

During the third quarter of 2008, the Seattle Bank and each of the other 11 FHLBanks entered into lending agreements (Lending Agreements)
with the U.S. Treasury in connection with the U.S. Treasurys establishment of a GSECF, as authorized by the Housing Act. The GSECF is designed to serve as a contingent source of liquidity for the housing GSEs, including the FHLBanks. Any
borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowing are agreed to at the time of issuance.
Loans under a Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members and mortgage-backed securities issued by Fannie Mae or Freddie Mac. Each FHLBank is required to submit to
the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of March 31, 2009, the Seattle Bank had provided the U.S. Treasury with a listing of advance
collateral totaling $31.3 billion. The amount of collateral can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral.

The interest rate applicable to a loan under a Lending Agreement shall be the rate as from time to time established by the U.S. Treasury. If all or any
portion of the principal and interest on a loan are not paid when due, interest on the unpaid portion shall be calculated at a rate 500 basis points higher than the applicable rate then in effect until the unpaid portion is paid in full. The
principal and interest on a loan are immediately due and payable on demand, on the due date and time specified by the U.S. Treasury in writing or upon the occurrence of certain events of default. Voluntary prepayments of loans are permissible
without penalty, subject to certain conditions pertaining to minimum notice.

Each Lending Agreement requires the applicable FHLBank
promptly to notify the U.S. Treasury if it fails or is about to fail to meet applicable regulatory capital requirements and to maintain its organizational existence. Each Lending Agreement contains restrictions on the ability of an FHLBank to create
liens on the collateral or to dispose of the collateral. Each Lending Agreement contains events of default, including nonpayment of principal, interest, fees or other amounts owed to the U.S. Treasury when due; violation of covenants; the occurrence
of certain bankruptcy events; inaccuracy of representations and warranties; the actual or asserted invalidity of any loan document; and encumbrances, levies, judicial seizure of, or an attachment upon the collateral. In



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addition, it is an event of default if the Secretary of the U.S. Treasury determines that U.S. Treasurys position is not secure with respect to the
financial condition of the FHLBank or the FHLBanks ability to perform its obligations under its Lending Agreement. If an event of default occurs and is continuing, the U.S. Treasury may debit the FHLBanks account or set-off any amount
owed by the U.S. Treasury to the FHLBank; exercise any right of set-off against the FHLBanks property in the U.S. Treasurys possession or control; take possession of any collateral; and pursue all other remedies available to collect,
enforce or satisfy an obligation, including disposing of the collateral or satisfying the amount against any other FHLBank on the basis that the obligation is a consolidated obligation.

The U.S. Treasury may amend a Lending Agreement without prior notice at any time. Any amendment of a Lending Agreement by the U.S. Treasury will not
modify the terms of any loans outstanding at the time of the amendment. Each Lending Agreement terminates on December 31, 2009, but will remain in effect as to any loan outstanding on that date. An FHLBank may terminate its consent to be bound
by its Lending Agreement prior to that time so long as no loan is then outstanding to the U.S. Treasury.

As of March 31, 2009, no
FHLBank had drawn on the available source of liquidity provided by its Lending Agreement.

Contractual Obligations and Other
Commitments

The following table presents our contractual obligations and commitments as of March 31, 2009.



|                                             |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           
|-------------------------------------------- |  | --------------------- | ---------- | ------------ | - | ------------ |  | ---------- | --------- | ----- | - | --------- |  | - | ----------
|                                             |  | As of March 31, 2009 
|                                             |  | Payment Due by Period
|Contractual Obligations and Commitments      |  | Less than 1 Year      |            | 1 to 3 Years |   | 3 to 5 Years |  | Thereafter |           | Total
|(in thousands)                               |  |                       |            |              |   |              |  |            |           |      
|Member term deposits                         |  | $                     | 184,963    |              | $ |              |  | $          |           |       | $ |           |  | $ | 184,963   
|Consolidated obligation bonds (at par)*      |  |                       | 16,738,835 |              |   | 3,370,295    |  |            | 5,115,500 |       |   | 5,862,940 |  |   | 31,087,570
|Derivative liabilities                       |  |                       | 263,583    |              |   |              |  |            |           |       |   |           |  |   | 263,583   
|Mandatorily redeemable capital stock         |  |                       | 86,683     |              |   | 64,141       |  |            | 770,148   |       |   |           |  |   | 920,972   
|Operating leases                             |  |                       | 3,152      |              |   | 6,519        |  |            | 3,663     |       |   |           |  |   | 13,334    
|                                             |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           
|Total contractual obligations                |  | $                     | 17,277,216 |              | $ | 3,440,955    |  | $          | 5,889,311 |       | $ | 5,862,940 |  | $ | 32,470,422
|                                             |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           
|Other Commitments                            |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           
|Commitments for additional advances          |  | $                     | 8,146      |              | $ | 4,400        |  | $          |           |       | $ |           |  | $ | 12,546    
|Standby letters of credit                    |  |                       | 1,065,492  |              |   | 169,439      |  |            |           |       |   |           |  |   | 1,234,931 
|Standby bond purchase agreements             |  |                       |            |              |   | 51,160       |  |            |           |       |   |           |  |   | 51,160    
|Unused lines of credit and other commitments |  |                       |            |              |   | 50,000       |  |            |           |       |   |           |  |   | 50,000    
|                                             |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           
|Total other commitments                      |  | $                     | 1,073,638  |              | $ | 274,999      |  | $          |           |       | $ |           |  | $ | 1,348,637 
|                                             |  |                       |            |              |   |              |  |            |           |       |   |           |  |   |           



|* | Does not include discount notes and is based on contractual maturities; the actual timing of payments could be affected by redemptions.
|- | ---------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2009, we had $221.3 million in agreements outstanding to issue consolidated obligation bonds and discount notes.

In June 2006, the FHLBanks and the Office of Finance entered into the Federal Home Loan Banks P&I Funding and Contingency Plan Agreement (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.



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In January 2009, the Office of Finances board of directors approved a recommendation to establish a
special assessment in an amount equal to six times an FHLBanks average monthly assessment (calculated using the most recent 12 months of regular Office of Finance assessments) as a deterrent for an FHLBank missing an agreed-upon financial
reporting deadline in order to ensure timely publication of combined FHLBank System operating highlights and financial reports. A special assessment would be assessed upon missing an agreed-upon financial reporting deadline, and once paid, it would
be applied as a reduction to the other FHLBanks next regular monthly Office of Finance assessment. In March 2009, the Seattle Bank was notified by the Office of Finance that it was being assessed a special assessment of $1.1 million for
missing the due date for provision of the Seattle Banks information for the 2008 combined FHLBank System operating highlights and financial report, under the new special assessment policy. We appealed the special assessment and were notified
in May 2009 that we would not be required to pay the special assessment.

Results of Operations for the Three Months Ended March 31, 2009 and 2008

The Seattle Bank recorded a net loss of $16.2 million for the three months ended March 31, 2009, a decrease of $47.7 million from
net income of $31.5 million for the three months ended March 31, 2008. The decrease in net income for the three months ended March 31, 2009 was primarily due to a $71.7 million OTTI credit-related charge on certain of our held-to-maturity
securities (discussed in Other Loss below).



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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,
investments, and mortgage loans held for portfolio, 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, yield-curve shifts, and changes in market conditions are the primary economic factors affecting net interest income. Between March 31, 2009 and March 31, 2008, the Federal Reserve Open Market Committee reduced its target
for the federal funds rate from 2.25% to between 0% and 0.25%, in an effort to stimulate the U.S. economy. As a result of our significant holdings of short-term advances and investments, we expect net interest income to be unfavorably impacted by
the lower federal funds rates.

The following table presents average balances, interest income and expense, and average yields of our major
categories of interest-earning assets and interest-bearing liabilities, for the three months ended March 31, 2009 and 2008. The table also presents interest-rate spreads between the average yield on total interest-earning assets and the average
cost of total interest-bearing liabilities, as well as net interest margin (i.e., net interest income divided by the average balance of total interest-earning assets), for the three months ended March 31, 2009 and 2008.



|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|----------------------------------------------------------------- |  | ------------------------------------ | ---------- | ---------------------- | - | ------------ |  | -------------- |  | ---------------------- | ---------- | ------------ | - | ------- |  | ----
|                                                                  |  | For the Three Months Ended March 31,
|                                                                  |  | 2009                                 |            | 2008                  
|Average Balances, Interest Income and Expense, and Average Yields |  | AverageBalance                       |            | InterestIncome/Expense |   | AverageYield |  | AverageBalance |  | InterestIncome/Expense |            | AverageYield
|(in thousands, except percentages)                                |  |                                      |            |                        |   |              |  |                |  |                        |            |             
|Interest-Earning Assets:                                          |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Advances                                                          |  | $                                    | 36,702,021 |                        | $ | 179,233      |  | 1.98           |  | $                      | 39,870,790 |              | $ | 439,060 |  | 4.43
|Mortgage loans held for portfolio                                 |  |                                      | 5,016,411  |                        |   | 63,640       |  | 5.15           |  |                        | 5,598,643  |              |   | 68,446  |  | 4.92
|Investments                                                       |  |                                      | 18,077,100 |                        |   | 72,332       |  | 1.60           |  |                        | 21,632,409 |              |   | 198,367 |  | 3.69
|Other interest-earning assets                                     |  |                                      | 53,880     |                        |   | 27           |  | 0.20           |  |                        | 1,810      |              |   | 14      |  | 3.14
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Total interest-earning assets                                     |  |                                      | 59,849,412 |                        |   | 315,232      |  | 2.13           |  |                        | 67,103,652 |              |   | 705,887 |  | 4.23
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |             
|Other assets                                                      |  |                                      | 260,645    |                        |   |              |  |                |  |                        | 436,991    |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Total assets                                                      |  | $                                    | 60,110,057 |                        |   |              |  |                |  | $                      | 67,540,643 |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Interest-Bearing Liabilities:                                     |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Consolidated obligations                                          |  | $                                    | 56,082,752 |                        | $ | 240,387      |  | 1.74           |  | $                      | 62,875,640 |              | $ | 631,634 |  | 4.04
|Deposits                                                          |  |                                      | 633,932    |                        |   | 481          |  | 0.31           |  |                        | 1,160,824  |              |   | 9,255   |  | 3.21
|Mandatorily redeemable capital stock                              |  |                                      | 919,382    |                        |   |              |  |                |  |                        | 82,345     |              |   | 245     |  | 1.20
|Other borrowings                                                  |  |                                      | 2,904      |                        |   |              |  |                |  |                        | 330        |              |   | 3       |  | 4.40
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Total interest-bearing liabilities                                |  | $                                    | 57,638,970 |                        | $ | 240,868      |  | 1.69           |  | $                      | 64,119,139 |              | $ | 641,137 |  | 4.02
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |             
|Other liabilities                                                 |  |                                      | 664,908    |                        |   |              |  |                |  |                        | 731,860    |              |   |         |  |     
|Capital                                                           |  |                                      | 1,806,179  |                        |   |              |  |                |  |                        | 2,689,644  |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Total liabilities and capital                                     |  | $                                    | 60,110,057 |                        |   |              |  |                |  | $                      | 67,540,643 |              |   |         |  |     
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Net interest income                                               |  |                                      |            |                        | $ | 74,364       |  |                |  |                        |            |              | $ | 64,750  |  |     
|                                                                  |  |                                      |            |                        |   |              |  |                |  |                        |            |              |   |         |  |     
|Interest-rate spread                                              |  |                                      |            |                        |   |              |  | 0.44           |  |                        |            |              |   |         |  | 0.21
|Net interest margin                                               |  |                                      |            |                        |   |              |  | 0.49           |  |                        |            |              |   |         |  | 0.39

For the three months ended March 31, 2009, the average composition of our interest-earning
assets changed significantly from the same period in 2008, with decreases in all major asset portfolios. The average balances of our advances and investments decreased, reflecting decreased demand for advances as our borrowers reduced the sizes of
their balances sheets and corresponding requirement for short-term investments for liquidity. The further 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. Significantly lower prevailing interest rates impacted most of our interest-earning assets and interest-bearing liabilities, but had the most impact on our advance, investment, and consolidated obligation portfolios,
where yields generally declined significantly for the three months ended March 31, 2009, compared to the same period in 2008.

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 months ended March 31, 2009 and 2008.



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|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|------------------------------------ |  | ------------------------------------ | ------- | - | ----- | - | -------- | ----- |  | - | -------- | -
|                                     |  | For the Three Months Ended March 31, |        
|                                     |  | 2009 v. 2008Increase (Decrease)      |        
|Changes in Volume and Rate           |  | Volume*                              |         |   | Rate* |   |          | Total | 
|(in thousands)                       |  |                                      |         |   |       |   |          |       | 
|Interest Income                      |  |                                      |         |   |       |   |          |       |  |   |          |  
|Advances                             |  | $                                    | (32,468 | ) |       | $ | (227,359 | )     |  | $ | (259,827 | )
|Investments                          |  |                                      | (26,338 | ) |       |   | (99,697  | )     |  |   | (126,035 | )
|Mortgage loans held for portfolio    |  |                                      | (7,315  | ) |       |   | 2,509    |       |  |   | (4,806   | )
|Other loans                          |  |                                      | 38      |   |       |   | (25      | )     |  |   | 13       |  
|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|Total interest income                |  |                                      | (66,083 | ) |       |   | (324,572 | )     |  |   | (390,655 | )
|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|Interest Expense                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|Consolidated obligations             |  |                                      | (62,036 | ) |       |   | (329,211 | )     |  |   | (391,247 | )
|Mandatorily redeemable capital stock |  |                                      | 223     |   |       |   | (468     | )     |  |   | (245     | )
|Deposits                             |  |                                      | (2,931  | ) |       |   | (5,843   | )     |  |   | (8,774   | )
|Other borrowings                     |  |                                      | 3       |   |       |   | (6       | )     |  |   | (3       | )
|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|Total interest expense               |  |                                      | (64,741 | ) |       |   | (335,528 | )     |  |   | (400,269 | )
|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  
|Change in net interest income        |  | $                                    | (1,342  | ) |       | $ | 10,956   |       |  | $ | 9,614    |  
|                                     |  |                                      |         |   |       |   |          |       |  |   |          |  



|* | 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.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Both total interest income and total interest expense decreased significantly for the three months ended March 31, 2009, compared to the same period in 2008, primarily due to significantly lower short-term interest rates.

During the three months ended March 31, 2009, compared to the same period in 2008, we experienced a larger decrease in the average cost on our
interest-bearing liabilities than in the average yield on our interest-earning assets, increasing our interest-rate spread by 23 basis points to 44 basis points. The improvement of our interest-rate spread primarily resulted from a reduction in the
average cost of our consolidated obligations.

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 months ended March 31, 2009 and 2008.



|                                   |  |                                      |         |      |   |                            |  |        |  
|---------------------------------- |  | ------------------------------------ | ------- | ---- | - | -------------------------- |  | ------ | -
|                                   |  | For the Three Months Ended March 31, |        
|Interest Income                    |  | 2009                                 |         | 2008 |   | PercentIncrease/(Decrease) | 
|(in thousands, except percentages) |  |                                      |         |      |   |                            | 
|Advances                           |  | $                                    | 175,245 |      | $ | 424,589                    |  | (58.7  | )
|Prepayment fees on advances, net   |  |                                      | 3,988   |      |   | 14,471                     |  | (72.4  | )
|                                   |  |                                      |         |      |   |                            |  |        |  
|Subtotal                           |  |                                      | 179,233 |      |   | 439,060                    |  | (59.2  | )
|Investments                        |  |                                      | 72,359  |      |   | 198,367                    |  | (63.5  | )
|Mortgage loans held for portfolio  |  |                                      | 63,640  |      |   | 68,446                     |  | (7.0   | )
|Loans to other FHLBanks and other  |  |                                      |         |      |   | 14                         |  | (100.0 | )
|                                   |  |                                      |         |      |   |                            |  |        |  
|Total interest income              |  | $                                    | 315,232 |      | $ | 705,887                    |  | (55.3  | )
|                                   |  |                                      |         |      |   |                            |  |        |  

Total interest income decreased for the three months ended March 31, 2009, compared to the
same period in 2008, due to significant decreases in both yields and volumes on advances and investments.



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Advances

Interest income from advances, excluding prepayment fees on advances, decreased 58.7% for the three months ended March 31, 2009, compared to the same period in 2008. This decline was due to both declines in yield
and average advance volume. The average yield on advances (including prepayment fees) decreased by 245 basis points to 1.98% for the three months ended March 31, 2009, compared to the same period in 2008, primarily due to significant declines
in prevailing short-term interest rates. This decline was magnified because our advance portfolio during the first quarter of 2009 was heavily weighted toward short-term advances. Further, average advance volume declined $3.2 billion for the three
months ended March 31, 2009, compared to the same period in 2008, primarily due to decreased advance activity with our largest borrowers, although we had generally decreased advance demand across the membership in the first quarter of 2009.

For the three months ended March 31, 2009, new advances totaled $21.1 billion and maturing advances totaled $26.1 billion. Advance
activity for the three months ended March 31, 2009 was significantly below the advance activity for the same period in 2008, when new advances totaled $31.0 billion and maturing advances totaled $39.1 billion.

While the long-term impact of the completed BofA/Merrill Lynch merger transaction on our advance levels is unknown, in March 2009, Merrill Lynch Bank,
USA prepaid $2.9 billion in outstanding advances and had no advances outstanding as of March 31, 2009 while Bank of America Oregon, N.A. had $6.7 billion in outstanding advances as of such date. We expect that advance volumes and associated
advance interest income will continue the decline that began in fourth quarter 2008 as a result of the acquisition of our then largest member, Washington Mutual Bank, F.S.B. by JPMorgan Chase, a non-member institution. The majority of this former
members advances mature during 2009, and it is unknown at this time whether we will be able to replace these advances or reinvest the proceeds of the maturing advances into similarly yielding investments. Because a large concentration of our
advances is held by only a few members and a non-member shareholder, changes in this groups borrowing decisions have and still can significantly affect the amount of our total advances outstanding. We expect that the concentration of advances
with our largest borrowers will remain significant for the foreseeable future.

Prepayment Fees on Advances

For the three months ended March 31, 2009, we recorded net prepayment fee income on advances of $4.0 million, primarily resulting from fees charged
to borrowers that prepaid $3.2 billion in advances. Prepayment fees on hedged advances are partially offset by termination fees charged on the cancellation of interest-rate exchange agreements hedging those advances. Borrowers prepaid $7.6 billion
in advances for the three months ended March 31, 2008, resulting in net prepayment fee income of $14.5 million.

Short-Term and
Held-to-Maturity Investments

Interest income from investments, which includes short-term investments and long-term held-to-maturity
investments decreased by 45.6% for the three months ended March 31, 2009, compared to the same period in 2008. This decrease primarily resulted from lower average yields on investments and a higher proportion of lower yielding short-term
investments to our total investment portfolio. In March 2009, as a result of modest improvements in the U.S. credit markets, on a limited basis, we have extended unsecured credit to a select group of financial institutions and slightly increased our
unsecured short-term investment balance.

Mortgage Loans Held for Portfolio

Interest income from mortgage loans held for portfolio decreased by 7.0% for the three months ended March 31, 2009, compared to the same period in
2008. The decrease was primarily due to a continued 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 $582.2 million, to $5.0 billion, for the three months ended March 31, 2009, compared to the three months ended March 31, 2008, primarily due to receipt of principal payments. Partially offsetting this decrease in interest income from
our mortgage loans held for portfolio was a 23-basis point increase in the average yield on mortgage loans held for portfolio for the three months ended March 31, 2009, compared to the same period in 2008. The balance of our remaining mortgage
loans held for portfolio will continue to decrease as the remaining mortgage 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 months ended March 31, 2009 and 2008.



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|                                               |  |                                      |         |      |   |                            |  |        |  
|---------------------------------------------- |  | ------------------------------------ | ------- | ---- | - | -------------------------- |  | ------ | -
|                                               |  | For the Three Months Ended March 31, |        
|Interest Expense                               |  | 2009                                 |         | 2008 |   | PercentIncrease/(Decrease) | 
|(in thousands, except percentages)             |  |                                      |         |      |   |                            | 
|Consolidated obligations - discount notes      |  | $                                    | 31,615  |      | $ | 145,990                    |  | (78.3  | )
|Consolidated obligations - bonds               |  |                                      | 208,772 |      |   | 485,644                    |  | (57.0  | )
|Deposits                                       |  |                                      | 481     |      |   | 9,255                      |  | (94.8  | )
|Securities sold under agreements to repurchase |  |                                      |         |      |   | 3                          |  | (100.0 | )
|Mandatorily redeemable capital stock           |  |                                      |         |      |   | 244                        |  | (100.0 | )
|Other borrowings                               |  |                                      |         |      |   | 1                          |  | (100.0 | )
|                                               |  |                                      |         |      |   |                            |  |        |  
|Total interest expense                         |  | $                                    | 240,868 |      | $ | 641,137                    |  | (62.4  | )
|                                               |  |                                      |         |      |   |                            |  |        |  

Consolidated Obligation Discount Notes

Interest expense on consolidated obligation discount notes decreased by 78.3% for the three months ended March 31, 2009, compared to the same period
in 2008, primarily due to lower prevailing interest rates. Investor demand for high-quality, short-term debt instruments was strong during the first quarter of 2009, resulting in generally favorable interest rates on our short-term consolidated
obligation discount notes. The average balance of our consolidated obligation discount notes increased by 28.9% to $21.7 billion for the three months ended March 31, 2009, compared to the same period in 2008.

Consolidated Obligation Bonds

Interest expense on consolidated obligation bonds decreased by 57.0% for the three months ended March 31, 2009, compared to the same period in 2008, primarily due to the decreased issuances of longer-term consolidated obligation bonds
and lower prevailing interest rates. During the first quarter of 2009, demand for longer-term debt remained low, which negatively impacted the interest rates on these types of instruments. The average balance of our consolidated obligation bonds
decreased by 25.4%, to $34.3 billion, and average yield on such bonds declined by 178 basis points, to 2.47%, for the three months ended March 31, 2009, compared to the same period in 2008.

Deposits

Interest expense on
deposits decreased by 94.8% for the three months ended March 31, 2009, compared to the same period in 2008, due to a 290-basis point decrease in the average interest rate paid on deposits and a $526.9 million decrease in the average balance of
deposits. Deposit levels generally vary based on the interest rates paid to our members, as well as our members liquidity levels and market conditions.

Mandatorily Redeemable Capital Stock

Although the average balance of mandatorily redeemable
stock increased by $837.0 million to $919.4 million, interest expense was zero for the three months ended March 31, 2009, due to our inability to pay dividends while we have a risk-based capital deficiency.

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 months ended March 31, 2009 and 2008.



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|                                                                                               |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|---------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | -------------------------- | - | -------- | ----------------------------------- |  | - | ----------------------------------------------- | - |  | - | ------- | -
|                                                                                               |  | Three Months Ended March 31, 2009 |        
|Gain (Loss) on Derivatives and on the Related Hedged Items in Fair Value Hedging Relationships |  | Gain/(Loss) onDerivatives         |         |   | Gain/(Loss) on HedgedItems |   |          | Net Fair Value HedgeIneffectiveness |  |   | Effect of Derivatives onNet Interest Income(1)  |  
|(in thousands)                                                                                 |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |  
|Advances                                                                                       |  | $                                 | 4,282   |   |                            | $ | (8,445   | )                                   |  | $ | (4,163                                          | ) |  | $ | (55,491 | )
|Consolidated obligation bonds                                                                  |  |                                   | (58,897 | ) |                            |   | 58,843   |                                     |  |   | (54                                             | ) |  |   | 58,102  |  
|Consolidated obligation discount notes                                                         |  |                                   | (6,878  | ) |                            |   | 8,226    |                                     |  |   | 1,348                                           |   |  |   | 3,931   |  
|                                                                                               |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|Total                                                                                          |  | $                                 | (61,493 | ) |                            | $ | 58,624   |                                     |  | $ | (2,869                                          | ) |  | $ | 6,542   |  
|                                                                                               |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|                                                                                               | 
|                                                                                               |  | Three Months Ended March 31, 2008 |        
|Gain (Loss) on Derivatives and on the Related Hedged Items in Fair Value Hedging Relationships |  | Gain/(Loss) onDerivatives         |         |   | Gain/(Loss) on HedgedItems |   |          | Net Fair Value HedgeIneffectiveness |  |   | Effect of Derivatives onNet Interest Income (1) |  
|(in thousands)                                                                                 |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |  
|Advances                                                                                       |  | $                                 | (15,413 | ) |                            | $ | 16,723   |                                     |  | $ | 1,310                                           |   |  | $ | (2,416  | )
|Consolidated obligation bonds                                                                  |  |                                   | 128,956 |   |                            |   | (127,663 | )                                   |  |   | 1,293                                           |   |  |   | 28,494  |  
|                                                                                               |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  
|Total                                                                                          |  | $                                 | 113,543 |   |                            | $ | (110,940 | )                                   |  | $ | 2,603                                           |   |  | $ | 26,078  |  
|                                                                                               |  |                                   |         |   |                            |   |          |                                     |  |   |                                                 |   |  |   |         |  



|(1) | The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

Our use of interest-rate exchange agreements had a net favorable effect on our net interest income for the three months ended March 31, 2009 and
2008, 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 variable
interest rates, combined with changes in short-term interest rates, resulted in increases in net interest income for the three months ended March 31, 2009 and 2008.

Other Loss

Other loss includes member service fees, credit-related portion of OTTI charges on
held-to-maturity securities, net (loss) gain on derivatives and hedging activities, net realized (loss) gain on the early extinguishment of consolidated obligations, and other miscellaneous income (loss) not included in net interest income. Because
of the type of financial activity reported in this category, other (loss) income can be volatile from one period to another. For instance, net (loss) gain 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 loss for the three months
ended March 31, 2009 and 2008.



|                                                                        |  |                                      |         |   |      |   |         |                            |  |        |  
|----------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------- | -------------------------- |  | ------ | -
|                                                                        |  | For the Three Months Ended March 31, |        
|Other Loss                                                              |  | 2009                                 |         |   | 2008 |   |         | PercentIncrease/(Decrease) | 
|(in thousands, except percentages)                                      |  |                                      |         |   |      |   |         |                            | 
|Service fees                                                            |  | $                                    | 572     |   |      | $ | 449     |                            |  | 27.4   |  
|Net other-than-temporary impairment loss on held-to-maturity securities |  |                                      | (71,668 | ) |      |   |         |                            |  |        |  
|Net (loss) gain on derivatives and hedging activities                   |  |                                      | (2,941  | ) |      |   | 6,001   |                            |  | (149.0 | )
|Net realized loss on early extinguishment of consolidated obligations   |  |                                      | (4,526  | ) |      |   | (16,177 | )                          |  | 72.0   |  
|Other income (loss), net                                                |  |                                      | 13      |   |      |   | (106    | )                          |  | 112.3  |  
|                                                                        |  |                                      |         |   |      |   |         |                            |  |        |  
|Total other loss                                                        |  | $                                    | (78,550 | ) |      | $ | (9,833  | )                          |  | (698.8 | )
|                                                                        |  |                                      |         |   |      |   |         |                            |  |        |  

Total other loss increased by $68.7 million for the three months ended March 31, 2009,
compared to the same period in 2008, primarily due to a $71.7 million increase in the credit-related portion of OTTI charges on held-to-maturity securities and an $8.9 million increase in net (loss) gain on derivatives and hedging activities. These
increases were offset by an $11.7 million decrease in net realized loss on early extinguishment of consolidated obligations. The significant changes in other loss are discussed in more detail below.



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Other-Than-Temporary Impairment Charge on Held-to-Maturity Securities

For the three months ended March 31, 2009, we recognized OTTI charges of $71.7 million related to credit losses on our private-label mortgage-backed
securities, which are reported in our Statement of Operations as net other-than-temporary impairment loss on held-to-maturity securities and $823.5 million related to non-credit losses, which are reported in our Statement of Condition in
other comprehensive loss as non-credit portion of OTTI loss on held-to-maturity securities. We did not have similar charges for the three months ended March 31, 2008. The OTTI recognized in accumulated other comprehensive loss is
accreted to the carrying value of each security on a prospective basis, over the remaining life of each security. The accretion increases the carrying value of each security and continues until each security is sold or matures or has an additional
OTTI charge that is recognized in earnings. See Financial ConditionInvestmentsOther-Than-Temporary Impairment Assessment for additional information.

The following table summarizes key information as of March 31, 2009 on the private-label securities on which we recorded OTTI charges during the
first quarter of 2009.



|                                                |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               |  |   |          |   |  |   |          |  
|----------------------------------------------- |  | ---------------------- | --------- | ----------------------------------------- | - | --------------------- |  | - | ---------- | - | ------------------------- | - | ------- | ----------------------------- | - | ------- | ------------- |  | - | -------- | - |  | - | -------- | -
|                                                |  | As of March 31, 2009   |           | For the Three Months Ended March 31, 2009 |  
|Other-than-Temporarily Impaired Securities      |  | UnpaidPrincipalBalance |           | AmortizedCost                             |   | GrossUnrealizedLosses |  |   | Fair Value |   | OTTIRelated toCredit Loss |   |         | OTTIRelated toNon-Credit Loss |   |         | TotalOTTILoss | 
|(in thousands)                                  |  |                        |           |                                           |   |                       |  |   |            |   |                           |   |         |                               |   |         |               | 
|Alt -A private-label mortgage-backed securities |  | $                      | 1,758,993 |                                           | $ | 1,681,522             |  | $ | (1,102,296 | ) |                           | $ | 579,226 |                               | $ | (71,668 | )             |  | $ | (823,527 | ) |  | $ | (895,195 | )

Key inputs and assumptions used to measure the amount of credit loss related to private-label
mortgage-backed securities include prepayments, default rates and loss severity. To discount expected cash flows expected to be collected, we use the interest rate in effect prior to impairment.

See Financial ConditionInvestmentsOther-Than-Temporary Impairment Assessment for additional information.

Net (Loss) Gain on Derivatives and Hedging Activities

For the three months ended March 31, 2009, we recorded an increase of $8.9 million in our total net (loss) gain on derivatives and hedging activities, compared to the same period in 2008. These changes are
discussed below.

Advances

For the three months ended March 31, 2009, we recognized a net loss of $4.2 million on interest-rate exchange agreements used to hedge advances, compared to a net gain of $1.3 million for the same period in 2008.

Consolidated Obligation Bonds

For
the three months ended March 31, 2009, we recognized a net loss of $54,000 on interest-rate exchange agreements used to hedge consolidated obligation bonds, compared to a net gain of $1.3 million for the same period in 2008.

Consolidated Obligation Discount Notes

For the three months ended March 31, 2009, we recognized a net gain of $1.3 million on interest-rate exchange agreements used to hedge consolidated obligation discount notes. There was no comparable activity during the three months
ended March 31, 2008.

Economic Hedges

For the three months ended March 31, 2009, we recorded a net loss of $72,000, compared to a net gain of $3.4 million for the same period in 2008. These net gains are discussed by derivative type below.

Caps and Floors

As of March 31, 2009, we held $240.0 million notional amount of interest-rate caps that were used to economically hedge changes in the fair value of our assets and liabilities, compared to $260.0 million notional amount of
interest-rate caps and $150.0 million notional amount of interest-rate floors as of March 31, 2008. Our recorded net loss related to interest-rate caps and floors was $184,000 for the three months ended March 31, 2009, compared to a net
gain of $1.3 million for the same period in 2008.



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Swaptions

For the three months ended March 31, 2008, we recorded a net gain of $1.6 million on $850.0 million notional of swaptions purchased at a cost of $14.4 million to economically hedge the fair value of our mortgage
loan portfolio and to reduce our negative convexity of equity. There was no comparable activity during the three months ended March 31, 2009.

Interest-Rate Swaps

For the three months ended March 31, 2009, we recorded a net gain of $112,000 on
interest-rate swaps economically hedging our consolidated obligations and advances, compared to a net gain of $509,000 relating to such interest-rate swaps for the same period in 2008.

Net Realized Loss on Early Extinguishment of Consolidated Obligation Bonds

During the three months ended on March 31, 2009, we recorded net losses of $4.5 million related to calls of consolidated obligations and no losses on
extinguishments of consolidated obligations, net of interest rate exchange agreement cancellations. During the same period of 2008, we recorded net losses of $6.6 million on consolidated obligation calls and net losses of $9.6 million on
extinguishment of consolidated obligations, net of interest rate exchange agreement cancellations.

The following table summarizes the par
value and weighted-average interest rates of the consolidated obligations called and extinguished for the three months ended March 31, 2009 and 2008.



|                                                 |  |                                      |           |   |      |   |            |  
|------------------------------------------------ |  | ------------------------------------ | --------- | - | ---- | - | ---------- | -
|                                                 |  | For the Three Months Ended March 31, |          
|Consolidated Obligations Called and Extinguished |  | 2009                                 |           |   | 2008 |  
|(in thousands, except interest rates)            |  |                                      |           |   |      |  
|Consolidated Obligations Called                  |  |                                      |           |   |      |   |            |  
|Par value                                        |  | $                                    | 4,967,255 |   |      | $ | 9,856,350  |  
|Weighted-average interest rate                   |  |                                      | 4.59      | % |      |   | 4.84       | %
|Consolidated Obligations Extinguished            |  |                                      |           |   |      |   |            |  
|Par value                                        |  |                                      |           |   |      |   | 189,390    |  
|Weighted-average interest rate                   |  |                                      |           |   |      |   | 5.29       | %
|                                                 |  |                                      |           |   |      |   |            |  
|Total par value                                  |  | $                                    | 4,967,255 |   |      | $ | 10,045,740 |  
|                                                 |  |                                      |           |   |      |   |            |  

We call and extinguish this debt primarily to economically lower the relative cost of our debt in
future years, as the future yield of the replacement debt is expected to be lower than the yield for the called and extinguished debt. We continue to review our consolidated obligation portfolio for opportunities to call or extinguish debt, lower
our interest expense, and better match the duration of our liabilities to that of our assets.

Other Expense

Other expense includes operating expenses, Finance Board/Finance Agency 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 months ended March 31, 2009 and 2008.



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|                                   |  |                                      |        |      |   |                            |  |       |  
|---------------------------------- |  | ------------------------------------ | ------ | ---- | - | -------------------------- |  | ----- | -
|                                   |  | For the Three Months Ended March 31, |       
|Other Expense                      |  | 2009                                 |        | 2008 |   | PercentIncrease/(Decrease) | 
|(in thousands, except percentages) |  |                                      |        |      |   |                            | 
|Operating:                         |  |                                      |        |      |   |                            |  |       |  
|Compensation and benefits          |  | $                                    | 6,652  |      | $ | 6,358                      |  | 4.6   |  
|Occupancy cost                     |  |                                      | 1,167  |      |   | 1,211                      |  | (3.6  | )
|Other operating                    |  |                                      | 3,062  |      |   | 3,301                      |  | (7.2  | )
|Finance Agency/Finance Board       |  |                                      | 496    |      |   | 503                        |  | (1.4  | )
|Office of Finance                  |  |                                      | 484    |      |   | 470                        |  | 3.0   |  
|Other                              |  |                                      | 145    |      |   | 165                        |  | (12.1 | )
|                                   |  |                                      |        |      |   |                            |  |       |  
|Total other expense                |  | $                                    | 12,006 |      | $ | 12,008                     |  | (0.0  | )
|                                   |  |                                      |        |      |   |                            |  |       |  

Total other expense was essentially unchanged for the three months ended March 31, 2009,
compared to the same period in 2008. Increased compensation and benefits expense was essentially offset by reduced other operating expense due to contractor conversions to employees during 2008.

Assessments

Due to our first quarter
of 2009 net loss, we had no AHP and REFCORP assessments for the three months ended March 31, 2009. The table below presents our AHP and REFCORP assessments for the three months ended March 31, 2009 and 2008. The amount shown in REFCORP
expense for the three months ended March 31, 2009 represents an adjustment of 2007 charges recorded in early 2009.



|                                   |  |                                      |    |      |   |                            |  |        |  
|---------------------------------- |  | ------------------------------------ | -- | ---- | - | -------------------------- |  | ------ | -
|                                   |  | For the Three Months Ended March 31, |   
|AHP and REFCORP Assessments        |  | 2009                                 |    | 2008 |   | PercentIncrease/(Decrease) | 
|(in thousands, except percentages) |  |                                      |    |      |   |                            | 
|AHP                                |  | $                                    |    |      | $ | 3,528                      |  | (100.0 | )
|REFCORP                            |  |                                      | 33 |      |   | 7,876                      |  | (99.6  | )
|                                   |  |                                      |    |      |   |                            |  |        |  
|Total assessments                  |  | $                                    | 33 |      | $ | 11,404                     |  | (99.7  | )
|                                   |  |                                      |    |      |   |                            |  |        |  

Due to our payment of quarterly REFCORP assessments during 2008, we are currently entitled to a
refund of $19.7 million, which we have recorded in other assets on our Statement of Condition.

See Part I. Item 1.
BusinessRegulation in our 2008 annual report on Form 10-K for additional information on our assessments.

Summary of Critical Accounting
Policies and Estimates

A discussion of our critical accounting policies and estimates is provided in our 2008 annual report on Form
10-K. Except as disclosed below, there have been no significant changes to our critical accounting policies or the estimates and assumptions used to apply them during the three months ended March 31, 2009.

Estimation of Other-than-Temporary Impairments of Securities

The continued deterioration of credit performance related to residential mortgage loans and the accompanying decline in U.S. residential real estate values have increased the level of credit risk exposure on our
private-label mortgage-backed securities. Our investments in private-label mortgage-backed securities are directly or indirectly supported by underlying mortgage loans. Due to the decline in values of residential U.S. real estate and volatile
conditions in the credit markets, we closely monitor the performance of our investment securities classified as held-to-maturity on at least a quarterly basis (or more frequently if a loss-triggering event occurs, such as a material downgrade by the
rating agencies) to evaluate our exposure to the risk of loss on these investments in order to determine whether a loss is other-than-temporary, consistent with SFAS 115 (as amended by FSP FAS No 115-1, The Meaning of
Other-than-Temporary Impairment and its Application to Certain Investments,and FSP FAS 115-2).



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For impaired debt securities, FSP FAS 115-2
requires an entity to assess whether (a) it has the intent to sell the debt security or (b) it is more likely than not that it will be required to sell the debt security before its anticipated recovery. If either of these conditions is
met, an OTTI on the security must be recognized. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, the entire amortized cost basis of the security will not be recovered, and an OTTI is
considered to have occurred. We consider whether or not we will recover the entire amortized cost of the security by comparing our best estimate of the present value of the cash flows expected to be collected from the security with the amortized
cost basis of the security. These evaluations are inherently subjective and consider a number of qualitative factors. In addition to monitoring the credit ratings of these securities for downgrades, as well as placement on negative outlook or credit
watch, we evaluate other factors that may be indicative of OTTI. These include, but are not limited to, an evaluation of the type of security, the length of time and extent to which the fair value of a security has been less than its cost, any
credit enhancement or insurance, and certain other collateral-related characteristics such as FICO® credit scores, loan-to-value ratios, delinquency and foreclosure rates, geographic
information, and the securitys performance. If our initial analysis identifies securities at risk of OTTI, we perform additional testing of these investments, which are typically private-label mortgage-backed securities. At-risk securities are
evaluated by estimating projected cash flows using models that incorporate projections and assumptions typically based on the structure of the security and certain economic environment assumptions such as delinquency and default rates, loss
severity, home price appreciation/depreciation, interest rates and securities prepayment speeds while factoring in the underlying collateral and credit enhancement.

In instances in which a determination is made that a credit loss (defined by FSP FAS 115-2 as the difference between the present value of the cash flows expected to be collected and the amortized cost basis) exists,
but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (i.e., the amortized cost
basis less any current-period credit loss), FSP FAS 115-2 changes the presentation and amount of the OTTI recognized in the statement of income. In these instances, the impairment is separated into (a) the amount of the total impairment related
to the credit loss and (b) the amount of the total impairment related to all other factors. If a securitys cash flow analysis results in a present value of expected cash flows that is less than the amortized cost basis of the security
(that is, a credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, any impairment is not other-than-temporary. If we determine that an OTTI exists, we account for the investment security as if it had been purchased
on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in non-interest income. The difference between the new amortized cost basis and the cash flows expected to be
collected is accreted into interest income prospectively over the remaining life of the security. The OTTI recognized in accumulated comprehensive loss is accreted to the carrying value of each security on a prospective basis, based on the amount
and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). See additional discussion regarding the recognition and
presentation of OTTI in Note 2 in Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements and Financial Condition and Results of OperationsInvestmentsCredit Risk.

For accounting policies and additional information regarding, among other things, estimated fair values, see Notes 1, 2, and 9 in
Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements of this report, and Note 16 in Part II. Item 8. Financial Statements and Supplementary Data and Part II. Item 7.
Managements Discussion and Analysis of Financial Condition and Results of OperationsSummary of Critical Accounting Policies and Estimates included in our 2008 annual report on Form 10-K.



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

Market Risk

The Seattle Bank is exposed to market risk since interest rates and spreads have direct effects on the market
value of our financial assets and liabilities. Because our business model results in our holding large amounts of interest-earning assets and interest-bearing liabilities, the component of market risk having the greatest effect on our financial
condition and results of operations is interest-rate risk.

Interest-rate risk is the risk that the market value of our asset and liability
portfolios will decline as a result of interest-rate volatility or that net earnings will be significantly affected by interest-rate changes. Interest-rate risk can occur in a variety of forms, including repricing risk, yield-curve risk, basis risk,
and option risk. We face repricing risk when assets and liabilities reprice at different times and with different rates, resulting in interest-margin sensitivity to changes in market interest rates. In isolation, repricing risk assumes that all
interest rates change by the same magnitude; however, differences in the timing of the repricing of assets and liabilities can cause spreads between assets and liabilities to diverge. Yield-curve risk is the risk that changes in the shape of the
yield curve may affect the market value of our assets and liabilities differently because a liability used to fund an asset may be short-term while the asset is long-term, or vice versa. Basis risk occurs when yields on assets and costs on
liabilities are based on different indices, such as LIBOR or our cost of funds. Different indices can move at different rates or in different directions, which can cause variances in income and expense. Option risk results from the optionality
embedded in certain of our assets and liabilities, such as prepayable mortgage-related instruments.

Through our market-risk management, we
attempt to ensure that we are profitable and that we protect net 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. This approach complies with Finance Agency regulations that limit the use of interest-rate exchange
agreements to those that reduce the 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 regarding our exposure to market risk 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.

Effective Duration/Effective Duration of Equity

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, absent any other effects.

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 being equal, higher effective duration numbers, whether positive
or negative, indicate greater market value sensitivity to changes in interest rates.

Effective Key-Rate-Duration-of-Equity Mismatch

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 is the difference between the maximum and minimum effective key-rate duration of equity measures.

Effective Convexity of Equity

Effective convexity measures the estimated effect of 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.



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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.

Market Value of Equity/Market Value-of-Equity Sensitivity

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

Market-Risk Management

Our market-risk measures reflect the sensitivity of our assets and liabilities to changes in
interest rates, which is primarily due to mismatches in the maturities and embedded options associated with our mortgage-related assets and the consolidated obligation bonds we use to fund these assets. The prepayment options embedded in
mortgage-related instruments generally 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-related assets and the call options within the consolidated obligations issued on our behalf cause the market values of our mortgage-related 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 has historically triggered increased prepayments of our mortgage-related assets, while the debt issued to fund the
purchase of those assets may or may not have been called depending on the specific call provisions, including lock-out periods, associated with the debt.

Our advances result in minimal interest-rate risk because we generally enter contemporaneously into interest-rate swaps or match fund to hedge our fixed interest-rate advances with maturities greater than three months
and advances with embedded derivatives, such as put options. These hedged advances effectively create a pool of variable interest-rate assets, which in combination with the strategy of issuing a portion of our debt swapped to variable
interest-rates, creates an advance portfolio with low net interest-rate risk. Our short-term investments have maturities of three months or less or are variable interest-rate investments. These investments also effectively match the interest-rate
risk of our variable interest-rate funding.

For entities with low market value of equity in relation to total assets, changes in market
conditions, including changes in or volatility of interest rates and yield-curve shifts, cause proportionately high and volatile risk measures. The table below provides financial data relating to the significant decrease in our market value of
equity as of March 31, 2009, compared to December 31, 2008. This decline in our market value of equity was primarily driven by material declines in the market value of our mortgage-backed securities backed by Alt-A collateral.



|                                                                        |  |                     |   |  |                        |   |  |            |  
|----------------------------------------------------------------------- |  | ------------------- | - |  | ---------------------- | - |  | ---------- | -
|                                                                        |  | As ofMarch 31, 2009 |   |  | As ofDecember 31, 2008 |   |  | Change     |  
|(in thousands, except ratios)                                           |  |                     |   |  |                        |   |  |            |  
|Regulatory capital                                                      |  | 2,986,799           |   |  | 2,687,140              |   |  | 299,659    |  
|Market value (loss)                                                     |  | (1,429,841          | ) |  | (2,070,136             | ) |  | 640,295    |  
|Market value of equity (including mandatorily redeemable capital stock) |  | 450,757             |   |  | 578,875                |   |  | (128,118   | )
|Total assets                                                            |  | 56,947,426          |   |  | 58,361,690             |   |  | (1,414,264 | )
|Market value leverage ratio*                                            |  | 126.3               |   |  | 100.8                  |   |  | 25.5       |  



|* | Market value leverage ratio is calculated by dividing total assets by the market value of equity.
|- | -------------------------------------------------------------------------------------------------

We evaluate our market-risk measures on an ongoing basis, under a variety of parallel and non-parallel shock scenarios.
As of March 31, 2009 and December 31, 2008, due to our significantly decreased market value of equity, we were out of compliance with our primary risk measures, as further discussed below. These primary risk measures are used for
regulatory reporting purposes, however, as discussed in detail below, for interest-rate risk management and policy compliance purposes, we have enhanced our market-risk measurement process to better isolate the effects of credit/liquidity associated
with our Alt-A-backed mortgage-backed securities portfolio. The following table summarizes our primary risk measures and their respective limits as of March 31, 2009 and December 31, 2008.



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|                                                                                       |  |                     |    |  |                        |   
|-------------------------------------------------------------------------------------- |  | ------------------- | -- |  | ---------------------- | --
|Primary Risk Measures                                                                  |  | As ofMarch 31, 2009 |    |  | As ofDecember 31, 2008 |   
|Effective duration of equity                                                           |  | 7.98                |    |  | 23.59                  |   
|Effective convexity of equity                                                          |  | 12.13               |    |  | (6.18                  | ) 
|Effective key-rate-duration-of-equity mismatch                                         |  | 20.59               |    |  | 16.09                  |   
|Market value-of-equity sensitivity (+ 100 basis point shock scenario) (in percentages) |  | (6.06               | )% |  | (27.24                 | )%
|Market value-of-equity sensitivity (-100 basis point shock scenario) (in percentages)  |  | 20.38               | %  |  | 20.92                  | % 

The duration and the market value of each of our asset and liability portfolios have contributing
effects on our overall effective duration of equity. The reduction in the effective duration of equity primarily resulted from a decrease in duration contributions of our mortgage-related assets and advances (net of derivatives hedging our
advances). Decreases in the duration contributions of our consolidated obligation bonds further reduced our effective duration. The increase in the effective convexity of equity was primarily caused by reduced negative convexity contributions of our
mortgage-related assets, increased positive convexity of our advances (including the derivatives hedging the advances), and increased positive convexity contributions from our callable consolidated obligations. Effective key-rate-duration-of-equity
mismatch increased as of March 31, 2009 from December 31, 2008, primarily due to the changes described above for our duration-related measures, which were exacerbated by the high market value leverage ratio.

Our estimates of our market-value-of-equity sensitivity changes resulting from up 100-basis point changes in interest rates improved as a result of the
reduced duration, but the shock values remain elevated due to the very depressed market value of our equity and the resulting high market value leverage ratio as of March 31, 2009 and December 31, 2008.

In the first quarter of 2009, we continued our market-risk measurement process improvements. For market-risk management purposes, we replaced the
adjusted risk measures used in the third and fourth quarters of 2008 with a more sophisticated disaggregation of our operations to better isolate the effects of credit/liquidity associated with our Alt-A-backed collateral. Commencing in mid-January
2009, for market-risk management purposes, we began reporting on a market value basis (i) a credit/liquidity portfolio and (ii) a basis and mortgage portfolio. The sum of the market values of these two portfolios equal the market value of
the Seattle Bank. The credit/liquidity portfolio contains our mortgage-backed investments that are backed by Alt-A mortgage-backed securities portfolio along with the liabilities that fund these assets, as well as any associated hedging instruments.
The basis and mortgage portfolio contains the Seattle Banks remaining operations, primarily consisting of our advances, short-term investments, mortgage loans held for portfolio, and mortgage investments that are not backed by Alt-A
collateral, along with the funding and hedges associated with these assets. This process allows us to more accurately measure and manage interest-rate risk in the basis and mortgage portfolio. Similarly, the credit/liquidity portfolio allows more
accurate identification of the credit/liquidity effects of this portfolio on our market risk measures and our market value leverage ratio. We believe that this improvement in our risk management process provides greater transparency, a more granular
assessment of market risk, and a means to more effectively manage our risks.

Our risk management policy limits apply to the basis and
mortgage book risk measures, just as they previously applied to our adjusted risk measures in the third and fourth quarters of 2008. The following tables summarize our basis and mortgage book risk measures and their respective limits as of
March 31, 2009 and our adjusted risk measures as of December 31, 2008.



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|                                                                                      |  |                     |    |  |                   |  
|------------------------------------------------------------------------------------- |  | ------------------- | -- |  | ----------------- | -
|Mortgage and Basis Book Risk Measures and Limits                                      |  | As ofMarch 31, 2009 |    |  | Risk MeasureLimit |  
|Effective duration of equity                                                          |  | (1.68               | )  |  | +/-5.00           |  
|Effective convexity of equity                                                         |  | (0.68               | )  |  | +/-5.00           |  
|Effective key-rate-duration-of-equity mismatch                                        |  | 2.73                |    |  | +/-3.50           |  
|Market-value-of-equity sensitivity (+100 basis point shock scenario) (in percentages) |  | 0.82                | %  |  | +/-4.50           | %
|Market-value-of-equity sensitivity (-100 basis point shock scenario) (in percentages) |  | (0.71               | )% |  | +/-4.50           | %



|                                                                                      |  |                        |    |  |                   |  
|------------------------------------------------------------------------------------- |  | ---------------------- | -- |  | ----------------- | -
|Adjusted Risk Measures and Limits                                                     |  | As ofDecember 31, 2008 |    |  | Risk MeasureLimit |  
|Effective duration of equity                                                          |  | 10.56                  |    |  | +/-5.00           |  
|Effective convexity of equity                                                         |  | (9.34                  | )  |  | +/-4.00           |  
|Effective key-rate-duration-of-equity mismatch                                        |  | 4.75                   |    |  | +/-3.50           |  
|Market-value-of-equity sensitivity (+100 basis point shock scenario) (in percentages) |  | (15.75                 | )% |  | +/-4.50           | %
|Market-value-of-equity sensitivity (-100 basis point shock scenario) (in percentages) |  | 6.41                   | %  |  | +/-4.50           | %

Instruments that Address Market Risk

Consistent with Finance Agency regulation, we enter into interest-rate exchange agreements, such as interest-rate swaps, interest-rate caps and floors,
forward purchase and sale agreements, and swaptions only to reduce the interest-rate exposures inherent in otherwise unhedged assets and funding positions, to achieve our risk-management objectives, and to reduce our cost of funds. 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 $40.9 billion and $30.6 billion as of March 31, 2009 and December 31, 2008. We report our derivatives in the Statements of
Condition at their estimated fair value. As of March 31, 2009 and December 31, 2008, we held derivative assets of $37.8 million and $32.0 million, as well as derivative liabilities of $263.6 million and $235.4 million. See
Financial Condition  Derivative Assets and Liabilities, for additional information.



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

Disclosure Controls and Procedures

The Seattle Banks senior management is responsible for establishing and maintaining a system of disclosure controls and procedures
designed to ensure that information required to be disclosed by the Seattle Bank in the reports it files or submits under the Securities Exchange Act of 1934, as amended, (Exchange Act), is recorded, processed, summarized, and reported within the
time periods specified in the rules and forms of the SEC. The Seattle Banks disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Seattle
Bank in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure. Because of inherent limitations, disclosure controls and procedures, as well as internal control over financial reporting, may not prevent or detect all inaccurate statements or omissions. The
design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving stated goals under all potential conditions.

As discussed in Part II. Item 9A(T)  Controls and Procedures of our 2008 annual report on Form 10-K, our management
concluded that the Seattle Banks disclosure controls and procedures were not effective as of December 31, 2008 due to a material weakness in our control environment, which also contributed to the existence of additional material
weaknesses related to the financial reporting and accounting for private-label mortgage-backed securities and amortization of premiums and discounts on held-to-maturity securities. A material weakness is a control deficiency, or combination of
control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Seattle Banks annual or interim financial statements will not be prevented or detected on a
timely basis.

Under the supervision and with the participation of the Seattle Banks management, including the president and chief
executive officer and the chief accounting and administrative officer (who for purposes of the Seattle Banks disclosure controls and procedures performs similar functions as a principal financial officer), the Seattle Bank evaluated the
effectiveness of the Seattle Banks disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, 2009, the end of the period covered by this report. Based on this evaluation, our management has concluded
that the Seattle Banks disclosure controls and procedures were not effective as of March 31, 2009, because the previously identified material weaknesses as of December 31, 2008 and September 30, 2008 have not been fully
remediated.

The Seattle Banks senior management performed additional analysis and other procedures to ensure that our financial
statements contained within this quarterly report on Form 10-Q were prepared in accordance with GAAP. Accordingly, notwithstanding the material weaknesses described below, we believe our financial statements included in this quarterly report on Form
10-Q fairly present in all material respects our financial position, results of operations, and cash flows, for the periods presented.

Material
Weaknesses

Control Environment

As of December 31, 2008, we had not maintained an effective control environment based on the criteria established in the COSO Framework, and as of March 31, 2009 had not fully remediated such control environment, specifically:



| |  |  | We did not ensure adequate oversight over significant accounting estimates and assumptions given the current risks in our credit and investment portfolios and the
rapidly changing market conditions. Our oversight over significant estimates and assumptions was not sufficiently independent and did not include input from key managers across the organization nor did we conduct timely benchmarking of assumptions
to ensure they were still applicable during rapidly changing market conditions. In addition, ineffective flows of information and lines of communication among key functional areas, such as treasury and risk management, contributed to our failure to
detect or prevent risks to the financial reporting process from being appropriately addressed.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We did not establish and maintain an adequate assignment of authority and segregation of duties among members of management. Specifically, a member of senior
management and an analyst that participated in OTTI evaluation for private-label mortgage-backed securities were members of the department which was also responsible for the purchase of such securities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The material weakness in our control environment contributed to the existence of the additional material
weaknesses described below, as of December 31, 2008. In addition, this control environment material weakness could result in a material misstatement to any of our financial statement accounts and disclosures. Such a misstatement, if not
prevented or detected on a timely basis, could result in a material misstatement to the annual or interim financial statements.

Financial Reporting and Accounting for Private-Label Mortgage-Backed Securities.As of December 31, 2008, we had not designed and maintained effective controls to ensure that financial reporting and accounting for OTTI of
private-label mortgage-backed securities were in conformity with GAAP. Specifically, we did not utilize an appropriate methodology that included financial models and related assumptions, in determining whether these securities were other than
temporarily impaired. In addition, as of September 30, 2008, we concluded that we did not maintain effective controls over the methodology for evaluating OTTI of private-label mortgage-backed securities given the change in risk profile for
these securities.

Amortization of Premiums and Accretion of Discounts on Held-to-Maturity Securities. As of December 31, 2008,
we had not maintained effective controls to ensure that our amortization of premiums and accretion of discounts on held-to-maturity securities were in conformity with GAAP. Specifically, we did not have adequate controls to ensure a sufficient,
timely review and approval of significant inputs to our amortization methodology, including controls to ensure that unusual results were appropriately identified, reviewed, and evaluated.

Each of the two preceding control deficiencies resulted in adjustments to our preliminary financial statements for the year ended December 31, 2008.
In addition, these control deficiencies could result in misstatement of the related financial statement accounts that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a
timely basis. Accordingly, management concluded that each of these control deficiencies constitutes a material weakness. As of March 31, 2009, we had not fully remediated these weaknesses.

Changes in Internal Control over Financial Reporting

The president and chief executive officer and the chief accounting and administrative officer (who for the purposes of the Seattle Banks internal control of financial reporting performs similar functions as the principal 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 fiscal quarter ended
March 31, 2009 that have materially affected or which are reasonably likely to materially affect our internal control over financial reporting. Changes in our internal control over financial reporting since December 31, 2008, including the
three months ending March 31, 2009 that management believes have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting are described below.

Remediation Activities Relating to Previously Identified Material Weaknesses

Material Weakness Identified as of September 30, 2008

During the first quarter of 2009, we
continued to address the material weakness identified in managements assessment of our disclosure controls and procedures as of September 30, 2008 relating to our financial accounting and reporting for private-label mortgage-backed
securities, specifically evaluation of OTTI:



| | 1. | We formally established an OTTI steering committee (OTTI committee) composed of senior Seattle Bank managers, including accounting and credit risk personnel. The OTTI committee acts
as the Seattle Banks focal point for developing and approving new methodologies, controls, policies, and frameworks for the OTTI evaluation process. We completed this remediation activity for the first quarter of 2009.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | We developed and documented an improved process for identifying and evaluating securities for possible OTTI. Under the direction of our OTTI steering committee, we perform an
initial, security-by-security assessment to identify investments at risk for OTTI at the end of each quarter, based on various quantitative and qualitative criteria. We implemented procedures to regularly validate our data and assumptions for this
initial assessment. For securities identified as being at risk, we implemented a more robust cash flow modeling approach, as discussed further below, in the fourth quarter of 2008. Finally, the OTTI committee reviews the model results and formally
documents its conclusions for this inherently complex and subjective evaluation. While we believe the key elements of this new control process were successfully implemented for the fourth quarter of 2008, we put additional controls in place to help
ensure, for example, that proper segregation exists between those responsible
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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for trading securities and those responsible for running models and analyzing the securities for OTTI. We
completed this remediation activity for the first quarter of 2009.



| | 3. | We acquired new software and implemented a more granular and sophisticated cash-flow modeling system in order to improve
the reliability and transparency of the data used to evaluate possible other-than-temporary impairment of our at-risk securities. In particular, we are now able to consider loan-level information, including estimated LTV ratios, FICO® credit scores, geographic information, and other characteristics. These models estimate future cash flows, including defaults and losses, to help us assess whether the Seattle Bank will collect
all contractual cash flows related to a potentially at-risk security. The advanced cash-flow modeling software was successfully implemented for the fourth quarter of 2008 and was used for the first quarter of 2009.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | In addition to implementing new software, we implemented new guidance from our regulator, the Finance Agency, intended to ensure consistency among the FHLBanks relating to OTTI. As
discussed below, the Seattle Bank, like other FHLBanks, used and validated key modeling assumptions provided by the FHLBank of San Francisco in performing our OTTI assessment for the first quarter of 2009. We are continuing to participate in other
related consistency initiatives in accordance with the guidance, particularly in the area of pricing. We are attempting to complete this remediation activity, working with the other FHLBanks, for the second quarter of 2009. We believe that this
joint effort will also help remediate our OTTI material weakness identified as of December 31, 2008.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We also updated
our documentation and processes to comply with the requirements of FSP FAS 115-2, which we adopted effective January 1, 2009. When the above procedures and controls are fully implemented, we believe that we will have remediated our material
weakness related to the financial reporting and accounting for private-label mortgage-backed securities, specifically evaluation of OTTI.

Material Weaknesses Identified as of December 31, 2008

Also during the first quarter of 2009, we began to
implement new controls and procedures to address the material weaknesses as of December 31, 2008 related to our overall control environment and the amortization of premiums and accretion of discounts on held-to-maturity securities. As part of
this effort, which is continuing, we plan to implement the following actions to increase the effectiveness of information and communication within the Seattle Bank and with the Finance Agency and our external auditors:

Increase Oversight and Governance of Valuations of Financial Instruments used for Financial Reporting. We are in the process of evaluating our
management committee structure to help ensure appropriate oversight and segregation of duties through the participation of key managers from different departments across the organization responsible for developing, benchmarking, and documenting
assumptions and processes used for significant accounting estimates and valuations, including identification of key control points, in coordination with the OTTI committee. Once established, we expect this structure to enhance our controls and
information flow as well as facilitate communication and actions requiring inter-departmental cooperation. We expect to complete this remediation activity for the second quarter of 2009.

During the first quarter of 2009, we also established specialized management committees to provide oversight over our processes and policies with respect
to (1) the amortization of premiums and the accretion of discounts on mortgage-related assets, and (2) derivative strategies and documentation, effectiveness testing, and accounting and disclosure requirements for derivatives and hedging.
In addition, in April 2009, we made certain changes to our senior management team which were intended in part to strengthen our risk management and, in May 2009, we established a new Board-level committee to provide enhanced oversight of risk
management activities. This committee will be in place for the third quarter of 2009.

FHLB System Efforts.The Seattle Bank will be
involved in a FHLB System-wide effort to standardize pricing of financial instruments among the 12 FHLBanks. This effort is expected to lead to enhanced and more consistent disclosures relating to, among other things, valuation of financial
instruments and help ensure that improved and more consistent information is provided to our regulator and external auditors. We currently expect to complete this activity for the third quarter of 2009. In addition, as discussed below, the FHLBanks,
including the Seattle Bank, successfully implemented new regulatory guidance to help ensure consistent assumptions and methods for OTTI evaluations during the first quarter of 2009.

Other Changes in Internal Control Over Financial Reporting



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As described in Part I. Item 1. Financial StatementsCondensed Notes to Financial
Statements, in accordance with the Finance Agencys OTTI consistency guidance, we are required to use the key modeling assumptions provided by the FHLBank of San Francisco for the cash flow analysis of our private-label mortgage-backed
securities in evaluating OTTI for such securities. Such assumptions are material to the determination of OTTI and, in turn, material to the Seattle Banks internal control over financial reporting. Accordingly, management has established
procedures to review the documentation and assumptions provided by the FHLBank of San Francisco in order to determine whether such assumptions are reasonable. Based on this review, management has concluded that this change did not diminish the
Seattle Banks internal control over financial reporting. There were no other changes in the Seattle Banks internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Seattle Banks internal control over financial reporting.



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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
|-------- | ------------

Our 2008 annual report on Form 10-K
includes a detailed discussion of our risk factors. The information below includes material updates to, and should be read in conjunction with, the risk factors included in our 2008 annual report on Form 10-K.

The continued deterioration and uncertainty in the U.S. housing and credit markets has and could continue to adversely impact the market value of
our assets and liabilities, particularly our private-label mortgage-backed securities, as well as result in asset impairment charges that could significantly impact our future financial condition and operating results.

Although mortgage loan refinancing applications significantly increased in the first quarter of 2009, the U.S. mortgage market generally continued to
deteriorate during this period, with delinquency and foreclosure rates on mortgage loans increasing nationwide. The mortgage-backed security market, which had for the most part ceased operating during much of 2008, continued its lack of activity as
uncertainty over the impact of new or proposed governmental actions (including mortgage loan modification programs), further home-price deterioration, and changes in borrower, lender, and investor behavior depressed and complicated the pricing of
private-label mortgage-backed securities. The uncertainty as to the depth and duration of these trends has resulted in a change in the markets for private-label mortgage-backed securities, such that what had been generally functioning markets in
early to mid-2007 have become highly illiquid markets, with prices reflecting a lack of dealer and investor sponsorship. In addition, in the first quarter of 2009, the NRSROs downgraded a significant number of additional private-label
mortgage-backed securities, including some owned by the Seattle Bank.

These and other factors have led to the deterioration of the market
value of many of our private-label mortgage-backed securities since mid-2007, contributing to our unrealized market value to book value of equity of 24.0% as of March 31, 2009. In addition, although we believe the credit quality of our
mortgage-backed securities to be generally good, we recorded $895.2 million of other-than-temporary impairments as of March 31, 2009 (of which $71.7 million was related to credit loss and $823.5 million was related to non-credit factors), after
recording $304.2 million in other-than-temporary impairment charges for the year ended December 31, 2008 related to certain of our held-to-maturity securities. We believe that the recent NRSRO ratings downgrades and the changes in accounting
rules related to the recognition of other-than-temporary impairments may indicate a higher possibility of additional other-than-temporary impairment charges on our private-label mortgage-backed securities in the future, which, among other things,
would negatively affect our financial condition and operating results. For additional information, see Note 2 in Part I. Item 1. Financial StatementsCondensed Notes to Financial Statements, and Part I. Item 2.
Managements Discussion and Analysis of Financial Condition and Results of OperationsFinancial ConditionInvestments in this report.

We continued to report a risk-based capital deficiency, primarily resulting from the unrealized and realized market-value losses on our private-label mortgage-backed securities as of March 31, 2009. Should
these conditions continue, we will, among other things, continue to be unable to redeem or repurchase capital stock or pay dividends, which could negatively impact our



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members use of our services, resulting in a decline in advance volumes and results of operations, and could
be subject to additional regulatory action.

We are required to hold risk-based capital at least equal to the sum of our
credit-risk, market-risk, and operations-risk capital requirements. One component of the market-risk requirement is that we maintain capital equal to the amount by which the market value of our assets is less than 85% of their book value. The
credit-risk component is significantly affected by the credit ratings of our investments. As a result of the downgrades of a number of our private-label mortgage-backed securities in the first quarter of 2009, the credit-risk component of our
risk-based capital significantly increased. Further, we are also required to maintain operations-risk capital equal to 30% of the sum of our market-risk requirement and credit-risk requirement. Accordingly, with the continued decline in the market
value of our private-label mortgage-backed securities, our market-risk, credit risk, and operations-risk capital requirements have increased significantly, leading to a risk-based capital deficiency. As of March 31, 2009, we reported a $466.7
million deficiency, compared to the $159.2 million deficiency in our risk-based capital requirement as of December 31, 2008. Under Finance Agency regulations, an FHLBank that fails to meet any regulatory capital requirement may not declare
dividends or redeem or repurchase capital stock without obtaining a waiver from the Director of the Finance Agency. As such, we do not expect to declare dividends or redeem or repurchase any of our outstanding Class A or Class B stock while a
risk-based capital deficiency exists. Until the risk-based capital shortfall occurred, we had been repurchasing Class A stock on a regular basis since April 2007 and had declared quarterly dividends since December 2006. Although we do not
believe that the risk-based capital shortfall has affected our ability to meet our members liquidity and funding needs, the suspension of dividends and all capital stock repurchases and redemptions could decrease member confidence, which in
turn could reduce advance demand and net income should our members elect to use alternative sources of wholesale funding. Further, as a result of the risk-based capital shortfall, the credit rating agencies could perceive an increased level of risk
or deterioration in the performance at the Seattle Bank, which could result in a downgrade in our outlook or short-or long-term credit ratings. Should our ratings decline, our business counterparties could perceive that the Seattle Bank has
increased credit risk, which could increase our cost of entering into interest-rate exchange agreements, secured borrowings, and collateral arrangements, negatively impacting our net income.

In addition, as a result of these conditions, the Finance Agency could take regulatory action with regard to the Seattle Bank, which could require, among
other things, our developing a capital restoration plan. Implementation of such a plan could result in further limitations on dividend and capital stock repurchases and redemptions, which could also negatively impact demand for our advances and
results of operations.

See Part I. Item 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationsCapital Resources and LiquidityCapital Resources for additional information on the Seattle Banks dividend and stock repurchase restrictions and Capital Plan amendments.

The loss of large members with significant amounts of advance business (such as through the merger of Washington Mutual Bank, F.S.B. into JPMorgan
Chase Bank N.A., a non-member entity) or the loss of substantial advance business from those institutions could have a negative effect on our financial condition and results of operations.

Our advance balance has been concentrated with commercial banks and thrift institutions. As of March 31, 2009, five borrowers held 70.6 % of
the par value of our outstanding advances, with two borrowers holding 55.5% of the par value of our outstanding advances (JPMorgan Chase Bank N.A. with 34.2% and Bank of America Oregon, N.A with 21.3%).

In September 2008, BofA announced that it had agreed to purchase Merrill Lynch, which transaction closed on January 1, 2009. Bank of America Oregon,
N.A., a wholly owned subsidiary of BofA, and Merrill Lynch Bank USA, a wholly owned subsidiary of Merrill Lynch, are both members of the Seattle Bank. In March 2009, Merrill Lynch Bank USA prepaid its outstanding advances totaling $2.9 billion and
currently holds none of our advances.

On September 25, 2008, in a transaction facilitated by the FDIC, Washington Mutual Bank, F.S.B.
was acquired by JPMorgan Chase, a non-member. In early October 2008, JPMorgan Chase notified the Seattle Bank that it had merged Washington Mutual Bank, F.S.B. into a non-member entity, JPMorgan Chase Bank, N.A. that assumed the fully
collateralized, related advances and outstanding capital stock of the Seattle Bank. In connection with the transaction and pursuant to our Capital Plan, we reclassified the membership to that of a non-member shareholder that is no longer able to
enter into new borrowing arrangements with the Seattle Bank. Approximately 83% of the advances outstanding as of December 31, 2008 with JPMorgan Chase Bank, N.A. mature by the end of 2009.

The reclassification of our then largest member into a non-member shareholder (which cannot take out new advances) and the combination of the parent
entities of two of our other large members have significantly changed the potential concentration of our advances among our members, particularly our largest borrowers. We believe that these changes may lead to adverse effects on our business,
including lower advance balances and related interest income, and possibly, lower net income. Further, the loss of an additional large member could result in additional significant adverse impact on our financial condition and results of operations,
which could impact our ability to maintain our current level of business operations.



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Member failures and consolidations may adversely affect our business.

The financial services industry has experienced an increase in both the number of financial institution failures and in the number of mergers and
consolidations. So far in 2009, five of the Seattle Banks member institutions have failed. If the number of member institution failures and mergers or consolidations, particularly into out-of-district acquirers, continues to increase, this
activity may reduce the number of current and potential members in our district. The resulting loss of business could negatively impact our financial condition and results of operations, as well as our operations generally.

Further, although all of our outstanding advances with the five failed institutions referenced above were prepaid by either the FDIC or the applicable
acquiring institutions, if more members fail and if the FDIC or the member (or another applicable entity) does not promptly repay all of the failed institutions obligations to us or assume the outstanding advances, we may be required to
liquidate the collateral pledged by the failed institution in order to satisfy its obligations to us. If that were the case, the proceeds realized from the liquidation of pledged collateral may not be sufficient to fully satisfy the amount of the
failed institutions obligations or the operational cost of liquidating the collateral.

We rely heavily upon effective
information systems and other technology, and failures in these systems could adversely affect our business.

We rely heavily upon
effective information systems and other technology to conduct and manage our business, including systems and other technology provided by third parties. Maintaining or, if necessary, upgrading effective information systems and technologies is
dependent on the continued support capabilities of our third party providers, a stable operating environment, and appropriate upgrade and enhancement strategies which may require substantial capital expenditures from time to time. To the extent that
we experience a significant failure or interruption in any of these systems or other technology due to business decisions or actions by third parties, we may be unable to conduct and manage our business effectively. In the first quarter of
2009, our primary vendor for data processing services notified us of its intent not to renew our agreement, which runs until December 31, 2010. We are currently evaluating alternatives to
replace the essential computing services currently provided by this vendor and may be negatively impacted if an appropriate alternative cannot be timely found. In addition, although we have established and maintain disaster recovery
plans, we can provide no assurance that they will be able to prevent, or timely and adequately address or mitigate, the negative effects of any failure or interruption in our information systems and other technology. A natural disaster or other
catastrophe, an act of terrorism, security breach, or a third-party service providers error could cause such a failure or interruption. Any significant failure or interruption in our systems and related technology could harm our customer
relations, reputation, risk management, safety and soundness, and profitability, which could negatively affect our financial condition and results of operations.



|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
|------- | ---------------------------------------------------

None.



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

None.



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



|            |  |                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibits                                                                                                                                                                  
|10.1*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for President and CEO as of January 1, 2009.                                      
|            | 
|10.2*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for Exempt Staff and Officers as of January 1, 2009.                              
|            | 
|10.3*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP)  Long-term Incentive Plan as of January 1, 2009.                                               
|            | 
|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 Accounting and Administrative 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 Accounting and Administrative Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Director or employee compensation-related exhibit.
|- | --------------------------------------------------



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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: |  | May 20, 2009
|    |  | Richard M. Riccobono President and Chief
Executive Officer                             |  |        |  |             
|    |  |                                                                                        | 
|By: |  | /s/ Christina J. Gehrke                                                                |  | Dated: |  | May 20, 2009
|    |  | Christina J. Gehrke Senior Vice President,
Chief Accounting and Administrative Officer |  |        |  |             



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EXHIBITS



|            |  |                                                                                                                                                                           
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibits                                                                                                                                                                  
|10.1*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for President and CEO as of January 1, 2009.                                      
|            | 
|10.2*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for Exempt Staff and Officers as of January 1, 2009.                              
|            | 
|10.3*       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP)  Long-term Incentive Plan as of January 1, 2009.                                               
|            | 
|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 Accounting and Administrative 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 Accounting and Administrative Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Director or employee compensation-related exhibit.
|- | --------------------------------------------------



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