##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended March 31, 2007

OR



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

For the transition period from  to

Commission File No. 000-51406



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FEDERAL HOME LOAN BANK OF
SEATTLE

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Federally chartered corporation                                |  | 91-0852005                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                            |  |           
|------------------------------------------- |  | ----------
|1501 Fourth Avenue, Suite 1800, Seattle, WA |  | 98101-1693
|(Address of principal executive offices)    |  | (Zip Code)

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



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

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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

The registrants stock is not publicly
traded and is generally only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, and subject to certain regulatory and statutory limits. As of April 30, 2007, the registrant had 4,795 shares of
Class A stock and 22,220,673 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, 2007

TABLE OF CONTENTS



|           |  |                                                                                       |  |     
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                       |  | Page
|PART I.    |  | FINANCIAL INFORMATION                                                                 |  |     
|           |  |                                                                                      
|Item 1.    |  | Financial Statements:                                                                 |  |     
|           |  |                                                                                      
|           |  | Statements of Condition  As of March 31, 2007 and December 31, 2006                  |  | 3   
|           |  |                                                                                      
|           |  | Statements of Income  For the three months ended March 31, 2007 and 2006             |  | 4   
|           |  |                                                                                      
|           |  | Statements of Capital  For the three months ended March 31, 2007 and 2006            |  | 5   
|           |  |                                                                                      
|           |  | Statements of Cash Flows  For the three months ended March 31, 2007 and 2006         |  | 6   
|           |  |                                                                                      
|           |  | Condensed Notes to Financial Statements                                               |  | 8   
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 43  
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 48  
|           |  |                                                                                      
|PART II.   |  | OTHER INFORMATION                                                                     |  |     
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  | 49  
|           |  |                                                                                      
|Item 1A.   |  | Risk Factors                                                                          |  | 49  
|           |  |                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 49  
|           |  |                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                       |  | 49  
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 49  
|           |  |                                                                                      
|Item 5.    |  | Other Information                                                                     |  | 49  
|           |  |                                                                                      
|Item 6.    |  | Exhibits                                                                              |  | 50  
|           | 
|SIGNATURES |  | 51                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

Federal Home Loan Bank of Seattle

Statements of Condition



|                                                                          |  |                        |            |   |                        |   |            |  
|------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ---------------------- | - | ---------- | -
|                                                                          |  | As of   March 31, 2007 |            |   | As ofDecember 31, 2006 |  
|(in thousands, except par value)                                          |  | (unaudited)            |            |   | (audited)              |  
|Assets                                                                    |  |                        |            |   |                        |   |            |  
|Cash and due from banks                                                   |  | $                      | 1,604      |   |                        | $ | 1,119      |  
|Interest-bearing deposits                                                 |  |                        | 2,873,000  |   |                        |   | 2,165,000  |  
|Securities purchased under agreements to resell                           |  |                        | 500,000    |   |                        |   |            |  
|Federal funds sold                                                        |  |                        | 9,168,000  |   |                        |   | 2,832,000  |  
|Held-to-maturity securities* (Other FHLBanks consolidated obligations:   |  |                        | 11,647,229 |   |                        |   | 13,687,909 |  
|$3,024,963 and $4,224,959) (Note 2)                                       |  |                        |            |   |                        |   |            |  
|Advances (Note 3)                                                         |  |                        | 25,652,824 |   |                        |   | 27,960,994 |  
|Mortgage loans held for portfolio (Note 4)                                |  |                        | 6,188,245  |   |                        |   | 6,366,648  |  
|Accrued interest receivable (Other FHLBanks: $9,421 and $51,325)          |  |                        | 248,349    |   |                        |   | 323,342    |  
|Premises and equipment, net                                               |  |                        | 11,963     |   |                        |   | 12,622     |  
|Derivative assets (Note 7)                                                |  |                        | 163,228    |   |                        |   | 146,900    |  
|Other assets                                                              |  |                        | 19,887     |   |                        |   | 18,211     |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Total Assets                                                              |  | $                      | 56,474,329 |   |                        | $ | 53,514,745 |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Liabilities and Capital                                                   |  |                        |            |   |                        |   |            |  
|Liabilities                                                               |  |                        |            |   |                        |   |            |  
|Deposits                                                                  |  | $                      | 1,075,877  |   |                        | $ | 1,003,960  |  
|Consolidated obligations, net (Note 5):                                   |  |                        |            |   |                        |   |            |  
|Discount notes                                                            |  |                        | 4,628,825  |   |                        |   | 1,495,861  |  
|Bonds                                                                     |  |                        | 47,790,509 |   |                        |   | 48,040,715 |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Total consolidated obligations, net                                       |  |                        | 52,419,334 |   |                        |   | 49,536,576 |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Accrued interest payable                                                  |  |                        | 587,994    |   |                        |   | 567,585    |  
|Affordable Housing Program (AHP)                                          |  |                        | 21,262     |   |                        |   | 22,759     |  
|Payable to REFCORP                                                        |  |                        | 2,638      |   |                        |   | 1,541      |  
|Derivative liabilities (Note 7)                                           |  |                        | 21,931     |   |                        |   | 46,846     |  
|Other liabilities                                                         |  |                        | 33,060     |   |                        |   | 34,952     |  
|Mandatorily redeemable Class B stock (Note 6)                             |  |                        | 82,219     |   |                        |   | 69,222     |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Total Liabilities                                                         |  |                        | 54,244,315 |   |                        |   | 51,283,441 |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Commitments and Contingencies (Note 10)                                   |  |                        |            |   |                        |   |            |  
|Capital                                                                   |  |                        |            |   |                        |   |            |  
|Capital Stock ($100 par value), putable, issued and outstanding (Note 6): |  |                        |            |   |                        |   |            |  
|Class A stock: 5 shares                                                   |  |                        | 485        |   |                        |   |            |  
|Class B stock: 21,308 and 21,410 shares                                   |  |                        | 2,130,775  |   |                        |   | 2,140,997  |  
|Retained earnings                                                         |  |                        | 100,844    |   |                        |   | 92,397     |  
|Accumulated other comprehensive loss                                      |  |                        | (2,090     | ) |                        |   | (2,090     | )
|                                                                          |  |                        |            |   |                        |   |            |  
|Total Capital                                                             |  |                        | 2,230,014  |   |                        |   | 2,231,304  |  
|                                                                          |  |                        |            |   |                        |   |            |  
|Total Liabilities and Capital                                             |  | $                      | 56,474,329 |   |                        | $ | 53,514,745 |  
|                                                                          |  |                        |            |   |                        |   |            |  

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|* | Fair values of held-to-maturity securities were $11,474,988 and $13,474,121 as March 31, 2007 and December 31, 2006.
|- | --------------------------------------------------------------------------------------------------------------------

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Income

(Unaudited)



|                                                                                            |  |      |         |   |      |   |        
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------
|For the Three Months Ended March 31,                                                        |  | 2007 |         |   | 2006
|(in thousands)                                                                              |  |      |         |   |     
|Interest Income                                                                             |  |      |         |   |      |   |        
|Advances                                                                                    |  | $    | 357,591 |   |      | $ | 249,878
|Prepayment fees on advances                                                                 |  |      | 1,143   |   |      |   | 344    
|Interest-bearing deposits                                                                   |  |      | 31,363  |   |      |   | 13,022 
|Securities purchased under agreements to resell                                             |  |      | 6,813   |   |      |   | 4,741  
|Federal funds sold                                                                          |  |      | 82,884  |   |      |   | 77,193 
|Held-to-maturity securities (other FHLBanks Consolidated Obligations: $31,504 and $44,876) |  |      | 133,299 |   |      |   | 143,315
|Mortgage loans held for portfolio                                                           |  |      | 78,090  |   |      |   | 91,323 
|Loans to other FHLBanks                                                                     |  |      | 1       |   |      |   |        
|                                                                                            |  |      |         |   |      |   |        
|Total interest income                                                                       |  |      | 691,184 |   |      |   | 579,816
|                                                                                            |  |      |         |   |      |   |        
|Interest Expense                                                                            |  |      |         |   |      |   |        
|Consolidated obligations                                                                    |  |      | 652,332 |   |      |   | 548,020
|Deposits                                                                                    |  |      | 10,300  |   |      |   | 7,829  
|Securities sold under agreements to repurchase                                              |  |      | 4       |   |      |   | 3,698  
|Mandatorily redeemable Class B stock and other borrowings                                   |  |      | 90      |   |      |   | 10     
|                                                                                            |  |      |         |   |      |   |        
|Total interest expense                                                                      |  |      | 662,726 |   |      |   | 559,557
|                                                                                            |  |      |         |   |      |   |        
|Net Interest Income                                                                         |  |      | 28,458  |   |      |   | 20,259 
|Other Income (Loss)                                                                         |  |      |         |   |      |   |        
|Service fees                                                                                |  |      | 404     |   |      |   | 457    
|Net loss from sale of held-to-maturity securities                                           |  |      | (2,351  | ) |      |   |        
|Net (loss) gain on derivatives and hedging activities                                       |  |      | (1,187  | ) |      |   | 1,865  
|Net gain on early extinguishment of consolidated obligations                                |  |      | 327     |   |      |   |        
|Other gain, net                                                                             |  |      | 25      |   |      |   | 2      
|                                                                                            |  |      |         |   |      |   |        
|Total other income (loss)                                                                   |  |      | (2,782  | ) |      |   | 2,324  
|                                                                                            |  |      |         |   |      |   |        
|Other Expense                                                                               |  |      |         |   |      |   |        
|Operating expenses:                                                                         |  |      |         |   |      |   |        
|Compensation and benefits                                                                   |  |      | 5,657   |   |      |   | 5,697  
|Other operating                                                                             |  |      | 4,434   |   |      |   | 4,804  
|Federal Housing Finance Board                                                               |  |      | 447     |   |      |   | 459    
|Office of Finance                                                                           |  |      | 405     |   |      |   | 375    
|Other                                                                                       |  |      | 316     |   |      |   | 360    
|                                                                                            |  |      |         |   |      |   |        
|Total other expense                                                                         |  |      | 11,259  |   |      |   | 11,695 
|                                                                                            |  |      |         |   |      |   |        
|Income Before Assessments                                                                   |  |      | 14,417  |   |      |   | 10,888 
|Assessments                                                                                 |  |      |         |   |      |   |        
|AHP                                                                                         |  |      | 1,185   |   |      |   | 882    
|REFCORP                                                                                     |  |      | 2,647   |   |      |   | 2,001  
|                                                                                            |  |      |         |   |      |   |        
|Total assessments                                                                           |  |      | 3,832   |   |      |   | 2,883  
|                                                                                            |  |      |         |   |      |   |        
|Net Income                                                                                  |  | $    | 10,585  |   |      | $ | 8,005  
|                                                                                            |  |      |         |   |      |   |        

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Capital

(Unaudited)



|                                                              |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|------------------------------------------------------------- | ------ | ----------------------- | --------- | ----------------------- | ------ |  | -------------------------- | --------- |  | -------------------------- | --------- | - | ----------------------------------- | --------- | - | ----------------- | ------ | --------- | ------------ | --------- | ----- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------- | - |  | - | --------- | -
|For the Three Months Ended March 31, 2007 and 2006            |        | Class A Stock - Putable |           | Class B Stock - Putable |        |  | Class B(1) Stock - Putable |           |  | Class B(2) Stock - Putable |           |   | Accumulated OtherComprehensive Loss |           |   | Retained Earnings |        |           | TotalCapital |          
|                                                              | Shares |                         | Par Value |                         | Shares |  |                            | Par Value |  |                            | Shares    |   |                                     | Par Value |   |                   | Shares |           |              | Par Value |       |   |  |  
|(in thousands, except annualized dividend rate)               |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of December 31, 2005                               |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     | 20,197    |   |                   | $      | 2,019,731 |              |           | 1,128 |   |  | $ | 112,803 |   |  |   |        |   |  | $ | 68,759  |   |  | $ | 2,201,293 |  
|Issuance of stock                                             |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     | 4         |   |                   |        | 423       |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 423       |  
|Transfers                                                     |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     | (142      | ) |                   |        | (14,202   | )            |           | 142   |   |  |   | 14,202  |   |  |   |        |   |  |   |         |   |  |   |           |  
|Net shares classified as mandatorily redeemable Class B stock |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     | (16       | ) |                   |        | (1,602    | )            |           | (3    | ) |  |   | (336    | ) |  |   |        |   |  |   |         |   |  |   | (1,938    | )
|Net income                                                    |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | 8,005   |   |  |   | 8,005     |  
|                                                              |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of March 31, 2006                                  |        |                         |           | $                       |        |  |                            |           |  | $                          |           |   |                                     | 20,043    |   |                   | $      | 2,004,350 |              |           | 1,267 |   |  | $ | 126,669 |   |  |   |        |   |  | $ | 76,764  |   |  | $ | 2,207,783 |  
|                                                              |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of December 31, 2006                               |        |                         |           | $                       |        |  | 21,410                     |           |  | $                          | 2,140,997 |   |                                     |           |   |                   | $      |           |              |           |       |   |  | $ |         |   |  | $ | (2,090 | ) |  | $ | 92,397  |   |  | $ | 2,231,304 |  
|Issuance of stock                                             |        | 5                       |           |                         | 485    |  | 28                         |           |  |                            | 2,775     |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 3,260     |  
|Net shares classified as mandatorily redeemable Class B stock |        |                         |           |                         |        |  | (130                       | )         |  |                            | (12,997   | ) |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (12,997   | )
|Net income                                                    |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | 10,585  |   |  |   | 10,585    |  
|Dividends on stock:                                           |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Class B stock ($0.40)                                         |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Cash                                                          |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   | (2,138  | ) |  |   | (2,138    | )
|                                                              |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  
|Balance as of March 31, 2007                                  |        | 5                       |           | $                       | 485    |  | 21,308                     |           |  | $                          | 2,130,775 |   |                                     |           |   |                   | $      |           |              |           |       |   |  | $ |         |   |  | $ | (2,090 | ) |  | $ | 100,844 |   |  | $ | 2,230,014 |  
|                                                              |        |                         |           |                         |        |  |                            |           |  |                            |           |   |                                     |           |   |                   |        |           |              |           |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   |           |  

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 Ended March 31,                                                                       |  | 2007 |             |   | 2006 |  
|(in thousands)                                                                                             |  |      |             |   |      |  
|Operating Activities                                                                                       |  |      |             |   |      |   |             |  
|Net income                                                                                                 |  | $    | 10,585      |   |      | $ | 8,005       |  
|Adjustments to reconcile net income to net cash provided by operating activities:                          |  |      |             |   |      |   |             |  
|Depreciation and amortization:                                                                             |  |      |             |   |      |   |             |  
|Net premiums and discounts on consolidated obligations, investments, and mortgage loans held for portfolio |  |      | 24,225      |   |      |   | 8,829       |  
|Concessions on consolidated obligation bonds                                                               |  |      | 1,501       |   |      |   | 1,113       |  
|Premises and equipment                                                                                     |  |      | 735         |   |      |   | 703         |  
|Other                                                                                                      |  |      | (302        | ) |      |   |             |  
|Net realized loss from sale of held-to-maturity securities                                                 |  |      | 2,351       |   |      |   |             |  
|Net (increase) in fair value adjustment on derivatives and hedging activities                              |  |      | (4,689      | ) |      |   | (2,950      | )
|(Gain) on early extinguishment of debt                                                                     |  |      | (327        | ) |      |   |             |  
|Net loss on disposal of premises and equipment                                                             |  |      | 9           |   |      |   | 1           |  
|Decrease in accrued interest receivable                                                                    |  |      | 74,993      |   |      |   | 59,423      |  
|(Increase) in net accrued interest on derivatives                                                          |  |      | (23,005     | ) |      |   | (46,236     | )
|Decrease (increase) in other assets                                                                        |  |      | 210         |   |      |   | (170        | )
|(Decrease) in AHP liability and discount on AHP advances                                                   |  |      | (1,513      | ) |      |   | (2,737      | )
|Increase in payable to REFCORP                                                                             |  |      | 1,097       |   |      |   | 4,226       |  
|Increase in accrued interest payable                                                                       |  |      | 20,409      |   |      |   | 83,327      |  
|(Decrease) in other liabilities                                                                            |  |      | (1,893      | ) |      |   | (4,081      | )
|                                                                                                           |  |      |             |   |      |   |             |  
|Total adjustments                                                                                          |  |      | 93,801      |   |      |   | 101,448     |  
|                                                                                                           |  |      |             |   |      |   |             |  
|Net cash provided by operating activities                                                                  |  |      | 104,386     |   |      |   | 109,453     |  
|                                                                                                           |  |      |             |   |      |   |             |  
|Investing Activities                                                                                       |  |      |             |   |      |   |             |  
|Net (increase) decrease in interest-bearing deposits                                                       |  |      | (708,000    | ) |      |   | 288,150     |  
|Net (increase) decrease in securities purchased under agreements to resell                                 |  |      | (500,000    | ) |      |   | 450,000     |  
|Net (increase) in federal funds sold                                                                       |  |      | (6,336,000  | ) |      |   | (1,204,600  | )
|Proceeds from maturities of held-to-maturity securities                                                    |  |      | 1,850,688   |   |      |   | 584,616     |  
|Proceeds from sales of held-to-maturity securities                                                         |  |      | 747,649     |   |      |   |             |  
|Purchases of held-to-maturity securities                                                                   |  |      | (559,837    | ) |      |   | (529,684    | )
|Principal collected on advances                                                                            |  |      | 20,591,791  |   |      |   | 21,584,504  |  
|Advances made                                                                                              |  |      | (18,271,431 | ) |      |   | (22,120,326 | )
|Principal collections on mortgage loans held for portfolio                                                 |  |      | 176,000     |   |      |   | 212,511     |  
|Net (increase) in premises and equipment                                                                   |  |      | (86         | ) |      |   | (878        | )
|                                                                                                           |  |      |             |   |      |   |             |  
|Net cash (used in) investment activities                                                                   |  |      | (3,009,226  | ) |      |   | (735,707    | )
|                                                                                                           |  |      |             |   |      |   |             |  

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Statements of Cash Flows  (Continued)

(Unaudited)



|                                                                 |  |      |              |   |      |   |             |  
|---------------------------------------------------------------- |  | ---- | ------------ | - | ---- | - | ----------- | -
|For the Three Months Ended March 31,                             |  | 2007 |              |   | 2006 |  
|(in thousands)                                                   |  |      |              |   |      |  
|Financing Activities                                             |  |      |              |   |      |   |             |  
|Net decrease in deposits                                         |  | $    | 71,917       |   |      | $ | 105,423     |  
|Net (increase) in securities sold under agreements to repurchase |  |      |              |   |      |   | (198,250    | )
|Net proceeds from issuance of consolidated obligations:          |  |      |              |   |      |   |             |  
|Discount notes                                                   |  |      | 106,534,846  |   |      |   | 93,061,504  |  
|Bonds                                                            |  |      | 11,854,719   |   |      |   | 2,051,477   |  
|Payments for maturing and retiring consolidated obligations:     |  |      |              |   |      |   |             |  
|Discount notes                                                   |  |      | (103,423,094 | ) |      |   | (92,280,969 | )
|Bonds                                                            |  |      | (12,134,185  | ) |      |   | (2,116,000  | )
|Proceeds from the sale of Class A stock                          |  |      | 485          |   |      |   |             |  
|Proceeds from the sale of Class B stock                          |  |      | 2,775        |   |      |   | 423         |  
|Dividends paid                                                   |  |      | (2,138       | ) |      |   |             |  
|                                                                 |  |      |              |   |      |   |             |  
|Net cash provided by financing activities                        |  |      | 2,905,325    |   |      |   | 623,608     |  
|                                                                 |  |      |              |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents             |  |      | 485          |   |      |   | (2,646      | )
|Cash and cash equivalents at beginning of period                 |  |      | 1,119        |   |      |   | 4,124       |  
|                                                                 |  |      |              |   |      |   |             |  
|Cash and cash equivalents at end of period                       |  | $    | 1,604        |   |      | $ | 1,478       |  
|                                                                 |  |      |              |   |      |   |             |  
|Supplemental Disclosures                                         |  |      |              |   |      |   |             |  
|Interest paid                                                    |  | $    | 642,317      |   |      | $ | 476,230     |  
|AHP payments                                                     |  |      | 2,006        |   |      |   | 3,618       |  
|REFCORP payments                                                 |  |      | (1,549       | ) |      |   | (225        | )
|Real estate owned                                                |  |      | 315          |   |      |   |             |  

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



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##### Table of Contents

Federal Home Loan Bank of Seattle

Condensed Notes to Financial Statements  (Unaudited)

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

General

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

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

 Segment Disclosure Our core business is traditional member finance, which includes making advances, providing letters of credit, accepting deposits, and providing securities safekeeping and other
services. Historically, we offered products and services through two operating segments, traditional member finance and the Mortgage Purchase Program, or MPP. The MPP segment consisted of mortgage loans held for portfolio as a result of purchases
from participating members. During the first quarter of 2005, we decided to exit the MPP. As a result of this decision, Seattle Bank management no longer manages the business using separate operating segments. As of March 31, 2007, our MPP
balance has declined 38.6% to $6.2 billion from $10.1 billion as of March 31, 2005.

Recently Issued Accounting Standards and
Interpretations

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

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



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##### Table of Contents

FIN 39-A. Amendment of FASB Interpretation No. 39  On April 30, 2007, the FASB issued
FASB Staff Position No. 39-A to amend FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts, or FIN 39-A. The amendment permits offsetting of fair value amounts recognized for multiple derivative instruments
with fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral only if both the derivative and collateral transactions arise from the same master netting agreement involving the same
counterparty. FIN 39-A is effective for fiscal years beginning after November 15, 2007, with early application permitted. We are currently evaluating the amendment and have not yet determined our expected adoption date or the impact, if any, of the
proposed change on our results of operations or financial condition.

Note 2. Held-To-Maturity Securities

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

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



|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|----------------------------------------- |  | ------------- | ---------- | -------------------- | - | ------------------- |  | - | ------------------- | - |  | - | ----------
|As of March 31, 2007                      |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLoss |  |   | EstimatedFair Value
|(in thousands)                            |  |               |            |                      |   |                     |  |   |                    
|Non-Mortgage-Backed Securities            |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Commercial paper                          |  | $             | 98,906     |                      | $ |                     |  | $ | (23                 | ) |  | $ | 98,883    
|Other U.S. agency obligations             |  |               | 133,261    |                      |   | 1,810               |  |   | (11                 | ) |  |   | 135,060   
|Government-sponsored enterprises          |  |               | 1,688,735  |                      |   | 22,500              |  |   | (23,508             | ) |  |   | 1,687,727 
|Other FHLBanks consolidated obligations  |  |               | 3,024,963  |                      |   |                     |  |   | (50,390             | ) |  |   | 2,974,573 
|State or local housing agency obligations |  |               | 10,763     |                      |   | 51                  |  |   |                     |   |  |   | 10,814    
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Subtotal                                  |  |               | 4,956,628  |                      |   | 24,361              |  |   | (73,932             | ) |  |   | 4,907,057 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Mortgage-Backed Securities                |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Government-sponsored enterprises          |  |               | 1,712,473  |                      |   | 1,001               |  |   | (65,442             | ) |  |   | 1,648,032 
|Other U.S. agency obligations             |  |               | 6,563      |                      |   | 129                 |  |   |                     |   |  |   | 6,692     
|Other                                     |  |               | 4,971,565  |                      |   | 3,836               |  |   | (62,194             | ) |  |   | 4,913,207 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Subtotal                                  |  |               | 6,690,601  |                      |   | 4,966               |  |   | (127,636            | ) |  |   | 6,567,931 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Total                                     |  | $             | 11,647,229 |                      | $ | 29,327              |  | $ | (201,568            | ) |  | $ | 11,474,988
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|                                          |  |               |            |                     
|As of December 31, 2006                   |  | AmortizedCost |            | GrossUnrealizedGains |   | GrossUnrealizedLoss |  |   | EstimatedFair Value
|(in thousands)                            |  |               |            |                      |   |                     |  |   |                    
|Non-Mortgage-Backed Securities            |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Other U.S. agency obligations             |  | $             | 146,298    |                      | $ | 3,073               |  | $ |                     |   |  | $ | 149,371   
|Government-sponsored enterprises          |  |               | 2,691,238  |                      |   | 21,697              |  |   | (33,725             | ) |  |   | 2,679,210 
|Other FHLBanks consolidated obligations  |  |               | 4,224,959  |                      |   |                     |  |   | (73,113             | ) |  |   | 4,151,846 
|State or local housing agency obligations |  |               | 12,067     |                      |   | 77                  |  |   |                     |   |  |   | 12,144    
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Subtotal                                  |  |               | 7,074,562  |                      |   | 24,847              |  |   | (106,838            | ) |  |   | 6,992,571 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Mortgage-Backed Securities                |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Government-sponsored enterprises          |  |               | 1,779,877  |                      |   | 689                 |  |   | (71,052             | ) |  |   | 1,709,514 
|Other U.S. agency obligations             |  |               | 6,963      |                      |   | 102                 |  |   |                     |   |  |   | 7,065     
|Other                                     |  |               | 4,826,507  |                      |   | 2,637               |  |   | (64,173             | ) |  |   | 4,764,971 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Subtotal                                  |  |               | 6,613,347  |                      |   | 3,428               |  |   | (135,225            | ) |  |   | 6,481,550 
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           
|Total                                     |  | $             | 13,687,909 |                      | $ | 28,275              |  | $ | (242,063            | ) |  | $ | 13,474,121
|                                          |  |               |            |                      |   |                     |  |   |                     |   |  |   |           

---

|* | The amortized cost of our mortgage-backed securities classified as held-to-maturity includes net discounts of $33.2 million and $35.7 million as of March 31, 2007 and
December 31, 2006.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We generally execute interest-rate exchange agreements with major broker-dealers under bilateral
collateral agreements. As of March 31, 2007, we did not have any securities pledged as collateral to broker-dealers which they cannot sell or repledge.



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As of March 31, 2007 and December 31, 2006, we held $332.6 million and $366.8 million of
held-to-maturity securities purchased from members or affiliates of members who own more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class A and Class B stock, or members with a representative serving on
our Board of Directors. For additional information see Note 9.

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



|                                         |  |                      |           |                         |   |               |  |                     |           |  |   |          
|---------------------------------------- |  | -------------------- | --------- | ----------------------- | - | ------------- |  | ------------------- | --------- |  | - | ---------
|                                         |  | As of March 31, 2007 |           | As of December 31, 2006
|Other FHLBanks Consolidated Obligations |  | AmortizedCost        |           | EstimatedFair Value     |   | AmortizedCost |  | EstimatedFair Value
|(in thousands)                           |  |                      |           |                         |   |               |  |                    
|FHLBank of Boston                        |  | $                    |           |                         | $ |               |  | $                   | 450,000   |  | $ | 449,419  
|FHLBank of Des Moines                    |  |                      | 1,879,963 |                         |   | 1,844,131     |  |                     | 1,879,959 |  |   | 1,830,756
|FHLBank of San Francisco                 |  |                      | 1,145,000 |                         |   | 1,130,442     |  |                     | 1,895,000 |  |   | 1,871,671
|                                         |  |                      |           |                         |   |               |  |                     |           |  |   |          
|Total                                    |  | $                    | 3,024,963 |                         | $ | 2,974,573     |  | $                   | 4,224,959 |  | $ | 4,151,846
|                                         |  |                      |           |                         |   |               |  |                     |           |  |   |          

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



|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|---------------------------------------- |  | ------------------- | ------- | --------------------- | ----------------- | ------ | ------------------- | ----- | --------------------- | --------- |  | ------------------- | -------- | --------------------- |  | - | --------- |  | - | -------- | -
|                                         |  | Less than 12 months |         |                       | 12 months or more |        |                     | Total |                      
|As of March 31, 2007                     |  | EstimatedFair Value |         | GrossUnrealizedLosses |                   |        | EstimatedFair Value |       | GrossUnrealizedLosses |           |  | EstimatedFair Value |          | GrossUnrealizedLosses | 
|(in thousands)                           |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       | 
|Non-Mortgage-Backed Securities           |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Commercial paper                         |  | $                   | 98,883  |                       | $                 | (23    | )                   |       | $                     |           |  | $                   |          |                       |  | $ | 98,883    |  | $ | (23      | )
|Other U.S. agency obligations            |  |                     | 2,639   |                       |                   | (11    | )                   |       |                       |           |  |                     |          |                       |  |   | 2,639     |  |   | (11      | )
|Government-sponsored enterprises         |  |                     |         |                       |                   |        |                     |       |                       | 1,277,506 |  |                     | (23,508  | )                     |  |   | 1,277,506 |  |   | (23,508  | )
|Other FHLBanks consolidated obligations |  |                     |         |                       |                   |        |                     |       |                       | 2,974,573 |  |                     | (50,390  | )                     |  |   | 2,974,573 |  |   | (50,390  | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Subtotal                                 |  |                     | 101,522 |                       |                   | (34    | )                   |       |                       | 4,252,079 |  |                     | (73,898  | )                     |  |   | 4,353,601 |  |   | (73,932  | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Mortgage-Backed Securities               |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Government-sponsored enterprises         |  |                     | 12,453  |                       |                   | (17    | )                   |       |                       | 1,547,686 |  |                     | (65,425  | )                     |  |   | 1,560,139 |  |   | (65,442  | )
|Other                                    |  |                     | 780,946 |                       |                   | (1,290 | )                   |       |                       | 2,259,117 |  |                     | (60,904  | )                     |  |   | 3,040,063 |  |   | (62,194  | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Subtotal                                 |  |                     | 793,399 |                       |                   | (1,307 | )                   |       |                       | 3,806,803 |  |                     | (126,329 | )                     |  |   | 4,600,202 |  |   | (127,636 | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  
|Total                                    |  | $                   | 894,921 |                       | $                 | (1,341 | )                   |       | $                     | 8,058,882 |  | $                   | (200,227 | )                     |  | $ | 8,953,803 |  | $ | (201,568 | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |           |  |                     |          |                       |  |   |           |  |   |          |  



|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|---------------------------------------- |  | ------------------- | ------- | --------------------- | ----------------- | ------ | ------------------- | ----- | --------------------- | ---------- |  | ------------------- | -------- | --------------------- |  | - | ---------- |  | - | -------- | -
|                                         |  | Less than 12 months |         |                       | 12 months or more |        |                     | Total |                      
|As of December 31, 2006                  |  | EstimatedFair Value |         | GrossUnrealizedLosses |                   |        | EstimatedFair Value |       | GrossUnrealizedLosses |            |  | EstimatedFair Value |          | GrossUnrealizedLosses | 
|(in thousands)                           |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       | 
|Non-Mortgage-Backed Securities           |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Government-sponsored enterprises         |  | $                   |         |                       | $                 |        |                     |       | $                     | 2,269,882  |  | $                   | (33,725  | )                     |  | $ | 2,269,882  |  | $ | (33,725  | )
|Other FHLBanks consolidated obligations |  |                     |         |                       |                   |        |                     |       |                       | 4,151,846  |  |                     | (73,113  | )                     |  |   | 4,151,846  |  |   | (73,113  | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Subtotal                                 |  |                     |         |                       |                   |        |                     |       |                       | 6,421,728  |  |                     | (106,838 | )                     |  |   | 6,421,728  |  |   | (106,838 | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Mortgage-Backed Securities               |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Government-sponsored enterprises         |  |                     |         |                       |                   |        |                     |       |                       | 1,601,347  |  |                     | (71,052  | )                     |  |   | 1,601,347  |  |   | (71,052  | )
|Other                                    |  |                     | 318,767 |                       |                   | (3,454 | )                   |       |                       | 2,432,972  |  |                     | (60,719  | )                     |  |   | 2,751,739  |  |   | (64,173  | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Subtotal                                 |  |                     | 318,767 |                       |                   | (3,454 | )                   |       |                       | 4,034,319  |  |                     | (131,771 | )                     |  |   | 4,353,086  |  |   | (135,225 | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  
|Total                                    |  | $                   | 318,767 |                       | $                 | (3,454 | )                   |       | $                     | 10,456,047 |  | $                   | (238,609 | )                     |  | $ | 10,774,814 |  | $ | (242,063 | )
|                                         |  |                     |         |                       |                   |        |                     |       |                       |            |  |                     |          |                       |  |   |            |  |   |          |  



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##### Table of Contents

The gross unrealized losses on the held-to-maturity portfolio as of March 31, 2007 and
December 31, 2006 were related to declining market values as a result of overall increases in market interest rates and not to underlying credit concerns relating to issuers. As March 31, 2007, 161 of our investment positions had gross
unrealized losses totaling $201.6 million, with the total estimated fair value of these positions being approximately 97.8% of their carrying value. Of these 161 positions, 129 positions had gross unrealized losses for at least 12 months or more. As
of December 31, 2006, 149 of our investment positions had gross unrealized losses totaling $242.1 million, with the total estimated fair value of these positions being approximately 97.8% of their carrying value. Of these 149 positions, 139
positions had gross unrealized losses for at least 12 months or more.

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

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



|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|----------------------------------------------- |  | -------------------- | ---------- | ----------------------- | - | ------------- |  | ------------------- | ---------- |  | - | ----------
|                                                |  | As of March 31, 2007 |            | As of December 31, 2006
|Term to Maturity                                |  | AmortizedCost        |            | EstimatedFair Value     |   | AmortizedCost |  | EstimatedFair Value
|(in thousands)                                  |  |                      |            |                         |   |               |  |                    
|Non-Mortgage-Backed Securities, excluding Other |  |                      |            |                         |   |               |  |                     |            |  |   |           
|FHLBanks Consolidated Obligations              |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Due in one year or less                         |  | $                    | 915,857    |                         | $ | 910,810       |  | $                   | 1,817,899  |  | $ | 1,805,823 
|Due after one year through five years           |  |                      | 652,925    |                         |   | 640,212       |  |                     | 576,466    |  |   | 557,000   
|Due after five years through 10 years           |  |                      | 301,449    |                         |   | 319,406       |  |                     | 388,332    |  |   | 410,035   
|Due after 10 years                              |  |                      | 61,434     |                         |   | 62,056        |  |                     | 66,906     |  |   | 67,867    
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Subtotal                                        |  |                      | 1,931,665  |                         |   | 1,932,484     |  |                     | 2,849,603  |  |   | 2,840,725 
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Other FHLBanks Consolidated Obligations        |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Due in one year or less                         |  |                      | 500,000    |                         |   | 497,276       |  |                     | 1,700,000  |  |   | 1,691,215 
|Due after one year through five years           |  |                      | 2,524,963  |                         |   | 2,477,297     |  |                     | 2,524,959  |  |   | 2,460,631 
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Subtotal                                        |  |                      | 3,024,963  |                         |   | 2,974,573     |  |                     | 4,224,959  |  |   | 4,151,846 
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Mortgage-Backed Securities                      |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Due after one year through five years           |  |                      | 1,900      |                         |   | 1,929         |  |                     | 2,120      |  |   | 2,161     
|Due after five years through 10 years           |  |                      | 36,221     |                         |   | 36,108        |  |                     | 29,267     |  |   | 28,927    
|Due after 10 years                              |  |                      | 6,652,480  |                         |   | 6,529,894     |  |                     | 6,581,960  |  |   | 6,450,462 
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Subtotal                                        |  |                      | 6,690,601  |                         |   | 6,567,931     |  |                     | 6,613,347  |  |   | 6,481,550 
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           
|Total                                           |  | $                    | 11,647,229 |                         | $ | 11,474,988    |  | $                   | 13,687,909 |  | $ | 13,474,121
|                                                |  |                      |            |                         |   |               |  |                     |            |  |   |           

 Losses on the Sale of Held-to-Maturity Securities  We recorded
net realized losses of $2.4 million and $6.5 million on sales of held-to-maturity securities during the three months ended March 31, 2007 and the year ended December 31, 2006. The proceeds received of $747.6 million and $1.0 billion on the
sales of held-to-maturity securities in the first three months of 2007 and in 2006 were for securities that were within three months of maturity or had returned at least 85% of the principal outstanding from the date of acquisition.



11



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##### Table of Contents

Note 3. Advances

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

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

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



|                                      |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|------------------------------------- |  | -------------------- | ---------- | ----------------------- | ----------------------------- | ---- | ------ | - | ---------- | ----------------------------- |  | ----
|                                      |  | As of March 31, 2007 |            | As of December 31, 2006
|Year of Maturity                      |  | Amount               |            |                         | WeightedAverageInterestRate % |      | Amount |   |            | WeightedAverageInterestRate %
|(in thousands, except interest rates) |  |                      |            |                         |                               |      |        |   |            |                              
|Due in one year or less               |  | $                    | 14,780,125 |                         |                               | 5.24 |        | $ | 16,139,522 |                               |  | 5.24
|Due in one year through two years     |  |                      | 4,969,985  |                         |                               | 5.20 |        |   | 6,425,043  |                               |  | 5.21
|Due in two years through three years  |  |                      | 1,509,486  |                         |                               | 4.84 |        |   | 1,238,398  |                               |  | 4.63
|Due in three years through four years |  |                      | 795,645    |                         |                               | 5.10 |        |   | 902,522    |                               |  | 5.09
|Due in four years through five years  |  |                      | 1,077,415  |                         |                               | 4.87 |        |   | 782,108    |                               |  | 4.97
|Thereafter                            |  |                      | 2,536,176  |                         |                               | 4.63 |        |   | 2,499,226  |                               |  | 4.62
|                                      |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total par value                       |  | $                    | 25,668,832 |                         |                               | 5.13 |        | $ | 27,986,819 |                               |  | 5.14
|                                      |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Overdrawn demand deposit accounts     |  |                      |            |                         |                               |      |        |   | 2,361      |                               |  |     
|Discount on advances                  |  |                      | (6,433     | )                       |                               |      |        |   | (6,708     | )                             |  |     
|Commitment fees                       |  |                      | (1,004     | )                       |                               |      |        |   | (1,020     | )                             |  |     
|Discount on AHP advances              |  |                      | (269       | )                       |                               |      |        |   | (285       | )                             |  |     
|Derivatives hedging adjustments       |  |                      | (8,302     | )                       |                               |      |        |   | (20,173    | )                             |  |     
|                                      |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total                                 |  | $                    | 25,652,824 |                         |                               |      |        | $ | 27,960,994 |                               |  |     
|                                      |  |                      |            |                         |                               |      |        |   |            |                               |  |     

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

 Concentration Risk  Our credit risk from advances is concentrated among commercial banks and savings institutions. As of March 31, 2007 and December 31, 2006, we had advances of $13.9 billion and $15.9 billion
outstanding to two member institutions, Bank of America Oregon, N.A. and Washington Mutual Bank, F.S.B., representing 54.2% and 56.8% of total advances outstanding as of those dates. The income from advances to these member institutions totaled
$196.7 million and $121.6 million for the three months ended March 31, 2007 and 2006. We held sufficient collateral to cover the advances to these institutions, and, as a result, we do not expect to incur any credit losses on these advances.
These same two members, Washington Mutual Bank, F.S.B. and Bank of America Oregon, N.A., held more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class A and Class B stock as of March 31, 2007 and
December 31, 2006. See Note 9 for additional information. No other member institutions held advances in excess of 10% of our total advances outstanding as of March 31, 2007 and December 31, 2006.

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



|                              |  |                        |            |                        |   |           
|----------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------
|Interest-Rate Payment Terms   |  | As of   March 31, 2007 |            | As ofDecember 31, 2006
|(in thousands)                |  |                        |            |                       
|Fixed-rate                    |  | $                      | 10,851,468 |                        | $ | 15,663,821
|Variable-rate                 |  |                        | 14,537,364 |                        |   | 12,182,998
|Floating-to-fixed convertible |  |                        | 280,000    |                        |   | 140,000   
|                              |  |                        |            |                        |   |           
|Total par value               |  | $                      | 25,668,832 |                        | $ | 27,986,819
|                              |  |                        |            |                        |   |           



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##### Table of Contents

Note 4. Mortgage Loans Held for Portfolio

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

As of March 31, 2007 and December 31, 2006, 88.9% and 88.8% of our outstanding mortgage
loans held for portfolio had been purchased from one participating member, Washington Mutual Bank, F.S.B. This member owned more than 10% of our total outstanding Class A and Class B stock and mandatorily redeemable Class A and Class B stock as of
March 31, 2007 and December 31, 2006. For more information, see Note 9.

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



|                                                  |  |                        |           |   |                        |   |           |  
|------------------------------------------------- |  | ---------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loans Held for Portfolio                 |  | As of   March 31, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands)                                    |  |                        |           |   |                        |  
|Fixed, medium-term*, single-family mortgage loans |  | $                      | 999,849   |   |                        | $ | 1,041,407 |  
|Fixed, long-term, single-family mortgage loans    |  |                        | 5,160,619 |   |                        |   | 5,295,225 |  
|                                                  |  |                        |           |   |                        |   |           |  
|Total loan principal                              |  |                        | 6,160,468 |   |                        |   | 6,336,632 |  
|Unamortized premiums                              |  |                        | 69,591    |   |                        |   | 73,110    |  
|Unamortized discounts                             |  |                        | (41,814   | ) |                        |   | (43,094   | )
|                                                  |  |                        |           |   |                        |   |           |  
|Total                                             |  | $                      | 6,188,245 |   |                        | $ | 6,366,648 |  
|                                                  |  |                        |           |   |                        |   |           |  

| | 
| | 

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

The principal balance of mortgage loans held for portfolio as of March 31, 2007 and December 31, 2006 was comprised of government-insured mortgage loans totaling $276.3 million and $292.1 million and conventional mortgage loans
totaling $5.9 billion and $6.0 billion. See Note 8 for the estimated fair value of the mortgage loans held for portfolio as of March 31, 2007 and December 31, 2006.

As of March 31, 2007, we had $40.2 million of mortgage loans delinquent 90 days or more, compared to $42.8 million as of December 31, 2006, and
we had no mortgage loans on nonaccrual status as of either of such dates because of the credit enhancements available to us. Mortgage loans are considered impaired when, based on current information and events, it is probable that we will be unable
to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement. As of March 31, 2007 and December 31, 2006, we held no impaired mortgage loans. Based on our analysis of the mortgage loan
portfolio, we have determined that the credit enhancement provided by the members, including the LRA and SMI, is sufficient to absorb inherent credit losses and that an allowance for credit loss is unnecessary.

As of March 31, 2007 and December 31, 2006, the Seattle Bank had 14 and 11 mortgage loans totaling $2.2 million and $1.8 million in
foreclosure. As of March 31, 2007 and December 31, 2006, the Seattle Banks other assets included $315,000 and $147,000 of real estate owned resulting from foreclosure of two and one mortgage loans held by the Seattle Bank. The real
estate, which is carried at the lower of market, less estimated selling costs, or carrying value, is currently being evaluated for disposal.



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Note 5. Consolidated Obligations

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

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



|                                                          |  |                        |            |                        |   |           
|--------------------------------------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------
|Consolidated Obligation Bonds Interest-Rate Payment Terms |  | As of   March 31, 2007 |            | As ofDecember 31, 2006
|(in thousands)                                            |  |                        |            |                       
|Fixed-rate                                                |  | $                      | 46,823,445 |                        | $ | 46,756,090
|Step-up                                                   |  |                        | 40,000     |                        |   | 235,000   
|Variable-rate bonds                                       |  |                        | 1,080,000  |                        |   | 1,230,000 
|                                                          |  |                        |            |                        |   |           
|Total par value                                           |  | $                      | 47,943,445 |                        | $ | 48,221,090
|                                                          |  |                        |            |                        |   |           

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



|                                               |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|---------------------------------------------- |  | -------------------- | ---------- | ----------------------- | ----------------------------- | ---- | ------ | - | ---------- | ----------------------------- |  | ----
|                                               |  | As of March 31, 2007 |            | As of December 31, 2006
|Consolidated Obligation Bonds Term to Maturity |  | Amount               |            |                         | WeightedAverageInterestRate % |      | Amount |   |            | WeightedAverageInterestRate %
|(in thousands, except interest rates)          |  |                      |            |                         |                               |      |        |   |            |                              
|Due in one year or less                        |  | $                    | 17,753,145 |                         |                               | 4.78 |        | $ | 20,272,290 |                               |  | 4.87
|Due after one year through two years           |  |                      | 9,617,050  |                         |                               | 4.47 |        |   | 9,586,050  |                               |  | 4.38
|Due after two years through three years        |  |                      | 6,195,520  |                         |                               | 5.01 |        |   | 5,206,520  |                               |  | 4.87
|Due after three years through four years       |  |                      | 2,869,285  |                         |                               | 4.82 |        |   | 2,453,300  |                               |  | 4.63
|Due after four years through five years        |  |                      | 2,477,380  |                         |                               | 5.29 |        |   | 1,586,865  |                               |  | 5.14
|Thereafter                                     |  |                      | 9,031,065  |                         |                               | 5.37 |        |   | 9,116,065  |                               |  | 5.37
|                                               |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total par value                                |  |                      | 47,943,445 |                         |                               | 4.89 |        |   | 48,221,090 |                               |  | 4.87
|Premiums                                       |  |                      | 25,471     |                         |                               |      |        |   | 27,641     |                               |  |     
|Discounts                                      |  |                      | (80,025    | )                       |                               |      |        |   | (74,809    | )                             |  |     
|Derivatives hedging adjustments                |  |                      | (98,382    | )                       |                               |      |        |   | (133,207   | )                             |  |     
|                                               |  |                      |            |                         |                               |      |        |   |            |                               |  |     
|Total                                          |  | $                    | 47,790,509 |                         |                               |      |        | $ | 48,040,715 |                               |  |     
|                                               |  |                      |            |                         |                               |      |        |   |            |                               |  |     

The amounts in the table above include consolidated obligation bonds obtained through transfers of
$1.4 billion par value from the FHLBank of Chicago and $50.0 million par value from the FHLBank of Pittsburgh, which transfers included $32.1 million of associated original bond discount for both March 31, 2007 and December 31, 2006.

Consolidated obligation bonds outstanding as of March 31, 2007 and December 31, 2006, include callable bonds, which we may
prepay on certain call dates without incurring prepayment or termination fees, totaling $25.4 billion and $24.5 billion. We continue to classify our debt as callable after the last call date has passed. Simultaneous with such a debt issue, we may
also enter into an interest-rate exchange agreement (in which we pay variable and receive fixed cash flows) with a call feature that mirrors the option embedded in the debt (e.g., a sold callable swap). The combined sold callable swap and callable
debt allows us to provide members with more economically priced, variable interest-rate funding.

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



|                                                         |  |                        |            |                        |   |           
|-------------------------------------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------
|Consolidated Obligation Bonds Callable and Putable Terms |  | As of   March 31, 2007 |            | As ofDecember 31, 2006
|(in thousands)                                           |  |                        |            |                       
|Non-callable or non-putable                              |  | $                      | 22,121,230 |                        | $ | 23,300,375
|Callable                                                 |  |                        | 25,418,115 |                        |   | 24,516,615
|Putable                                                  |  |                        | 404,100    |                        |   | 404,100   
|                                                         |  |                        |            |                        |   |           
|Total par value                                          |  | $                      | 47,943,445 |                        | $ | 48,221,090
|                                                         |  |                        |            |                        |   |           



14



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##### Table of Contents

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



|                                                                 |  |                        |            |  |                        |   |            | 
|---------------------------------------------------------------- |  | ---------------------- | ---------- |  | ---------------------- | - | ---------- | 
|Consolidated Obligation Bonds Term to Maturity or Next Call Date |  | As of   March 31, 2007 |            |  | As ofDecember 31, 2006 |  
|(in thousands)                                                   |  |                        |            |  |                        |  
|Due in one year or less                                          |  | $                      | 34,498,260 |  |                        | $ | 35,279,905 | 
|Due after one year through two years                             |  |                        | 5,549,500  |  |                        |   | 4,711,000  | 
|Due after two years through three years                          |  |                        | 2,406,520  |  |                        |   | 2,704,520  | 
|Due after three years through four years                         |  |                        | 904,285    |  |                        |   | 841,300    | 
|Due after four years through five years                          |  |                        | 430,380    |  |                        |   | 529,865    | 
|Thereafter                                                       |  |                        | 4,154,500  |  |                        |   | 4,154,500  | 
|                                                                 |  |                        |            |  |                        |   |            | 
|Total par value                                                  |  | $                      | 47,943,445 |  |                        | $ | 48,221,090 | 
|                                                                 |  |                        |            |  |                        |   |            | 

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

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



|                                                                        |  |                        |           |   |                        |   |           |  
|----------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------------- | - | --------- | -
|Consolidated Discount Notes Book Value & Weighted Average Interest Rate |  | As of   March 31, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands, except interest rates)                                   |  |                        |           |   |                        |  
|Par Value                                                               |  | $                      | 4,673,158 |   |                        | $ | 1,496,508 |  
|Discounts, net                                                          |  |                        | (44,277   | ) |                        |   | (643      | )
|Concession                                                              |  |                        | (56       | ) |                        |   | (4        | )
|                                                                        |  |                        |           |   |                        |   |           |  
|Book Value                                                              |  | $                      | 4,628,825 |   |                        | $ | 1,495,861 |  
|                                                                        |  |                        |           |   |                        |   |           |  
|Weighted Average Interest Rate                                          |  |                        | 5.07      | % |                        |   | 4.86      | %

Note 6. Capital

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

 Capital Requirements  As of March 31, 2007 and December 31, 2006, we were in compliance with our capital rules and

requirements. In addition, for regulatory purposes mandatorily redeemable stock, discussed further below, is considered permanent capital. The following table shows our
regulatory capital requirements compared to our actual capital position.



|                                  |  |                      |           |   |                         |   |           |          |  |   |           |   |  |   |           |  
|--------------------------------- |  | -------------------- | --------- | - | ----------------------- | - | --------- | -------- |  | - | --------- | - |  | - | --------- | -
|                                  |  | As of March 31, 2007 |           |   | As of December 31, 2006 |  
|Regulatory Capital Requirements   |  | Required             |           |   | Actual                  |   |           | Required |  |   | Actual    |  
|(in thousands, except for ratios) |  |                      |           |   |                         |   |           |          |  |   |           |  
|Risk-based capital                |  | $                    | 369,741   |   |                         | $ | 2,313,838 | *        |  | $ | 325,782   |   |  | $ | 2,302,616 |  
|Total capital-to-assets ratio     |  |                      | 4.00      | % |                         |   | 4.10      | %        |  |   | 4.00      | % |  |   | 4.30      | %
|Total regulatory capital          |  |                      | 2,258,973 |   |                         |   | 2,314,323 |          |  |   | 2,140,590 |   |  |   | 2,302,616 |  
|Leverage ratio                    |  |                      | 5.00      | % |                         |   | 6.15      | %        |  |   | 5.00      | % |  |   | 6.45      | %
|Leverage capital                  |  |                      | 2,823,716 |   |                         |   | 3,470,757 |          |  |   | 2,675,737 |   |  |   | 3,453,922 |  

| | 
| | 

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

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



15



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##### Table of Contents

 Dividends Generally, under our Capital Plan, our Board can declare and pay
dividends, in either cash or capital stock, only from retained earnings or current net earnings. However, in September 2006, the Board adopted a resolution limiting dividends on Class A stock to cash, and on December 28, 2006, the Finance
Board adopted a resolution limiting an FHLBank from issuing stock dividends, if, after the issuance, the outstanding excess stock at the FHLBank would be greater than 1.00% of its total assets. As of March 31, 2007 and December 31, 2006,
we had excess stock of $999.9 million and $902.2 million or 1.77% and 1.69% of our total assets.

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

On December 8, 2006, the Director of the Office of Supervision granted
us a waiver, at the request of our Board, to resume paying quarterly dividends beginning with the fourth quarter of 2006. The waiver contained dividend limitations imposed by our Board as a condition to the Finance Boards acceptance in 2005 of
our business plan. The dividend limitation identified in the waiver generally provides that dividend payments may not exceed 50.0% of year-to-date GAAP net income. The waiver allows us to pay quarterly cash dividends to our members within the
following parameters:



| |  |  | Dividends paid during the fourth quarter of 2006 may not exceed 50.0% of our third quarter 2006 GAAP net income;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | Total dividends paid during the fourth quarter of 2006 and the first quarter of 2007 may not exceed 50.0% of combined third quarter and fourth quarter 2006 GAAP net
income;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total dividends paid during the second, third and fourth quarters of any calendar year (any such calendar year being referred to as Year N) and the
first quarter of the immediately following calendar year (the four quarters being the Year N Quarters) may not exceed 50.0% of our GAAP net income for Year N, as calculated pursuant to GAAP;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | After the first quarter of 2007, dividends paid during any particular Year N Quarter may exceed 50.0% of the net income for the immediately preceding Year N
Quarter, but only if and to the extent that the aggregate amount of dividends paid with respect to earlier Year N Quarters does not exceed 50.0% of aggregate year-to-date net income, as calculated pursuant to GAAP, through the end of the immediately
preceding Year N Quarter.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Pursuant to the waiver received from the Director of the Office of Supervision, in December 2006, our Board declared a dividend of $0.10 per share on our
Class B stock based upon the average amount of such stock held during the third quarter 2006. Based upon Board approval, we paid a $2.1 million cash dividend in late December 2006. In January 2007, the Board declared a cash dividend of $2.1 million,
or $.10 per share, on our Class B stock based upon the average amount of such stock outstanding during the fourth quarter of 2006. The dividend was paid in February 2007. We had no Class A stock outstanding during 2006 and, therefore, no
Class A dividends were declared by our Board.

 Mandatorily Redeemable Class B Stock  As of March 31, 2007 and
December 31, 2006, we had $82.2 million and $69.2 million in Class B stock subject to mandatory redemption with payment subject to a five year waiting period with 20 and 16 members and former members. These amounts have been classified as
mandatorily redeemable Class B stock in the Statements of Condition.

The following table summarizes our activity related to
mandatorily redeemable Class B stock.



|                                                                                   |  |                                        |        |                             |   |       
|---------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | --------------------------- | - | ------
|Mandatorily Redeemable Stock                                                       |  | For theThree MonthsEndedMarch 31, 2007 |        | For the   Year Ended   2006
|(in thousands)                                                                     |  |                                        |        |                            
|Balance, beginning of period                                                       |  | $                                      | 69,222 |                             | $ | 66,259
|Capital stock subject to mandatory redemption reclassified from equity withdrawals |  |                                        | 12,997 |                             |   | 2,963 
|                                                                                   |  |                                        |        |                             |   |       
|Balance, end of period                                                             |  | $                                      | 82,219 |                             | $ | 69,222
|                                                                                   |  |                                        |        |                             |   |       



16



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##### Table of Contents

 Capital Concentration  Two members, Washington Mutual Bank, F.S.B. and Bank of
America Oregon, N.A., held 37.9% and 38.0% of our total outstanding Class A and Class B stock, including mandatorily redeemable Class A and Class B stock, as of March 31, 2007 and December 31, 2006. See Note 9 for additional information.
No other member held more than 10% of our outstanding Class A and Class B stock and mandatorily redeemable Class A and Class B stock as of these dates.

Note 7. Derivatives and Hedging Activities

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

For the three months ended
March 31, 2007 and 2006, we recorded a $1.2 million net loss and a $1.9 million net gain on derivatives and hedging activities in other income. The $1.2 million net loss as of March 31, 2007 was comprised of a $942,000 net loss on fair value
hedges and a $245,000 net loss on economic hedges. The $1.9 million net gain as of March 31, 2006 was comprised of a $1.3 million net gain on fair value hedges and a $522,000 net gain on economic hedges. We had no cash flow hedges, which are
designated when hedging the exposure to variable cash flows of a forecasted transaction, during the three months ended March 31, 2007 and 2006.

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



|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|----------------------------------------------------- |  | -------------------- | ---------- | ---------------------- | ----------------------- | -------- | -------- |  | ---------------------- | ---------- |  | - | -------- | -
|                                                      |  | As of March 31, 2007 |            |                        | As of December 31, 2006 |         
|Derivative Notional Amounts and Estimated Fair Values |  | Notional             |            | Estimated   Fair Value |                         |          | Notional |  | Estimated   Fair Value |           
|(in thousands)                                        |  |                      |            |                        |                         |          |          |  |                        |           
|Interest-rate swaps                                   |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Fair value                                            |  | $                    | 32,702,876 |                        | $                       | (101,408 | )        |  | $                      | 31,486,621 |  | $ | (120,698 | )
|Economic                                              |  |                      | 1,006,950  |                        |                         | (375     | )        |  |                        | 1,172,450  |  |   | 137      |  
|Interest-rate swaptions                               |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Economic                                              |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Interest-rate caps/floors                             |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Fair value                                            |  |                      | 140,000    |                        |                         | 747      |          |  |                        | 140,000    |  |   | 1,085    |  
|Economic                                              |  |                      | 450,000    |                        |                         | 1,097    |          |  |                        | 450,000    |  |   | 1,299    |  
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Total                                                 |  | $                    | 34,299,826 |                        |                         | (99,939  | )        |  | $                      | 33,249,071 |  |   | (118,177 | )
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Accrued interest                                      |  |                      |            |                        |                         | 241,236  |          |  |                        |            |  |   | 218,231  |  
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Net derivative balances                               |  |                      |            |                        | $                       | 141,297  |          |  |                        |            |  | $ | 100,054  |  
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Derivative balances                                   |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Assets                                                |  |                      |            |                        | $                       | 163,228  |          |  |                        |            |  | $ | 146,900  |  
|Liabilities                                           |  |                      |            |                        |                         | (21,931  | )        |  |                        |            |  |   | (46,846  | )
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  
|Net derivative balances                               |  |                      |            |                        | $                       | 141,297  |          |  |                        |            |  | $ | 100,054  |  
|                                                      |  |                      |            |                        |                         |          |          |  |                        |            |  |   |          |  

The fair values of embedded derivatives presented on a combined basis with the related
consolidated obligation bonds consisted of $272,000 in unrealized net gain related to $430.0 million in consolidated obligation bonds outstanding as of March 31, 2007. This compares to $193,000 in unrealized net loss related to $530.0 million
in consolidated obligation bonds outstanding as of December 31, 2006.

Note 8. Estimated Fair Value

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



17



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##### Table of Contents

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



|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|-------------------------------------------------- |  | -------------- | ----------- | - | ----------------------------------- | - | -------- | -------------------- |  | - | ----------- | -
|As of March 31, 2007                               |  | Carrying Value |             |   | Net    Unrealized    Gains (Losses) |   |          | Estimated Fair Value | 
|(in thousands)                                     |  |                |             |   |                                     |   |          |                      | 
|Financial Assets                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Cash and due from banks                            |  | $              | 1,604       |   |                                     | $ |          |                      |  | $ | 1,604       |  
|Interest-bearing deposits                          |  |                | 2,873,000   |   |                                     |   | 92       |                      |  |   | 2,873,092   |  
|Securities purchased under agreement to resell     |  |                | 500,000     |   |                                     |   |          |                      |  |   | 500,000     |  
|Federal funds sold                                 |  |                | 9,168,000   |   |                                     |   | (220     | )                    |  |   | 9,167,780   |  
|Held-to-maturity securities                        |  |                | 11,647,229  |   |                                     |   | (172,241 | )                    |  |   | 11,474,988  |  
|Advances                                           |  |                | 25,652,824  |   |                                     |   | 52,393   |                      |  |   | 25,705,217  |  
|Mortgage loans held for portfolio                  |  |                | 6,188,245   |   |                                     |   | (183,895 | )                    |  |   | 6,004,350   |  
|Accrued interest receivable                        |  |                | 248,349     |   |                                     |   |          |                      |  |   | 248,349     |  
|Derivative assets                                  |  |                | 163,228     |   |                                     |   |          |                      |  |   | 163,228     |  
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Total Financial Assets                             |  | $              | 56,442,479  |   |                                     |   |          |                      |  | $ | 56,138,608  |  
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Financial Liabilities                              |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Deposits                                           |  | $              | (1,075,877  | ) |                                     |   | 12       |                      |  | $ | (1,075,865  | )
|Consolidated obligations:                          |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Discount notes                                     |  |                | (4,628,825  | ) |                                     |   | 1,270    |                      |  |   | (4,627,555  | )
|Bonds                                              |  |                | (47,790,509 | ) |                                     |   | 15,408   |                      |  |   | (47,775,101 | )
|Mandatorily redeemable Class B stock               |  |                | (82,219     | ) |                                     |   |          |                      |  |   | (82,219     | )
|Accrued interest payable                           |  |                | (587,994    | ) |                                     |   |          |                      |  |   | (587,994    | )
|Derivative liabilities                             |  |                | (21,931     | ) |                                     |   |          |                      |  |   | (21,931     | )
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Total Financial Liabilities                        |  | $              | (54,187,355 | ) |                                     |   |          |                      |  | $ | (54,170,665 | )
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Other                                              |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Commitments to extend credit for advances          |  | $              | (1,004      | ) |                                     |   |          |                      |  | $ | (1,004      | )
|Commitments to issue consolidated obligation bonds |  |                |             |   |                                     |   | 169      |                      |  |   | 169         |  



|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|-------------------------------------------------- |  | -------------- | ----------- | - | ----------------------------------- | - | -------- | -------------------- |  | - | ----------- | -
|As of December 31, 2006                            |  | Carrying Value |             |   | Net    Unrealized    Gains (Losses) |   |          | Estimated Fair Value | 
|(in thousands)                                     |  |                |             |   |                                     |   |          |                      | 
|Financial Assets                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Cash and due from banks                            |  | $              | 1,119       |   |                                     | $ |          |                      |  | $ | 1,119       |  
|Interest-bearing deposits                          |  |                | 2,165,000   |   |                                     |   | (35      | )                    |  |   | 2,164,965   |  
|Federal funds sold                                 |  |                | 2,832,000   |   |                                     |   | (12      | )                    |  |   | 2,831,988   |  
|Held-to-maturity securities                        |  |                | 13,687,909  |   |                                     |   | (213,788 | )                    |  |   | 13,474,121  |  
|Advances                                           |  |                | 27,960,994  |   |                                     |   | 41,687   |                      |  |   | 28,002,681  |  
|Mortgage loans held for portfolio                  |  |                | 6,366,648   |   |                                     |   | (195,971 | )                    |  |   | 6,170,677   |  
|Accrued interest receivable                        |  |                | 323,342     |   |                                     |   |          |                      |  |   | 323,342     |  
|Derivative assets                                  |  |                | 146,900     |   |                                     |   |          |                      |  |   | 146,900     |  
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Total Financial Assets                             |  | $              | 53,483,912  |   |                                     |   |          |                      |  | $ | 53,115,793  |  
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|                                                   |  |                |            
|Financial Liabilities                              |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Deposits                                           |  | $              | (1,003,960  | ) |                                     |   | 12       |                      |  | $ | (1,003,948  | )
|Consolidated obligations:                          |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Discount notes                                     |  |                | (1,495,861  | ) |                                     |   | 541      |                      |  |   | (1,495,320  | )
|Bonds                                              |  |                | (48,040,715 | ) |                                     |   | 122,595  |                      |  |   | (47,918,120 | )
|Subordinated notes                                 |  |                | (69,222     | ) |                                     |   |          |                      |  |   | (69,222     | )
|Mandatorily redeemable Class B stock               |  |                | (567,585    | ) |                                     |   |          |                      |  |   | (567,585    | )
|Accrued interest payable                           |  |                | (46,846     | ) |                                     |   |          |                      |  |   | (46,846     | )
|Derivative liabilities                             |  |                | (59,252     | ) |                                     |   |          |                      |  |   | (59,252     | )
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Total Financial Liabilities                        |  | $              | (51,283,441 | ) |                                     |   |          |                      |  | $ | (51,160,293 | )
|                                                   |  |                |             |   |                                     |   |          |                      |  |   |             |  
|                                                   |  |                |            
|Other                                              |  |                |             |   |                                     |   |          |                      |  |   |             |  
|Commitments to extend credit for advances          |  | $              | (1,020      | ) |                                     |   |          |                      |  | $ | (1,020      | )
|Commitments to issue consolidated obligation bonds |  |                |             |   |                                     |   | 296      |                      |  |   | 296         |  



18



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##### Table of Contents

Note 9. Transactions with Related Parties and other FHLBanks

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

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

For member transactions related to:



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



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



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



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



19



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##### Table of Contents

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



|                                                                                   |  |                        |            |   |                        |   |           
|---------------------------------------------------------------------------------- |  | ---------------------- | ---------- | - | ---------------------- | - | ----------
|Outstanding Transactions                                                           |  | As of   March 31, 2007 |            |   | As ofDecember 31, 2006
|(in thousands)                                                                     |  |                        |            |   |                       
|Assets                                                                             |  |                        |            |   |                        |   |           
|Cash                                                                               |  | $                      | 306        |   |                        | $ | 356       
|Interest-bearing deposits                                                          |  |                        |            |   |                        |   |           
|Federal funds sold                                                                 |  |                        | 863,000    |   |                        |   |           
|Held-to-maturity securities                                                        |  |                        | 1,708,106  |   |                        |   | 1,712,166 
|Advances*                                                                          |  |                        | 25,581,289 |   |                        |   | 27,907,730
|Mortgage loans held for portfolio                                                  |  |                        | 6,182,383  |   |                        |   | 6,361,091 
|Accrued interest receivable                                                        |  |                        | 182,360    |   |                        |   | 208,659   
|Derivative assets                                                                  |  |                        | 74,312     |   |                        |   | 66,346    
|                                                                                   |  |                        |            |   |                        |   |           
|Total Assets                                                                       |  | $                      | 34,591,756 |   |                        | $ | 36,256,348
|                                                                                   |  |                        |            |   |                        |   |           
|Liabilities                                                                        |  |                        |            |   |                        |   |           
|Deposits                                                                           |  | $                      | 1,053,161  |   |                        | $ | 985,000   
|Mandatorily redeemable Class B stock                                               |  |                        | 67,978     |   |                        |   | 59,269    
|Derivative liabilities                                                             |  |                        | 299        |   |                        |   | 116       
|                                                                                   |  |                        |            |   |                        |   |           
|Total liabilities                                                                  |  | $                      | 1,121,438  |   |                        | $ | 1,044,385 
|                                                                                   |  |                        |            |   |                        |   |           
|Other                                                                              |  |                        |            |   |                        |   |           
|Notional amount of derivatives                                                     |  | $                      | 11,458,314 |   |                        | $ | 10,154,274
|Letters of credit                                                                  |  |                        | 140,742    |   |                        |   | 135,627   
|*  Includes the effect of
associated derivatives with members or their affiliates.
|                                                                                   |  |                       
|For the Three Months Ended March 31,                                               |  | 2007                   |            |   | 2006                  
|(in thousands)                                                                     |  |                        |            |   |                       
|Interest Income                                                                    |  |                        |            |   |                        |   |           
|Advances*                                                                          |  | $                      | 353,601    |   |                        | $ | 249,761   
|Prepayment fees on advances                                                        |  |                        | 1,143      |   |                        |   | 344       
|Interest-bearing deposits                                                          |  |                        |            |   |                        |   | 2,662     
|Federal funds sold                                                                 |  |                        | 5,989      |   |                        |   | 5,057     
|Held-to-maturity securities                                                        |  |                        | 25,341     |   |                        |   | 18,898    
|Mortgage loans held for portfolio                                                  |  |                        | 80,260     |   |                        |   | 93,760    
|                                                                                   |  |                        |            |   |                        |   |           
|Total interest income                                                              |  |                        | 466,334    |   |                        |   | 370,482   
|                                                                                   |  |                        |            |   |                        |   |           
|Interest Expense                                                                   |  |                        |            |   |                        |   |           
|Deposits                                                                           |  |                        | 10,040     |   |                        |   | 7,690     
|Consolidated obligations*                                                          |  |                        | 3,449      |   |                        |   | 925       
|Mandatorily redeemable Class B stock                                               |  |                        | 76         |   |                        |   |           
|                                                                                   |  |                        |            |   |                        |   |           
|Total interest expense                                                             |  |                        | 13,565     |   |                        |   | 8,615     
|                                                                                   |  |                        |            |   |                        |   |           
|Net Interest Income                                                                |  | $                      | 452,769    |   |                        | $ | 361,867   
|                                                                                   |  |                        |            |   |                        |   |           
|Other (Loss) Income                                                                |  |                        |            |   |                        |   |           
|Service fees                                                                       |  | $                      | 404        |   |                        | $ | 457       
|Net (loss) gain on derivatives and hedging activities                              |  |                        | (3,367     | ) |                        |   | 458       
|Other (loss) income                                                                |  |                        | (25        | ) |                        |   | 46        
|                                                                                   |  |                        |            |   |                        |   |           
|Total other (loss) income                                                          |  | $                      | (2,988     | ) |                        | $ | 961       
|                                                                                   |  |                        |            |   |                        |   |           
|*  Includes the effect of
associated derivatives with members or their affiliates.



20



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##### Table of Contents

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



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



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



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



|                                  |  |                      |            |                         |   |           
|--------------------------------- |  | -------------------- | ---------- | ----------------------- | - | ----------
|Transactions with Certain Members |  | As of March 31, 2007 |            | As of December 31, 2006
|                                  | 
|(in thousands)                    |  |                      |            |                        
|Assets                            |  |                      |            |                         |   |           
|Cash                              |  | $                    | 306        |                         | $ | 356       
|Federal funds sold                |  |                      | 280,000    |                         |   |           
|Held-to-maturity securities       |  |                      | 332,635    |                         |   | 366,799   
|Advances*                         |  |                      | 16,591,119 |                         |   | 18,923,425
|Mortgage loans held for portfolio |  |                      | 5,610,643  |                         |   | 5,770,420 
|Accrued interest receivable       |  |                      | 133,297    |                         |   | 163,115   
|Derivative assets                 |  |                      | 20,835     |                         |   | 12,106    
|                                  |  |                      |            |                         |   |           
|Total Assets                      |  | $                    | 22,968,835 |                         | $ | 25,236,221
|                                  |  |                      |            |                         |   |           
|Liabilities                       |  |                      |            |                         |   |           
|Deposits                          |  |                      | 16,745     |                         |   | 33,412    
|                                  |  |                      |            |                         |   |           
|Total liabilities                 |  | $                    | 16,745     |                         | $ | 33,412    
|                                  |  |                      |            |                         |   |           
|Other                             |  |                      |            |                         |   |           
|Notional amount of derivatives    |  | $                    | 2,158,150  |                         | $ | 808,650   
|Letters of credit                 |  |                      | 6,679      |                         |   | 10,594    

| | 
| | 

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



|                                               |  |      |         |   |      |   |         |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|For the Three Months Ended March 31,           |  | 2007 |         |   | 2006 |  
|(in thousands)                                 |  |      |         |   |      |  
|Interest Income                                |  |      |         |   |      |   |         |  
|Advances*                                      |  | $    | 232,628 |   |      | $ | 152,662 |  
|Prepayment fees on advances                    |  |      |         |   |      |   |         |  
|Federal funds sold                             |  |      | 2,934   |   |      |   | 3,422   |  
|Held to maturity securities                    |  |      | 5,278   |   |      |   | 5,736   |  
|Mortgage loans held for portfolio              |  |      | 72,932  |   |      |   | 85,122  |  
|                                               |  |      |         |   |      |   |         |  
|Total interest income                          |  |      | 313,772 |   |      |   | 246,942 |  
|                                               |  |      |         |   |      |   |         |  
|Interest Expense                               |  |      |         |   |      |   |         |  
|Deposits                                       |  |      | 285     |   |      |   | 195     |  
|Consolidated obligations*                      |  |      | 101     |   |      |   | 232     |  
|                                               |  |      |         |   |      |   |         |  
|Total interest expense                         |  |      | 386     |   |      |   | 427     |  
|                                               |  |      |         |   |      |   |         |  
|Net Interest Income                            |  | $    | 313,386 |   |      | $ | 246,515 |  
|                                               |  |      |         |   |      |   |         |  
|Other Income (Loss)                            |  |      |         |   |      |   |         |  
|Net gain on derivatives and hedging activities |  | $    | (1,525  | ) |      | $ | 54      |  
|Other income                                   |  |      | 4       |   |      |   | (10     | )
|                                               |  |      |         |   |      |   |         |  
|Total other income (loss)                      |  | $    | (1,521  | ) |      | $ | 44      |  
|                                               |  |      |         |   |      |   |         |  

| | 
| | 

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



21



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##### Table of Contents

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

Note 10. Commitments and Contingencies

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

We have not recognized a liability for our joint and several obligation related to other FHLBanks consolidated obligations as of March 31,
2007 and December 31, 2006. The par amounts of all the FHLBanks outstanding consolidated obligations for which we are jointly and severally liable, net of interbank holdings, were approximately $948.0 billion and $947.3 billion as of
March 31, 2007 and December 31, 2006.

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

Commitments that legally bind and unconditionally obligate us for
additional advances totaled $39.6 million and $46.2 million, as of March 31, 2007 and December 31, 2006. Commitments generally are for periods of up to 12 months. Standby letters of credit were approximately $140.7 million and $135.6
million as of March 31, 2007 and December 31, 2006 and had original terms of one month to 15 years, with a final expiration in 2015. Based on our credit analyses and collateral requirements, we do not consider it necessary to have any
provision for credit losses on these commitments.

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

As of March 31, 2007 and December 31, 2006, there were no investments that had been traded but not settled. We entered into agreements to issue $767.6 million and $850.0 million par value of consolidated
obligation bonds as of March 31, 2007 and December 31, 2006. We had no agreements outstanding to issue consolidated obligation discount notes as of March 31, 2007 and December 31, 2006.



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##### Table of Contents

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

Forward-Looking Statements

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

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

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



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



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



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



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



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



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



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



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



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



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



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



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



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



| |  |  | 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, or the value of the collateral that we hold.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



23



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##### Table of Contents

Overview

The Seattle Bank, a federally chartered corporation and one of 12 FHLBanks, is a cooperative that is owned by member financial institutions located within our district, which includes Alaska, Hawaii, Idaho, Montana, Oregon, Utah,
Washington, and Wyoming, as well as the U.S. territories of American Samoa, Guam, and the Northern Mariana Islands. All federally insured depository institutions and insurance companies engaged in residential housing finance and community financial
institutions located in the Seattle Banks district are eligible to apply for membership. Eligible institutions must purchase specified amounts of capital stock in the Seattle Bank as a condition of membership. Members generally are assigned a
credit line at the time they join, based on our evaluation of their financial condition, and are eligible to receive dividends, if and when payable, on their capital stock holdings. Members are subject to activity-based capital stock purchase
requirements, which may require them to purchase additional stock if the amount of business they do with us increases. All of our outstanding capital stock is owned by our members, except in limited circumstances, for example, for a period following
the acquisition of a member by a nonmember.

Our mission is to provide liquidity, funding, and services to enhance our members
success and the availability of affordable homes and economic development in their communities. We also work with our members and a variety of other entities, including non-profit organizations, to provide affordable housing and community economic
development funds through direct subsidy grants and low- or no-interest loans, to individuals and communities in need. We fund these grants and loans through the Affordable Housing Program, or AHP, and a number of other community investment
programs.

As a result of our 2004 Finance Board examination, we entered into an agreement with the Finance Board in December 2004, which
we refer to as the Written Agreement. The Written Agreement required us to develop a three-year business and capital management plan, which we refer to as our business plan, and submit it to the Finance Boards Office of Supervision, and
imposed certain other requirements and limitations. In May 2005, the Finance Board accepted our business plan, subject to our adoption of certain dividend and stock repurchase restrictions. See Capital Resources and
LiquidityCapital ResourcesCapital Plan Amendments and Board Policies Regarding Seattle Bank Stock for more information. On January 11, 2007, due to, among other things, our successful progress on the implementation of our
business plan, the Finance Board terminated the Written Agreement.

To implement the business plan, we have undertaken significant changes
to our business, operations, and capital policies, including refocusing our strategic direction and marketing efforts on advances, beginning our exit from the Mortgage Purchase Program, or MPP, and substantially reducing our operating expenses,
primarily through reductions in staff and facilities costs. To lead the Seattle Bank in refocusing our business, our Board of Directors, or Board, appointed James E. Gilleran as our president and chief executive officer effective June 2005,
appointed Richard M. Riccobono as our executive vice president, chief operating officer effective August 2005, and appointed Mark R. Szczepaniak as our chief financial officer effective July 2005. In February 2007, Mr. Gilleran announced his
resignation effective April 30, 2007, and the Board appointed Mr. Riccobono as our president and chief executive officer effective May 1, 2007.

Recent Developments

In April 2007, the Finance Board appointed Les AuCoin, Frederick C. Kiga, Michael W. McGowan, and
Cynthia A. Parker to the Board effective April 24, 2007. Mr. McGowan and Mr. AuCoin were appointed to fill the remainder of three-year terms that began on January 1, 2006. Ms. Parker and Mr. Kiga were appointed to fill
the remainder of three-year terms that began on January 1, 2007. The Finance Board has yet to make appointments for the two remaining director positions on the Board.

On April 26, 2007, the Board declared a $1.29 per share dividend on average Class A stock outstanding during the first quarter of 2007 and a
$0.15 per share dividend on average Class B stock outstanding during the quarter of 2007. The dividend will be paid prior to the end of the second quarter.

Quarterly Summary

This discussion and analysis reviews our financial condition as of March 31, 2007 and
December 31, 2006 and our results of operations for the three months ended March 31, 2007 and 2006. This discussion should be read in conjunction with our 2006 annual report on Form 10-K, including our audited financial statements and
related notes for the year ended December 31, 2006, or 2006 Audited Financials, and Item I. Financial Statements in this report.



24



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##### Table of Contents

As of March 31, 2007, we had total assets of $56.5 billion, total deposits of $1.1 billion, and
retained earnings of $100.8 million, compared to total assets of $53.5 billion, total deposits of $1.0 billion, and retained earnings of $92.4 million as of December 31, 2006. The increase in assets primarily resulted from reducing our
capital-to-assets ratio to a target of 4.10% during the first quarter 2007 from a target of 4.30% during 2006, in order to more fully use our capital and increase net interest income.

The Seattle Banks net income increased by $2.6 million, to $10.6 million for the three months ended March 31, 2007, compared to the same
period in 2006. The increase in net income for the three-month period was primarily due to an increase in net interest income resulting from increased advance business and from reinvesting proceeds from maturing low-yielding investments in the
consolidated obligations of other FHLBanks into higher-yielding investments such as federal funds.

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

We expect to increase our advance balance and our interest income from advances through additional advance
product offerings, continued use of differential pricing, and through our members making use of certain changes to our Capital Plan that were adopted to encourage increased advance activity. Advance balances will vary from time to time as a result
of changes in member demand, changes in market conditions, and other factors. For example, our advance balance declined by $2.3 billion as of March 31, 2007 from December 31, 2006, primarily as a result of a reduction in advances from one
of our largest members. As a result of our advance balance declining and a change in our target capital-to-assets ratio to 4.10% from 4.30%, our short-term investments increased significantly over the three months ended March 31, 2007 in order
to fully use our capital and maintain liquidity for future advance growth. The balance of our mortgage loans held for portfolio will continue to decrease, largely through principal repayments. Assuming future growth in our advances and a
substantially unchanged interest-rate environment, we anticipate continued improvement in net income and further decreases in our unrealized market value losses for the remainder of 2007 and later years.



25



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##### Table of Contents

Financial Highlights

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



|                                                         |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|-------------------------------------------------------- |  | --------------- | ------ | - | ---------------- | - | ------ | ----------------- |  | - | ------------- | - |  | ------------- | ------ | - |  | - | ------ | -
|Selected Financial Data                                  |  | March 31,  2007 |        |   | December 31,2006 |   |        | September 30,2006 |  |   | June 30, 2006 |   |  | March 31,2006 |       
|(in millions, except ratios)                             |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |       
|Statements of Condition (at period end)                  |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|Total assets                                             |  | $               | 56,474 |   |                  | $ | 53,515 |                   |  | $ | 53,491        |   |  | $             | 53,189 |   |  | $ | 53,376 |  
|Cash and investments(1)                                  |  |                 | 24,190 |   |                  |   | 18,686 |                   |  |   | 19,423        |   |  |               | 19,143 |   |  |   | 24,199 |  
|Advances                                                 |  |                 | 25,653 |   |                  |   | 27,961 |                   |  |   | 27,156        |   |  |               | 26,936 |   |  |   | 21,924 |  
|Mortgage loans held for portfolio                        |  |                 | 6,188  |   |                  |   | 6,367  |                   |  |   | 6,557         |   |  |               | 6,774  |   |  |   | 7,003  |  
|Deposits and other borrowings                            |  |                 | 1,076  |   |                  |   | 1,004  |                   |  |   | 876           |   |  |               | 890    |   |  |   | 1,101  |  
|Primary obligations on consolidated obligations          |  |                 | 52,419 |   |                  |   | 49,537 |                   |  |   | 49,657        |   |  |               | 49,388 |   |  |   | 49,143 |  
|Affordable Housing Program (AHP)                         |  |                 | 21     |   |                  |   | 23     |                   |  |   | 24            |   |  |               | 26     |   |  |   | 28     |  
|Payable to Resolution Funding                            |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|Corporation (REFCORP)                                    |  |                 | 3      |   |                  |   | 2      |                   |  |   | 2             |   |  |               | 1      |   |  |   | 2      |  
|Class A capital stock                                    |  |                 | 485    |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|Class B(1) / B(2) - putable or capital stock - putable   |  |                 | 2,131  |   |                  |   | 2,141  |                   |  |   | 2,136         |   |  |               | 2,135  |   |  |   | 2,131  |  
|Total capital                                            |  |                 | 2,230  |   |                  |   | 2,232  |                   |  |   | 2,225         |   |  |               | 2,214  |   |  |   | 2,208  |  
|Statements of Income (for the three-month period ending) |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|                                                         |  |                 |        |   |                 
|Interest income                                          |  | $               | 691    |   |                  | $ | 670    |                   |  | $ | 664           |   |  | $             | 619    |   |  | $ | 580    |  
|                                                         |  |                 |        |   |                 
|Net interest income                                      |  |                 | 28     |   |                  |   | 21     |                   |  |   | 22            |   |  |               | 14     |   |  |   | 20     |  
|                                                         |  |                 |        |   |                 
|Other income (loss)                                      |  |                 | (3     | ) |                  |   |       |                   |  |   |               |   |  |               | 1      |   |  |   | 2      |  
|                                                         |  |                 |        |   |                 
|Other expense                                            |  |                 | 11     |   |                  |   | 12     |                   |  |   | 10            |   |  |               | 11     |   |  |   | 12     |  
|                                                         |  |                 |        |   |                 
|Income before AHP and REFCORP assessments                |  |                 | 14     |   |                  |   | 9      |                   |  |   | 12            |   |  |               | 3      |   |  |   | 11     |  
|                                                         |  |                 |        |   |                 
|AHP and REFCORP assessments                              |  |                 | 4      |   |                  |   | 2      |                   |  |   | 3             |   |  |               | 1      |   |  |   | 3      |  
|                                                         |  |                 |        |   |                 
|Net income                                               |  |                 | 11     |   |                  |   | 7      |                   |  |   | 9             |   |  |               | 2      |   |  |   | 8      |  
|                                                         |  |                 |        |   |                 
|Dividends (for the three-month period ending)            |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|                                                         |  |                 |        |   |                 
|Dividends paid in cash                                   |  | $               | 2      |   |                  | $ | 2      |                   |  | $ |               |   |  | $             |        |   |  | $ |        |  
|                                                         |  |                 |        |   |                 
|Annualized dividend rate                                 |  |                 | 0.40   | % |                  |   | 0.10   | %                 |  |   | n/a           |   |  |               | n/a    |   |  |   | n/a    |  
|                                                         |  |                 |        |   |                 
|Dividend payout ratio                                    |  |                 | 20.20  | % |                  |   | 34.60  | %                 |  |   | n/a           |   |  |               | n/a    |   |  |   | n/a    |  
|Financial Statistics (for the three-month period ending) |  |                 |        |   |                  |   |        |                   |  |   |               |   |  |               |        |   |  |   |        |  
|Return on average equity                                 |  |                 | 1.93   | % |                  |   | 1.10   | %                 |  |   | 1.63          | % |  |               | 0.45   | % |  |   | 1.47   | %
|Return on average assets                                 |  |                 | 0.08   |   |                  |   | 0.05   |                   |  |   | 0.07          |   |  |               | 0.02   |   |  |   | 0.06   |  
|Equity-to-assets ratio(2)                                |  |                 | 4.17   |   |                  |   | 4.30   |                   |  |   | 4.30          |   |  |               | 4.30   |   |  |   | 4.30   |  
|Total capital-assets ratio(3)                            |  |                 | 4.10   |   |                  |   | 4.30   |                   |  |   | 4.29          |   |  |               | 4.29   |   |  |   | 4.26   |  
|Net interest margin(4)                                   |  |                 | 0.21   |   |                  |   | 0.16   |                   |  |   | 0.17          |   |  |               | 0.10   |   |  |   | 0.16   |  

---

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



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



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



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



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##### Table of Contents

Financial Condition

Our assets principally consist of advances, investments, and mortgage loans held for portfolio. The composition of our assets changed during the first quarter of 2007 from year-end 2006, primarily due to the maturity
and non-renewal of $3.0 billion in advances from one of our largest members and our subsequent reinvestment of the funds into short-term investments and the lowering of our capital-to-assets ratio to a target of 4.10% from a target of 4.30% in order
to more fully use our capital to earn interest income while maintaining liquidity to fund advances.

As part of the business plan, we began
to exit the MPP in 2005 and have refocused our business on advances. During 2006, we increased our advances by $6.5 billion, to $28.0 billion, or 30.4%, from December 31, 2005. During the first quarter of 2007, advance balances declined by $2.3
billion to $25.7 billion, primarily as a result of a $3.0 billion maturity and non-renewal of advances from one of our largest members. We seek to continue to increase our advances by offering additional advance products, using differential pricing,
offering the purchase of Class A stock with a six-month redemption period, and, for a limited time, permitting the use of an excess stock pool to support additional advances. Over time, we expect our advances to increase, our mortgage loan
portfolio to decrease as mortgage loans are paid off, and our investments to decrease as a percentage of our total assets, although these balances will vary from time to time as a result of changes in member demand, changes in market conditions, and
other factors.

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



|                                                    |  |                         |   |  |                        |  
|--------------------------------------------------- |  | ----------------------- | - |  | ---------------------- | -
|Major Asset Classes as a Percentage of Total Assets |  | As of    March 31, 2007 |   |  | As ofDecember 31, 2006 |  
|Advances                                            |  | 45.4                    | % |  | 52.2                   | %
|Investments                                         |  | 42.8                    |   |  | 34.9                   |  
|Mortgage loans held for portfolio                   |  | 11.0                    |   |  | 11.9                   |  
|Other assets                                        |  | 0.8                     |   |  | 1.0                    |  
|                                                    |  |                         |   |  |                        |  
|Total                                               |  | 100.0                   | % |  | 100.0                  | %
|                                                    |  |                         |   |  |                        |  

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

We report our assets, liabilities, and
commitments in accordance with U.S. GAAP, including the market value of our assets, liabilities, and commitments, which we also review for purposes of risk management. The differences between the carrying value and market value of our assets,
liabilities, and commitments are unrealized market value gains or losses. As of March 31, 2007, we had net unrealized market value losses of $287.0 million. Because of these net unrealized market value losses, the ratio of the market value
of our equity to the book value of our equity was 87.2% as of March 31, 2007. Our net unrealized market value losses increased from $245.0 million reported as of December 31, 2006, largely due to a decrease in the unrealized
market value gains of our consolidated obligations. We measure the market value of our equity as the present value of the expected net cash flows from all our existing assets, liabilities, and commitments. Our calculation of market values involves
estimates of the market value of our assets, liabilities, and commitments, which may add imprecision into any unrealized market-value gains or losses that we report.

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 $2.3 billion, to $25.7 billion, as of March 31, 2007,
compared to December 31, 2006. This decrease was primarily the result of the maturity and non-renewal of $3.0 billion in advances of one of our largest members. For the three months ended March 31, 2007, new advances totaled $18.3 billion,
while maturing advances totaled $20.6 billion. This level of activity was lower than that of the same period of 2006, when new advances totaled $22.1 billion and maturing advances totaled $21.6 billion, primarily due to lower new advance
activity with one of our largest members.



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##### Table of Contents

As of March 31, 2007, five members held 68.8% of our outstanding advances compared to 69.5% as of
December 31, 2006. Two of these members, Bank of America Oregon, N.A. and Washington Mutual Bank, F.S.B., had advances totaling 54.2% of the par value of our outstanding advances as of March 31, 2007 (Bank of America Oregon, N.A. with
41.3% and Washington Mutual Bank, F.S.B., with 12.9%) compared to those members holding 56.8% as of December 31, 2006 (Bank of America Oregon, N.A. with 36.0% and Washington Mutual Bank, F.S.B. with 20.8%). No other borrower held over 10% of
our outstanding advances as of March 31, 2007 or December 31, 2006. Because a large concentration of our advances is held by only a few members, changes in their borrowing decisions can significantly affect the amount of our advances
outstanding. As we refocus our business on our advances, we expect that the concentration of advances with our largest borrowers will remain significant for at least the remainder of 2007 and several years beyond.

As of March 31, 2007, 57.6% of the par value of our advance portfolio had a remaining term to maturity of one year or less, compared to 57.7% as of
December 31, 2006. The total weighted-average interest rate on our advance portfolio as of March 31, 2007 and December 31, 2006, was 5.13% and 5.14%, reflecting the lack of movement of interest rates during the first quarter of 2007.
For additional information on advances see Note 7 in the notes to the 2006 Audited Financials and Note 3 in Item 1. Financial Statements in this report.

The following table summarizes the par value of our advance portfolio by interest-rate payment terms, as of the dates indicated.



|                                                 |  |                         |   |  |                        |  
|------------------------------------------------ |  | ----------------------- | - |  | ---------------------- | -
|Advance Portfolio by Interest-Rate Payment Terms |  | As of    March 31, 2007 |   |  | As ofDecember 31, 2006 |  
|Fixed-interest rate                              |  | 42.3                    | % |  | 56.0                   | %
|Variable-interest rate                           |  | 56.6                    |   |  | 43.5                   |  
|Floating-to-fixed convertible                    |  | 1.1                     |   |  | 0.5                    |  
|                                                 |  |                         |   |  |                        |  
|Total                                            |  | 100.0                   | % |  | 100.0                  | %
|                                                 |  |                         |   |  |                        |  

The percentage of variable interest-rate advances as a portion of our total advance balance as of
March 31, 2007 increased to 56.6%, compared to 43.5% as of December 31, 2006, primarily due to the first quarter decrease in fixed interest-rate advances held by one of our largest members.

Member Demand for Advances. Many factors affect the demand for advances, including changes in interest rates and changes in member funding needs.
Members regularly evaluate financing options relative to our advance products and pricing. The Seattle Banks pricing alternatives include: differential pricing, through which a member can obtain lower advance rates on large transactions, as
set within parameters established by our asset and liability management committee under authority delegated by our chief executive officer and overseen by our Board; advance window daily market pricing; and auction funding, through which borrowers
can generally save five basis-points or more, but which is offered only two times per week. Excluding cash management advances, for the three months ended March 31, 2007, the amount of differentially priced advances accounted for 72.4% of new
advances, compared to 79.5% for the year ended December 31, 2006. Excluding cash management advances, the amount of window advances and auction-priced advances accounted for 12.9% and 14.7% of the advances made for the three months ended
March 31, 2007, compared to 10.0% and 10.5% of advances made for 2006.

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

The demand for advances may be affected by the manner in which we may pay dividends on the stock our members are required to purchase in connection with such advances and any applicable restrictions on their ability
to have that stock redeemed or repurchased by us. In the first quarter of 2007 and in 2006, demand for advances, particularly those that required new stock purchases, was limited as a result of our action in May 2005 to suspend the declaration or
payment of dividends and to suspend the repurchase of Class B stock prior to the end of the statutory five-year redemption period, without prior approval of the Director of the Office of Supervision in each case. On December 8, 2006, the
Director of the Office of Supervision granted us a waiver, at the request of our Board, allowing us to resume declaring and paying quarterly dividends beginning in the fourth quarter of 2006, subject to certain limitations. In December 2006, we paid
a cash dividend based on the average Class B stock balance outstanding during the third quarter of 2006, and in January 2007, we paid a cash dividend based on the average Class B stock balance outstanding during the fourth quarter of 2006. We
believe that our resumption of dividend payments may contribute to increased advances, particularly those that may require new stock purchases.



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##### Table of Contents

In October 2006, the Finance Board approved amendments to our Capital Plan as proposed by our Board,
which went into effect in December 2006. Our Board approved the amendments 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 to the
Capital Plan included the creation of an excess stock pool that allows a member, for new or renewing advance activity, to satisfy its total stock purchase requirement by relying on Seattle Bank capital that is associated with total outstanding
excess stock, and the creation of a Class A stock with terms consistent with the Capital Plan. We believe that the creation of the excess stock pool and a Class A stock will contribute to the continued growth of our advance portfolio,
notwithstanding the current restrictions relating to our repurchase of Class B stock and limitations on the payment of dividends, because members will have greater borrowing and investment flexibility. As of March 31, 2007, 4.2% of our members
were using stock from the excess stock pool to support $2.4 billion in additional advances. One consequence of this change, however, is that our capital will not increase as a result of the increase in advances supported by the excess stock pool.
Because our Board has determined that we must currently maintain a minimum capital-to-assets ratio of 4.05%, this lack of growth in capital could constrain the growth of our advances from time to time. See Capital Resources and Liquidity
 Capital Resources, for additional information regarding the amendments to the Capital Plan and related limitations and restrictions that may affect member demand for advances.

Credit Risk. Our credit risk from advances is concentrated in commercial banks and savings institutions. As of March 31, 2007 we had advances
of $13.9 billion outstanding to two members, which represented 54.2% of our total advances outstanding, compared to $15.9 billion, representing 56.8%, as of December 31, 2006. We held sufficient collateral to fully secure the advances to these
members, and, as a result, we do not expect to incur any credit losses on these advances.

As of March 31, 2007, we had an outstanding
advance of $7.4 million to one borrower that we classified as substandard. This advance is fully collateralized with rights to proceeds from mortgage loans. Because the borrower continues to pay according to contractual requirements, and because of
our collateral position, we continue to accrue interest and do not expect to incur any credit losses on this advance.

In December 2006,
the Board approved the use of first lien, owner-occupied single family residential properties with FICO scores of 660 or less, as collateral for advances. To qualify as collateral, both the borrower and the loans must undergo collateral reviews and
meet certain eligibility standards as set by the Board. The collateral reviews include testing for compliance with the Seattle Banks responsible lending policy.

Investments

We maintain a portfolio of short-term investments and a portfolio of long-term
investments for liquidity purposes and to generate returns on our capital. Short-term investments generally include federal funds sold and other money market instruments, and long-term investments generally include mortgage-backed securities and
agency obligations. During 2006, we significantly reduced our short-term investments as our advance balance continued to increase. In the first quarter of 2007 as our advance balance declined as described above, we increased our short-term
investments in order to more fully use our capital and provide liquidity to fund advances while staying within our Board-approved minimum capital-to-assets ratio of 4.05%, which was approved in January 2007. Over time, we expect investments to
decline as a percentage of our total assets as our advance balance increases.

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



|                                                |  |                       |            |                        |   |           
|----------------------------------------------- |  | --------------------- | ---------- | ---------------------- | - | ----------
|Short- and Long-Term Investments                |  | As of  March 31, 2007 |            | As ofDecember 31, 2006
|(in thousands)                                  |  |                       |            |                       
|Short-Term Investments                          |  |                       |            |                        |   |           
|Federal funds sold                              |  | $                     | 9,168,000  |                        | $ | 2,832,000 
|Interest-bearing deposits                       |  |                       | 2,873,000  |                        |   | 2,165,000 
|Securities purchased under agreements to resell |  |                       | 500,000    |                        |   |           
|Commercial paper                                |  |                       | 98,906     |                        |   |           
|                                                |  |                       |            |                        |   |           
|Total short-term investments                    |  | $                     | 12,639,906 |                        | $ | 4,997,000 
|                                                |  |                       |            |                        |   |           
|Long-Term Investments                           |  |                       |            |                        |   |           
|Consolidated obligations of other FHLBanks      |  |                       | 3,024,963  |                        |   | 4,224,959 
|Mortgage-backed securities                      |  |                       | 6,690,601  |                        |   | 6,613,347 
|Other U.S. agency obligations                   |  |                       | 133,261    |                        |   | 146,298   
|Government-sponsored enterprise obligations     |  |                       | 1,688,735  |                        |   | 2,691,238 
|State or local housing agency obligations       |  |                       | 10,763     |                        |   | 12,067    
|                                                |  |                       |            |                        |   |           
|Total long-term investments                     |  | $                     | 11,548,323 |                        | $ | 13,687,909
|                                                |  |                       |            |                        |   |           



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During the three months ended March 31, 2007, our balance of short-term investments increased by
$7.6 billion, primarily as a result of reductions in our advances and long-term investment portfolio balances and from changing our targeted capital-to-assets ratio from 4.30% to 4.10% as part of our strategy of to more fully use our capital while
staying within our Board-approved minimum capital-to-assets ratio of 4.05%. Going forward, we expect to continue to manage our business to a capital-to-assets ratio of 4.10%, subject to applicable regulatory requirements, although our actual
capital-to-assets ratio may vary from our target. We expect over time that as our advance balance increases, our short-term investments, primarily federal funds, will decline as a percentage of our total assets.

As of March 31, 2007 and December 31, 2006, we held $8.1 billion and $10.5 billion, in held-to-maturity investments with unrealized losses of
$200.2 million and $238.6 million that had been in an unrealized loss position for over 12 months. The unrealized losses relating to our held-to-maturity investments as of March 31, 2007 and December 31, 2006 were related to declining
market values as a result of overall increases in market interest rates and were not related to underlying credit concerns relating to the investments. Based on the creditworthiness of the issuers and underlying collateral, we believe that these
unrealized losses represent temporary impairments. See Note 2 in Item 1. Financial Statements in this report for tables summarizing the held-to-maturity securities with unrealized losses as of March 31, 2007 and December 31,
2006.

Consolidated Obligations of Other FHLBanks. Our investment in other FHLBanks consolidated obligation bonds of $3.0
billion as of March 31, 2007 represented a decrease of $1.2 billion from our investment in such bonds as of December 31, 2006. The decrease was primarily due to sales and maturities of certain of our consolidated obligation bonds. During
the first quarter of 2007, we sold $750.0 million of our low-yielding consolidated obligation bonds that were within three months of maturity and realized $2.4 million in losses on those sales. Under U.S. GAAP, securities that are within 90 days of
maturity or have substantially equal installment payments and that have been paid down to less than 15% of their original balances may be sold without calling into question the classification of other securities as held-to-maturity. In a
regulatory interpretation issued by the Finance Board in March 2005, the Finance Board clarified that it generally prohibits an FHLBank from purchasing any consolidated obligation as part of the consolidated obligations initial issuance,
either directly from the Office of Finance or indirectly through an underwriter.

Mortgage-Backed Securities. Our investment in
mortgage-backed securities increased by $77.3 million to $6.7 billion as of March 31, 2007 from December 31, 2006, reflecting our strategy to fully use our capital to earn interest income while staying within the Finance Boards
maximum limit regarding investment in these higher-yielding securities. Finance Board regulations limit each FHLBanks investment in mortgage-backed securities, at the time a security is purchased, to 300% of a banks regulatory capital,
which in our case is comprised of capital stock, retained earnings, and mandatorily redeemable capital stock. Our investment in mortgage-backed securities represented 289.2% and 287.2%, of our regulatory capital as of March 31, 2007, and
December 31, 2006. Our investment in mortgage-backed securities as of March 31, 2007 and December 31, 2006, included $980.2 million and $1.0 billion in Federal Home Loan Mortgage Corporation, or Freddie Mac, mortgage-backed securities
and $732.3 million and $758.1 million of investments in Federal National Mortgage Association, or Fannie Mae, mortgage-backed securities. The remaining investment in mortgage-backed securities is rated AAA (or its equivalent) by a
nationally recognized statistical rating organization, or NRSRO, such as Moodys Investor Services, or Moodys, and Standard & Poors.

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 investment in other U.S. agency obligations declined by $13.0 million to $133.3 million during the three months ended March 31, 2007, primarily due to principal repayments from maturing securities.

Government-Sponsored Enterprises (GSEs). Our held-to-maturity investments in GSEs, excluding our investments in consolidated obligations of other
FHLBanks, consist primarily of unsecured debt securities of Fannie Mae and Freddie Mac. These securities are not guaranteed, directly or indirectly, by the U.S. government. Fannie Mae securities totaled $407.4 million and $908.5 million
and Freddie Mac securities totaled $982.5 million and $1.5 billion, as of March 31, 2007, and December 31, 2006. These securities represented 5.8% and 12.8% of total investments as of such dates. Finance Board regulations limit any
investments in the debt of any one GSE to the lower of 100% of our capital or the capital of the GSE, with the exception of the investment in other FHLBank consolidated obligations, in which we can no longer invest without Finance Board approval.



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Mortgage Loans Held for Portfolio

The par balance of our mortgage loans held for portfolio consisted of $5.9 billion and $6.0 billion in conventional mortgage loans and $276.3 million and $292.1 million in government-insured mortgage loans as of
March 31, 2007 and December 31, 2006. The decrease during the three months ended March 31, 2007 was due to our receipt of $176.0 million in principal payments. As a result of our decision to exit the MPP, we ceased entering into new
master commitment contracts in 2005 and have terminated all open contracts.

As of March 31, 2007, 88.9% of our outstanding mortgage
loan portfolio consisted of mortgage loans originally purchased from our largest participating member, Washington Mutual Bank, F.S.B.

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



|                                                           |  |                        |           |   |                        |   |           |  
|---------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------------- | - | --------- | -
|Mortgage Loan Portfolio Activity                           |  | As of   March 31, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands, except percentages and FICO scores)         |  |                        |           |   |                        |  
|Mortgage loan par balance at beginning of the year         |  | $                      | 6,336,632 |   |                        | $ | 7,182,542 |  
|Mortgage loans transferred to real estate owned            |  |                        | (170      | ) |                        |   | (373      | )
|Maturities and principal amount received                   |  |                        | (175,994  | ) |                        |   | (845,537  | )
|                                                           |  |                        |           |   |                        |   |           |  
|Mortgage loan par balance at period end                    |  |                        | 6,160,468 |   |                        |   | 6,336,632 |  
|                                                           |  |                        |           |   |                        |   |           |  
|Mortgage loan net premium balance at beginning of the year |  |                        | 30,016    |   |                        |   | 33,065    |  
|Net premium recovery from repurchases                      |  |                        | (3        | ) |                        |   | (92       | )
|Net premium amortization                                   |  |                        | (2,236    | ) |                        |   | (2,957    | )
|                                                           |  |                        |           |   |                        |   |           |  
|Mortgage loan net premium balance at period end            |  |                        | 27,777    |   |                        |   | 30,016    |  
|                                                           |  |                        |           |   |                        |   |           |  
|Total mortgage loans held for portfolio                    |  | $                      | 6,188,245 |   |                        | $ | 6,366,648 |  
|                                                           |  |                        |           |   |                        |   |           |  
|Premium balance as a percent of mortgage loan par amounts  |  |                        | 0.45      | % |                        |   | 0.47      | %
|Average FICO score* at origination                         |  |                        | 745       |   |                        |   | 745       |  
|Average loan-to-value ratio at origination                 |  |                        | 64.79     | % |                        |   | 64.81     | %

| | 
| | 

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

Derivative Assets and Liabilities

As of March 31, 2007 and December 31, 2006, we held derivative assets, including associated accrued interest receivable and payable, of $163.2 million and $146.9 million and derivative liabilities of $21.9
million and $46.8 million. The changes in these balances reflect the effect of interest-rate changes on the fair value of our derivatives, as well as expirations and terminations of outstanding interest-rate exchange agreements and entry into new
interest-rate exchange agreements in the three months ended March 31, 2007. The differentials between accruals of interest receivable and interest payable on derivatives are recognized as adjustments to the income or expense of the designated
underlying investment securities, 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.

The notional amount of interestrate exchange agreements increased by $1.1 billion, to $34.3 billion, as of March 31, 2007,
compared to December 31, 2006. These increases were primarily related to our increased use of interest-rate exchange agreements to lower our cost of funds and reduce our interest-rate risk. Notional amounts are used to calculate the periodic
amounts to be received and paid under interest-rate exchange agreements and generally do not represent actual amounts to be exchanged or directly reflect our exposure to credit risk. Notional amounts are not recorded as assets or liabilities in our
Statements of Condition. For additional information, see Part I. Item 3. Quantitative and Qualitative Disclosures About Market Risk.



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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 for which we are the primary obligor. As of December 31, 2006, Standard and Poors outlook for the Seattle Bank was negative and Moodys outlook was stable. In January 2007, Standard
and Poors revised its outlook to stable.

Consolidated Obligation Discount Notes. The balance of discount notes increased by
$3.1 billion as of March 31, 2007 compared to December 31, 2006, primarily to finance short-term investments that were purchased in accordance with our strategy of managing our business to a target capital-to-assets ratio of 4.10%.

Consolidated Obligation Bonds. Our allocated portion of the FHLBank Systems combined consolidated obligation bonds
outstanding was a par amount of $47.9 billion and $48.2 billion as of March 31, 2007 and December 31, 2006.

Our callable debt
increased by $901.5 million as of March 31, 2007, to $25.4 billion, compared to December 31, 2006, primarily due to growth in our structured funding portfolio. We use structured funding, consisting of interest-rate swapped consolidated
obligation bonds which may contain option features, to reduce our funding cost and manage our liquidity. The relative increase in our use of callable debt reflects more favorable pricing of callable consolidated obligation bonds with associated
interest-rate exchange agreements relative to unswapped consolidated discount notes. We continue to classify our debt as callable after the last call date has passed.

During the three months ended March 31, 2007, we called $6.1 billion in fixed interest-rate consolidated obligations with a weighted-average interest-rate of 5.45%, and cancelled the associated interest-rate
agreements, resulting in a net gain of $327,000.

Capital Resources and Liquidity

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

Capital Resources

Our capital resources decreased $1.3 million for the three months ended March 31, 2007, from December 31, 2006. The changes
during the three months ended March 31, 2007 were driven by changes in the amount of our capital stock and our retained earnings.

Seattle Bank Stock. Prior to the implementation of the Capital Plan amendments described below, the Seattle Bank had two classes of capital stock, Class B(1) stock and Class B(2) stock. Each class of stock could be issued, redeemed,
and repurchased only at par value, $100 per share. Class B(1) stock represented the stock that members were required to hold based on minimum membership requirements, the volume of their business activity with us, and, in some instances, a certain
amount of excess stock that a member was allowed to hold that exceeded the stock required for membership or business activity. Class B(2) stock represented stock that a member was no longer required to hold, generally as a result of a decline in its
activity with us, that exceeded the amount of allowable excess Class B (1) stock.

In October 2006, the Finance Board approved
amendments to our Capital Plan that simplified its terms and provisions, and the amendments became effective in December 2006. Included in the amendments to the Capital Plan was the conversion of our Class B(1) stock and Class B(2) stock into a
single Class B stock. As with the previous classes of Class B stock, Class B stock can be issued, redeemed, and repurchased only at par value, $100 per share. Class B stock is redeemable five years after: (1) written notice from the member;
(2) consolidation or merger of a member with a nonmember; or (3) 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
resolutions adopted by our Board. Historically, we have elected to repurchase stock that was subject to redemption prior to the expiration of the five-year redemption period that applies to each outstanding redemption request for Class B stock.
However, as further described below, our Board has adopted limitations on our ability to repurchase Class B stock from members prior to the expiration of the five-year redemption period. As of March 31, 2007 and December 31, 2007, our
Class B stock totaled $2.2 billion, with $220.5 million and $207.5 million in Class B stock redemption requests and requests to withdraw from membership. All of the Class B stock related to member withdrawals has been classified as mandatorily
redeemable Class B stock in our Statements of Condition.



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Capital Plan Amendments and Board Policies Regarding Seattle Bank Stock.The Board approved the
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. Other than the conversion of the two classes of Class B stock
into a single class of Class B stock, the key amendments made to the Capital Plan included provisions for:

Class A Stock.
Class A stock may be issued, redeemed, and repurchased only at a par value of $100 per share. Class A stock may only be issued to members to satisfy a members advance stock purchase requirement for: (i) a new advance or
(ii) renewal of an existing advance initially supported by the excess stock pool, and only in the case where a member has no excess stock available to support a new advance or to renew an existing advance. Class A stock is redeemable in
cash on six months written notice to the Seattle Bank and can only be repurchased by the Seattle Bank 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. As of March 31, 2007 our outstanding Class A stock totaled $485,000 in par
value. There was no outstanding Class A stock as of December 31, 2006.

Excess Stock Pool. The excess stock pool allows a
member, when receiving advances from us, to satisfy its advance stock purchase requirement by relying on Seattle Bank capital that is associated with total outstanding excess stock. Excess stock is the amount of stock held by a member in excess of
its total stock purchase requirement, which is the greater of the members membership stock purchase requirement or the sum of: (i) the members advance stock purchase requirement and (ii) the members mortgage purchase plan
stock purchase requirement. There are certain limitations relating to the Seattle Banks use of the excess stock pool, including among others, restricting the aggregate use of the excess stock pool to 50% of the total amount of all excess stock
and the ability of the Board to suspend the use of the excess stock pool at any time. There are also per-member limitations that include: (i) a maturity limit of one year on advances supported by the excess stock pool, (ii) a per-member
usage limit of 25% of the total amount of the excess stock pool, and (iii) a maximum dollar threshold whereby a member cannot use the excess stock pool to support additional advances if, on the date the advance would be received by the member,
the members total outstanding advances exceed $11.0 billion. The authority to use the excess stock pool to support additional advances terminates on October 1, 2008, unless extended by our Board following approval by the Finance Board.

Additional significant changes to our Capital Plan from the 2006 amendments include:



| |  |  | providing that dividends on Class A and Class B stock shall be set and paid as determined by the Board, on a pro rata basis as to amount and character with
respect to each class (subject to the Seattle Banks current limitations on payment of dividends); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | streamlining the formulas for calculating various requirements, including a members total stock purchase requirement.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

In actions relating to approval of the 2006 amendments to our Capital Plan, our Board resolved that the Seattle Bank would maintain a 4.00% member
advance stock purchase requirement and would not repurchase Class B stock during the period the excess stock pool is in effect and would seek prior written authorization from the Director of Office of Supervision if the Seattle Bank wished to lower
that requirement or repurchase Class B stock thereafter.

In May 2005, the Finance Board accepted the business plan which was initially
implemented under the terms of the Written Agreement 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 Director of the Office of Supervision, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | suspending indefinitely the repurchase of any Class B(1) or Class B(2) stock, except that a limited amount of Class B(2) stock repurchases may be made after prior
approval of the Director of the Office of Supervision.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Director of the Office of Supervision did grant to the Seattle Bank a waiver of certain restrictions on the authority of the
Seattle Bank to pay dividends. See Retained Earnings and Dividends for additional information related to this waiver.

Retained Earnings and Dividends. In general, our retained earnings represent our net income after the payment of any dividends to our members. During the three months ended March 31, 2007, our net income increased to $10.6
million, compared to $8.0 million for the same period in 2006.



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##### Table of Contents

Generally under our Capital Plan, our Board can declare and pay dividends, in either cash or capital
stock, only from retained earnings or current net earnings. However, the Board has adopted a resolution limiting dividends on Class A stock to cash. Prior to the cash dividend in late December 2006, we had only declared dividends in the form of
capital stock since 1986, except for immaterial cash payments relating to dividends on fractional shares of stock of a member that cannot be rounded to the nearest $100. 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, 2007, the Seattle Bank had excess stock of $999.9 million, or 1.77% of total assets, and is currently
prohibited from issuing stock dividends.

Pursuant to a waiver received from the Director of the Office of Supervision in December 2006
relating to payment of dividends, in January 2007, the Board declared a cash dividend of $2.1 million, or $.10 per share, on our Class B stock based upon the average amount of such stock outstanding during the fourth quarter of 2006. The dividend
was paid in February 2007.

In September 2004, our Board adopted a revised retained earnings policy in accordance with Finance Board
guidance. Under this policy, we establish retained earnings targets each quarter based on criteria including, among other things, market-, credit-, and operations-risk components. As of March 31, 2007 and December 31, 2006, the target was
set at $97.0 million and $102.0 million. In April 2007, the Board approved a revised mechanism, which included, among other things, a component equal to one year of operating expenses, for determining the target level of retained earnings and
established a new target of $138.0 million. We reported retained earnings of $100.8 million and $92.4 million as of March 31, 2007 and December 31, 2006.

Under a Board policy adopted in December 2006, we are limited to paying dividends no greater than 50% of our current-period earnings until, among other requirements, our retained earnings target has been met. Our
longer term goal is to pay members a market-based dividend, subject to applicable dividend restrictions and capital requirements. On April 26, 2007, the Board declared a $1.29 per share dividend on average Class A stock outstanding during
the first quarter of 2007 and a $0.15 per share dividend on average Class B stock outstanding during the quarter of 2007. The dividends will be paid in May 2007.

Under the December 2006 waiver from the Director of the Office of Supervision that was requested by our Board, the Seattle Bank was given the ability to pay quarterly cash dividends to our members within the following
parameters:



| |  |  | Dividends paid during the fourth quarter of 2006 could not exceed 50% of third quarter 2006 net income, as calculated pursuant to U.S. GAAP;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total dividends paid during the fourth quarter of 2006 and the first quarter of 2007 could not exceed 50% of combined third quarter and fourth quarter 2006 net
income, as calculated pursuant to U.S. GAAP;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Total dividends paid during the second, third and fourth quarters of any calendar year (any such calendar year being referred to as Year N) and the
first quarter of the immediately following calendar year (the four quarters being the Year N Quarters) cannot exceed 50% of net income for Year N, as calculated pursuant to U.S. GAAP net income;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | After the first quarter of 2007, dividends paid during any particular Year N Quarter can exceed 50% of the net income for the immediately preceding Year N Quarter,
but only if and to the extent that the aggregate amount of dividends paid with respect to earlier Year N Quarters does not exceed 50% of aggregate year-to-date net income, as calculated pursuant to U.S. GAAP, through the end of the immediately
preceding Year N Quarter.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to the receipt of the waiver described above, since May 2005, our Board had indefinitely
suspended the declaration and payment of dividends on capital stock without prior approval by the Director of the Office of Supervision, in connection with the Finance Board approval of the initial business plan.

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

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



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##### Table of Contents

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



|                                              |  |                        |           |  |                        |   |           | 
|--------------------------------------------- |  | ---------------------- | --------- |  | ---------------------- | - | --------- | 
|Permanent and Risk-Based Capital Requirements |  | As of   March 31, 2007 |           |  | As ofDecember 31, 2006 |  
|(in thousands)                                |  |                        |           |  |                        |  
|Permanent Capital                             |  |                        |           |  |                        |   |           | 
|Class B stock                                 |  | $                      | 2,130,775 |  |                        | $ | 2,140,997 | 
|Mandatorily redeemable Class B stock          |  |                        | 82,219    |  |                        |   | 69,222    | 
|Retained earnings                             |  |                        | 100,844   |  |                        |   | 92,397    | 
|                                              |  |                        |           |  |                        |   |           | 
|Permanent capital                             |  | $                      | 2,313,838 |  |                        | $ | 2,302,616 | 
|                                              |  |                        |           |  |                        |   |           | 
|Risk-Based Capital Requirement                |  |                        |           |  |                        |   |           | 
|Credit risk                                   |  |                        | 161,318   |  |                        |   | 140,870   | 
|Market risk                                   |  |                        | 123,098   |  |                        |   | 109,732   | 
|Operations risk                               |  |                        | 85,325    |  |                        |   | 75,180    | 
|                                              |  |                        |           |  |                        |   |           | 
|Risk-based capital requirement                |  | $                      | 369,741   |  |                        | $ | 325,782   | 
|                                              |  |                        |           |  |                        |   |           | 

Second, we are required to maintain at all times a total regulatory capital-to-assets ratio of at
least 4.00%. Total capital is the sum of permanent capital, Class A stock, other comprehensive income, any general loss allowance, if consistent with U.S. GAAP and not established for specific assets, and other amounts from sources determined
by the Finance Board as available to absorb losses. Pursuant to action taken by the Board in January 2007, our minimum capital-to-assets ratio is currently 4.05%. From time to time, adherence to our minimum capital-to-assets ratio may constrain our
capacity to make advances to members because advances may increase our total assets without increasing our total capital. Between December 2004 and January 2007, under the terms of the business plan, the Board had set our minimum capital-to-assets
ratio at 4.25%.

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



|                                                                                                              |  |                        |           |   |                        |   |           |  
|------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------------- | - | --------- | -
|Capital-to-Assets Ratios                                                                                      |  | As of   March 31, 2007 |           |   | As ofDecember 31, 2006 |  
|(in thousands, except ratios)                                                                                 |  |                        |           |   |                        |  
|Minimum Board-approved capital (4.05% of total assets as of March 31, 2007 and 4.25% as of December 31, 2006) |  | $                      | 2,287,210 |   |                        | $ | 2,274,377 |  
|Total permanent capital                                                                                       |  |                        | 2,313,838 |   |                        |   | 2,302,616 |  
|Capital-to-assets ratio (total capital as a percentage of total assets)                                       |  |                        | 4.10      | % |                        |   | 4.30      | %

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

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



|                                                                                 |  |                        |           |   |                        |   |           |  
|-------------------------------------------------------------------------------- |  | ---------------------- | --------- | - | ---------------------- | - | --------- | -
|Leverage Ratios                                                                  |  | As of   March 31, 2007 |           |   | As ofDecember 31, 2007 |  
|(in thousands, except ratios)                                                    |  |                        |           |   |                        |  
|Minimum leverage capital (5.00% of total assets)                                 |  | $                      | 2,823,716 |   |                        | $ | 2,675,737 |  
|Leverage capital (includes 1.5 weighting factor applicable to permanent capital) |  |                        | 3,470,757 |   |                        |   | 3,453,922 |  
|Leverage ratio (leverage capital as a percentage of total assets)                |  |                        | 6.15      | % |                        |   | 6.45      | %

Liquidity

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



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

Federal regulations require the FHLBanks to maintain, in the aggregate, unpledged qualifying assets equal to the consolidated obligations outstanding. Qualifying assets are cash, secured advances, assets with an
assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations, mortgage loans or other securities of or issued by the U.S. government or its agencies, and securities that fiduciary and trust funds may
invest in under the laws of the state in which the FHLBank is located.

The following table presents our compliance with this requirement
as of March 31, 2007 and December 31, 2006.



|                            |  |                        |            |                        |   |           
|--------------------------- |  | ---------------------- | ---------- | ---------------------- | - | ----------
|Unpledged Qualifying Assets |  | As of   March 31, 2007 |            | As ofDecember 31, 2006
|(in thousands)              |  |                        |            |                       
|Outstanding debt            |  | $                      | 52,419,334 |                        | $ | 49,536,576
|Aggregate qualifying assets |  |                        | 56,279,251 |                        |   | 53,337,012

We maintain contingency liquidity plans designed to enable us to meet our obligations and the
liquidity needs of our members in the event of operational disruptions at the Seattle Bank or the Office of Finance or financial market disruptions. These include back-up funding sources in the repurchase and federal funds markets. In addition, in
the event of a financial market disruption in which the FHLBank System is not able to issue consolidated obligations, we could pledge our held-to-maturity investment portfolio to borrow funds. Our investment portfolio includes high-quality
investment securities that are readily marketable. Our long-term investments include U.S. agency obligations and mortgage-backed securities, of which almost 100% were rated AA+ by Standard & Poors or Aaa by
Moodys as of March 31, 2007.

As of March 31, 2007, we also were in compliance with other federal laws and regulations and
policies established by our Board relating to liquidity. For additional information on our statutory liquidity requirements, see Item 1. BusinessRegulationLiquidity Requirements. of our 2006 annual report on Form 10-K.

Contractual Obligations and Other Commitments

The following table presents our contractual obligations and commitments as of March 31, 2007.



|                                                 |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|------------------------------------------------ | ---------------- | ------------------------------------------ | ------------ |  | ------------ | ---------- | ---------- | - | --------- |  | - | --------- |  | - | ----------
|Contractual Obligations and Commitments          |                  | As of March 31, 2007 Payment Due by Period
|                                                 | Less than 1 Year |                                            | 1 to 3 Years |  | 3 to 5 Years |            | Thereafter |   | Total    
|(in thousands)                                   |                  |                                            |              |  |              |            |            |   |           | 
|Member term deposits                             |                  | $                                          | 88,560       |  | $            |            |            | $ |           |  | $ |           |  | $ | 88,560    
|Securities sold under agreement to repurchase    |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|Consolidated obligations                         |                  |                                            | 17,753,145   |  |              | 15,812,570 |            |   | 5,346,665 |  |   | 9,031,065 |  |   | 47,943,445
|Consolidated obligation bonds traded not settled |                  |                                            | 220,000      |  |              | 237,500    |            |   | 225,100   |  |   | 85,000    |  |   | 767,600   
|Derivative liabilities                           |                  |                                            | 21,931       |  |              |            |            |   |           |  |   |           |  |   | 21,931    
|Mandatorily redeemable capital stock             |                  |                                            |              |  |              | 63,677     |            |   | 18,542    |  |   |           |  |   | 82,219    
|Operating leases                                 |                  |                                            | 2,514        |  |              | 5,791      |            |   | 6,155     |  |   | 3,421     |  |   | 17,881    
|                                                 |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|Total contractual obligations                    |                  | $                                          | 18,086,150   |  | $            | 16,119,538 |            | $ | 5,596,462 |  | $ | 9,119,486 |  | $ | 48,921,636
|                                                 |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|Other Commitments                                |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|Commitments for additional advances              |                  | $                                          | 24,982       |  | $            | 14,640     |            | $ |           |  | $ |           |  | $ | 39,622    
|Standby letters of credit                        |                  |                                            | 140,305      |  |              | 10         |            |   | 354       |  |   | 73        |  |   | 140,742   
|Standby bond purchase agreements                 |                  |                                            | 65,955       |  |              |            |            |   |           |  |   |           |  |   | 65,955    
|Unused lines of credit and other commitments     |                  |                                            | 50,000       |  |              |            |            |   |           |  |   |           |  |   | 50,000    
|                                                 |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           
|Total other commitments                          |                  | $                                          | 281,242      |  | $            | 14,650     |            | $ | 354       |  | $ | 73        |  | $ | 296,319   
|                                                 |                  |                                            |              |  |              |            |            |   |           |  |   |           |  |   |           



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

Results of Operations

For the Three Months Ended March 31, 2007 and 2006

The Seattle Banks net income increased by $2.6 million, to $10.6 million, for the three months ended March 31, 2007, compared to the same period in 2006. The increase in net income for the three-month
period was primarily due to an increase in net interest income resulting from increased advance business and from reinvesting proceeds from maturing low-yielding investments in consolidated obligations of other FHLBanks into higher-yielding
investments. Partially offsetting this increase was a $5.1 million decrease in other income, which resulted primarily from a $3.1 million decrease in income from derivatives and hedging activities and a $2.4 million increase in losses on the sale of
held-to-maturity securities.

Net interest income increased by $8.2 million, to $28.5 million for the three months ended March 31,
2007, compared to the same period in 2006, as a result of increases in short-term interest rates, which favorably impacted our short-term advance rates as well as our short-term investment rates. The $1.2 billion in funds from the maturity and sale
of low-yielding consolidated obligations of other FHLBanks were reinvested in short-term investments. This increase was partially offset by the negative effect of a flattening yield curve.

As discussed above, as of March 31, 2007, we had a net unrealized market value loss of $287.0 million, which is not reflected in our Statement of
Condition. See Financial ConditionAdvances and Item 8. Financial Statements and Supplementary DataFinancial Statements in our 2006 annual report on Form 10-K, and Note 8 of Item 1. Financial
Statements in this report. These unrealized market value losses will continue to depress our net income in 2007 and in later years.

Net Interest Income

Net interest income is the primary performance measure for our ongoing operations. Our net interest
income consists of interest earned on advances, mortgage loans held for portfolio, and investments, less interest accrued or paid on consolidated obligations, deposits, and other borrowings. Our net interest income is affected by changes in the
average balance (volume) of our interest-earning assets and interest-bearing liabilities and changes in the average yield (rate) for both the interest-earning assets and interest-bearing liabilities. These changes are influenced by economic factors
and by changes in our products or services. Interest rates are the primary economic factor affecting net interest income. Beginning in 2001 and through 2003, the Federal Reserve Open Market Committee reduced its target for the federal funds rate by
550 basis-points. Although the federal funds rate increased by 100 basis points during 2006, 200 basis points during 2005, and 125 basis points during 2004, the historically low interest rates and the sustained period of such low interest rates
significantly impacted net interest income in 2006 and the three months ended March 31, 2007, and continue to impact our net interest income through both our interest income and interest expense.

The following table presents the components of our net interest income for the three months ended March 31, 2007 and 2006.



|                                   |      |                                      |         |  |                             |         |  |     
|---------------------------------- | ---- | ------------------------------------ | ------- |  | --------------------------- | ------- |  | ----
|Net Interest Income                |      | For the Three Months Ended March 31,
|                                   | 2007 |                                      | 2006    |  | PercentIncrease /(Decrease)
|(in thousands, except percentages) |      |                                      |         |  |                             |        
|Interest income                    |      | $                                    | 691,184 |  | $                           | 579,816 |  | 19.2
|Interest expense                   |      |                                      | 662,726 |  |                             | 559,557 |  | 18.4
|                                   |      |                                      |         |  |                             |         |  |     
|Net interest income                |      | $                                    | 28,458  |  | $                           | 20,259  |  | 40.5
|                                   |      |                                      |         |  |                             |         |  |     

Both total interest income and total interest expense increased for the three months ended
March 31, 2007, compared to the same period in 2006 because of the higher prevailing short-term interest rates and increases in advances and the debt required to fund those advances, resulting in an increase in net interest income. Net interest
income also increased as a result of the replacement of certain of our low-yielding investments with higher-yielding short-term investments. We expect that our existing high-cost, long-term borrowings and our remaining low-yielding investments in
consolidated obligations of other FHLBanks will continue to depress our net interest income in 2007 and in later years.



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##### Table of Contents

Average Balances, Interest Income and Expense, and Average Yields. The following table presents
average balances and yields, and interest income and expense of major categories of interest-earning assets and interest-bearing liabilities, for the three months ended March 31, 2007 and 2006. The table also presents spreads between the
average yield on total earning assets and the average cost of interest-bearing liabilities for the three months ended March 31, 2007 and 2006.



|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|------------------------------------ |  | ------------------------------------ | ---------- | ---------------------- | ---- | -------------- |  | ----- | -------------- |  | ---------------------- | ---------- | -------------- | - | ------- |  | ----- | -
|                                     |  | For the Three Months Ended March 31, |           
|                                     |  | 2007                                 |            |                        | 2006 |               
|                                     |  | AverageBalance                       |            | InterestIncome/Expense |      | AverageYield % |  |       | AverageBalance |  | InterestIncome/Expense |            | AverageYield % |  
|(in thousands, except percentages)   |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |  
|Interest-Earning Assets              |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Advances                             |  | $                                    | 27,042,412 |                        | $    | 358,734        |  | 5.38  |                |  | $                      | 22,257,718 |                | $ | 250,222 |  | 4.56  |  
|Mortgage loans held for portfolio    |  |                                      | 6,275,672  |                        |      | 78,090         |  | 5.05  |                |  |                        | 7,106,466  |                |   | 91,323  |  | 5.21  |  
|Investments                          |  |                                      | 21,443,012 |                        |      | 254,359        |  | 4.81  |                |  |                        | 23,187,470 |                |   | 238,271 |  | 4.17  |  
|Other interest-earning assets        |  |                                      | 69         |                        |      | 1              |  | 5.32  |                |  |                        |            |                |   |         |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Total interest-earning assets        |  | $                                    | 54,761,165 |                        | $    | 691,184        |  | 5.12  |                |  | $                      | 52,551,654 |                | $ | 579,816 |  | 4.48  |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Other assets                         |  |                                      | 479,982    |                        |      |                |  |       |                |  |                        | 300,631    |                |   |         |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Total assets                         |  | $                                    | 55,241,147 |                        |      |                |  |       |                |  | $                      | 52,852,285 |                |   |         |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Interest-Bearing Liabilities         |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Consolidated obligations             |  | $                                    | 51,395,270 |                        | $    | 652,332        |  | 5.15  |                |  | $                      | 48,896,256 |                | $ | 548,020 |  | 4.55  |  
|Deposits                             |  |                                      | 801,543    |                        |      | 10,300         |  | 5.21  |                |  |                        | 726,016    |                |   | 7,829   |  | 4.37  |  
|Mandatorily redeemable Class B stock |  |                                      | 76,665     |                        |      | 76             |  | 0.40  |                |  |                        | 66,672     |                |   |         |  |       |  
|Other borrowings                     |  |                                      | 1,351      |                        |      | 18             |  | 5.34  |                |  |                        | 341,480    |                |   | 3,708   |  | 4.40  |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Total interest-bearing liabilities   |  | $                                    | 52,274,829 |                        | $    | 662,726        |  | 5.14  |                |  | $                      | 50,030,424 |                | $ | 559,557 |  | 4.54  |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Other liabilities                    |  |                                      | 739,015    |                        |      |                |  |       |                |  |                        | 614,648    |                |   |         |  |       |  
|Capital                              |  |                                      | 2,227,303  |                        |      |                |  |       |                |  |                        | 2,207,213  |                |   |         |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Total liabilities and capital        |  | $                                    | 55,241,147 |                        |      |                |  |       |                |  | $                      | 52,852,285 |                |   |         |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Net interest income                  |  |                                      |            |                        | $    | 28,458         |  |       |                |  |                        |            |                | $ | 20,259  |  |       |  
|                                     |  |                                      |            |                        |      |                |  |       |                |  |                        |            |                |   |         |  |       |  
|Interest-rate spread                 |  |                                      |            |                        |      |                |  | (0.02 | )              |  |                        |            |                |   |         |  | (0.06 | )
|Net interest margin                  |  |                                      |            |                        |      |                |  | 0.21  |                |  |                        |            |                |   |         |  | 0.16  |  

For the three months ended March 31, 2007, the composition of our interest-earning assets
changed significantly from those of the same period in 2006, as we continued to refocus our business on advances, with the average balances of our advances increasing and the average balance of our investments and mortgage loans held for portfolio
decreasing. The significant increase in advances largely reflected our increased use of differential pricing and the lowering of our members activity-based stock purchase requirement from 3.50% to 2.50% from April 2006 to December 2006.
Effective in December 2006, the Board increased the activity-based stock purchase requirement to 4.00%. The reduction in mortgage loans held for portfolio reflected our decision in early 2005 to exit the MPP, which led to our discontinuing the
purchase of new mortgage loans. The decrease in investments resulted from our use of funds from maturing investments to make advances. Since the yield on our advances is higher than the yield on our mortgage loans held for portfolio and investments,
there was an overall increase in net interest income as our mortgage loans were paid down and our investments were sold or matured and were replaced with higher-yielding advances. We expect these trends to continue as we exit the MPP and refocus our
business on advances.

The 100 basis-point increase in the federal funds rate between January 1, 2006 and March 31, 2007 caused a
similar increase in short-term interest rates, which resulted in higher average yields on our interest-earning assets and higher average costs on our interest-bearing liabilities during the three months ended March 31, 2007, compared to the
same period in 2006. However, during the first quarter of 2007, we experienced a larger increase in the average yield on our interest-earning assets than in the average cost on our interest-bearing liabilities, increasing our interest-rate spread by
4 basis points to negative 2 basis points, and increasing our net interest income. This improvement of our interest-rate spread primarily resulted from a reduction in the amount of our low-yielding investments, primarily due to sales and maturities
of our investment in the consolidated obligations of other FHLBanks and an increase in the amount of our higher-yielding advances.



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Changes in Volume and Rate. The following table separates the two principal components of the
changes in our net interest incomeinterest income and interest expenseidentifying the amounts due to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in the average interest rate for the three
months ended March 31, 2007 and 2006.



|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|--------------------------------- | -------------------------------- | ------------------------------------ | ------- | ----- |  | - | ------ | - |  | - | ------- | -
|Change in Volume and Rate         |                                  | For the Three Months Ended March 31, |        
|                                  | 2007 v. 2006 Increase (Decrease) |                                     
|                                  | Volume*                          |                                      |         | Rate* |  |   | Total  |  
|(in thousands)                    |                                  |                                      |         |       |  |   |        |   | 
|Interest Income                   |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Advances                          |                                  | $                                    | 59,059  |       |  | $ | 49,453 |   |  | $ | 108,512 |  
|Investments                       |                                  |                                      | (18,832 | )     |  |   | 34,920 |   |  |   | 16,088  |  
|Mortgage loans held for portfolio |                                  |                                      | (10,410 | )     |  |   | (2,823 | ) |  |   | (13,233 | )
|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Total interest income             |                                  | $                                    | 29,817  |       |  | $ | 81,550 |   |  | $ | 111,367 |  
|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Interest Expense                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Consolidated obligations          |                                  | $                                    | 29,041  |       |  | $ | 75,271 |   |  | $ | 104,312 |  
|Deposits and other borrowings     |                                  |                                      | (2,833  | )     |  |   | 1,690  |   |  |   | (1,143  | )
|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Total interest expense            |                                  |                                      | 26,208  |       |  |   | 76,961 |   |  |   | 103,169 |  
|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  
|Change in net interest income     |                                  | $                                    | 3,609   |       |  | $ | 4,589  |   |  | $ | 8,198   |  
|                                  |                                  |                                      |         |       |  |   |        |   |  |   |         |  

---

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

For the three months ended March 31, 2007, compared to the same period in 2006, increases in net interest income were attributable to favorable changes in both volume and interest rates. The favorable change as a result of volume
changes is consistent with the Seattle Bank becoming an advances-focused business. This favorable volume change was partially offset by declines in our mortgage loan portfolio as a result of principal paydowns and in our investment portfolio as a
result of calls and sales of certain held-to-maturity investments. The favorable change in net interest income as a result of interest-rate changes was primarily due to interest-earning assets repricing faster than interest-bearing liabilities in an
increasing short-term interest-rate environment.

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, 2007 and 2006.



|                                   |      |                                      |         |  |                             |         |  |       |  
|---------------------------------- | ---- | ------------------------------------ | ------- |  | --------------------------- | ------- |  | ----- | -
|Interest Income                    |      | For the Three Months Ended March 31, |        
|                                   | 2007 |                                      | 2006    |  | PercentIncrease /(Decrease) |        
|(in thousands, except percentages) |      |                                      |         |  |                             |         | 
|Advances                           |      | $                                    | 357,591 |  | $                           | 249,878 |  | 43.1  |  
|Prepayment fees on advances        |      |                                      | 1,143   |  |                             | 344     |  | 232.3 |  
|                                   |      |                                      |         |  |                             |         |  |       |  
|Subtotal                           |      |                                      | 358,734 |  |                             | 250,222 |  | 43.4  |  
|Investments                        |      |                                      | 254,359 |  |                             | 238,271 |  | 6.8   |  
|Mortgage loans held for portfolio  |      |                                      | 78,090  |  |                             | 91,323  |  | (14.5 | )
|Other                              |      |                                      | 1       |  |                             |         |  | N/A   |  
|                                   |      |                                      |         |  |                             |         |  |       |  
|Total interest income              |      | $                                    | 691,184 |  | $                           | 579,816 |  | 19.2  |  
|                                   |      |                                      |         |  |                             |         |  |       |  

Total interest income increased for the three months ended March 31, 2007, compared to the
same period in 2006, primarily due to a significant increase in the volume and yield on our advance portfolio and the increase in yield on our investment portfolio. This increase was partially offset by the decreases in the size of our investment
portfolio and mortgage loans held for portfolio and the related interest income as we continued to refocus our business on advances.

Advances. Interest income from advances increased 43.1% for the three months ended March 31, 2007, compared to the same period in 2006, due to significant increases in the average advance volumes and increases in interest rates.
A $4.8 billion increase, representing a 21.5% growth in the average advance volume, primarily resulted from our increased use of differential pricing for



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advances. The yield on advances increased by 82 basis points, to 5.38%, primarily due to significantly higher prevailing short-term interest rates,
combined with our high percentage of short-term advances, during the three months ended March 31, 2007, compared to the same period in 2006.

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

Prepayment Fees on Advances. During the three months ended
March 31, 2007, we recorded prepayment fee income of $1.1 million compared to $344,000 for the same period in 2006. During the first quarter of 2007, prepayment fee income primarily resulted from fees charged to borrowers that prepaid
$25.0 million in advances, partially offset by termination fees charged on the cancellation of interest-rate exchange agreements hedging those advances. There was no comparable activity during the first quarter of 2006.

Investments. Interest income from investments, which includes short-term investments (e.g., interest-bearing deposits, securities purchased under
agreements to resell, and federal funds sold) and long-term investments (e.g., held-to-maturity securities), increased by 6.8% for the three months ended March 31, 2007, compared to the same period in 2006, primarily resulting from a higher
average investment yield partially offset by the decline in our average investment portfolio balance. We benefited from the significant increases in short-term interest rates that increased the yields earned on our short-term investments. For the
three months ended March 31, 2007, the yield on the investment portfolio increased by 64 basis points due to the addition of new investments at generally higher yields than the existing investments we held or replaced. Partially offsetting
this benefit was a $1.7 billion decrease, representing a 7.5% decline, in the average investment portfolio balance primarily resulting from sales of certain consolidated obligations of other FHLBanks that were within three months of maturity, and
calls and maturities of other long-term investments during the first quarter of 2007.

Mortgage Loans Held for Portfolio. Interest
income from mortgage loans held for portfolio decreased by 14.5% for the three months ended March 31, 2007, compared to the same period in 2006. The decrease was due to a significant decline in the average balance of mortgage loans held for
portfolio resulting from our decision in early 2005 to exit the MPP. The average balance of our mortgage loans held for portfolio decreased by $830.8 million, or 11.7%, to $6.3 billion, as of March 31, 2007, compared to $7.1 billion as of
March 31, 2006. Contributing to the decline in interest income caused by the reduction in the average balance was a 16 basis point decrease in the average yield on mortgage loans held for portfolio. The balance of our remaining mortgage loans
held for portfolio will continue to decrease as these loans are paid off.

Interest Expense

The following table presents the components of our interest expense by category of interest-bearing liability and the percentage change in each category
for the three months ended March 31, 2007 and 2006.



|                                                          |      |                                      |         |  |                             |         |  |       |  
|--------------------------------------------------------- | ---- | ------------------------------------ | ------- |  | --------------------------- | ------- |  | ----- | -
|Interest Expense                                          |      | For the Three Months Ended March 31, |        
|                                                          | 2007 |                                      | 2006    |  | PercentIncrease /(Decrease) |        
|(in thousands, except percentages)                        |      |                                      |         |  |                             |         | 
|Consolidated obligations                                  |      | $                                    | 652,332 |  | $                           | 548,020 |  | 19.0  |  
|Deposits                                                  |      |                                      | 10,300  |  |                             | 7,829   |  | 31.6  |  
|Securities sold under agreements to repurchase            |      |                                      | 4       |  |                             | 3,698   |  | (99.9 | )
|Mandatorily redeemable Class B stock and other borrowings |      |                                      | 90      |  |                             | 10      |  | 800.0 |  
|                                                          |      |                                      |         |  |                             |         |  |       |  
|Total interest expense                                    |      | $                                    | 662,726 |  | $                           | 559,557 |  | 18.4  |  
|                                                          |      |                                      |         |  |                             |         |  |       |  

Consolidated Obligations. Interest expense on consolidated obligations increased by 19.0%
for the three months ended March 31, 2007, compared to the same period in 2006. This increase was the result of a significant increase in both the volume of borrowings and the increased interest rates during the first three months of 2007 and
throughout 2006. The average balance of consolidated obligations increased by $2.5 billion, or 5.1%, from the same period in 2006. We increased the average balance of our consolidated obligations in order to fund growth in our advance portfolio and
implement our strategy of managing our business to a



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Board-approved capital-to-assets ratio of 4.10% in order to more fully use our capital, while staying within our minimum capital-to-assets ratio of 4.05%.
The average cost of consolidated obligations increased by 60 basis points due to the addition of new consolidated obligations at generally higher costs than the existing obligations held or the obligations replaced.

Deposits. Interest expense on deposits increased by 31.5% for the three months ended March 31, 2007, compared to the same period in 2006, due
to an 84-basis point increase in the average yield paid to members and a $75.5 million increase in the average balance of deposits.

Mandatorily Redeemable Class B Stock and Other Borrowings.Interest expense on mandatorily redeemable Class B stock and other borrowing decreased by $3.6 million in the first three months of 2007, compared to same period in 2006,
primarily due to a $195.3 million reduction in other borrowings.

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, 2007 and 2006.



|                                                         |      |                                                |         |      |  |   |         |  
|-------------------------------------------------------- | ---- | ---------------------------------------------- | ------- | ---- |  | - | ------- | -
|Effect of Derivatives and Hedging on Net Interest Income |      | Net Change For the Three MonthsEnded March 31, |        
|                                                         | 2007 |                                                |         | 2006 | 
|(in thousands)                                           |      |                                                |         |      |  |  
|Increase in Interest Income                              |      |                                                |         |      |  |   |         |  
|Advances                                                 |      | $                                              | 9,987   |      |  | $ | 3,574   |  
|Increase in Interest Expense                             |      |                                                |         |      |  |   |         |  
|Consolidated obligations                                 |      |                                                | (20,620 | )    |  |   | (14,618 | )
|                                                         |      |                                                |         |      |  |   |         |  
|Decrease in net interest income                          |      | $                                              | (10,633 | )    |  | $ | (11,044 | )
|                                                         |      |                                                |         |      |  |   |         |  

Our use of interest-rate exchange agreements had a net unfavorable effect on our net interest
income for the three-month periods ended March 31, 2007 and 2006, primarily because we held higher notional balances in interest-rate exchange agreements hedging consolidated obligations than hedging advances. As a result, the effective
conversion of our consolidated obligations to short-term floating rates, combined with significant increases in short-term interest rates, resulted in a decrease in net interest income for the three-month periods ended March 31, 2007 and 2006.

Other Income (Loss)

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

The following
table presents the components of our other income (loss) for the three months ended March 31, 2007 and 2006.



|                                                                    |      |                                      |        |      |  |                             |       |  |         |  
|------------------------------------------------------------------- | ---- | ------------------------------------ | ------ | ---- |  | --------------------------- | ----- |  | ------- | -
|Other Income (Loss)                                                 |      | For the Three Months ended March 31, |       
|                                                                    | 2007 |                                      |        | 2006 |  | PercentIncrease /(Decrease) |      
|(in thousands, except percentages)                                  |      |                                      |        |      |  |                             |       | 
|Service fees                                                        |      | $                                    | 404    |      |  | $                           | 457   |  | (11.6   | )
|Net (loss) on sale of held-to-maturity securities                   |      |                                      | (2,351 | )    |  |                             |       |  | N/A     |  
|Net (loss) gain on derivatives and hedging activities               |      |                                      | (1,187 | )    |  |                             | 1,865 |  | (163.6  | )
|Net gain from early extinguishment of consolidated obligation bonds |      |                                      | 327    |      |  |                             |       |  | N/A     |  
|Other income, net                                                   |      |                                      | 25     |      |  |                             | 2     |  | 1,150.0 |  
|                                                                    |      |                                      |        |      |  |                             |       |  |         |  
|Total other income (loss)                                           |      | $                                    | (2,782 | )    |  | $                           | 2,324 |  | (219.7  | )
|                                                                    |      |                                      |        |      |  |                             |       |  |         |  

Total other (loss) income decreased by $5.1 million for the three months ended March 31, 2007,
compared to the same period in 2006, primarily due to a $3.1 million increase in net loss on derivatives and hedging activities and a $2.4 million increase in net loss on sale of held-to-maturity securities. These changes are discussed in more
detail below.



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Net (Loss) on Sale of Held-to-Maturity Securities.During the first quarter of 2007, we sold
$750.0 million of investments in consolidated obligations of other FHLBanks that were within 90 days of maturity, resulting in a net loss of $2.4 million for the three months ended March 31, 2007.

Net (Loss) Gain on Derivatives and Hedging Activities. For the three months ended March 31, 2007, compared to the same period in 2006, we had
a $3.1 million increase in our total net loss on derivatives and hedging activities due to changes in the fair value of consolidated obligation bonds and the corresponding interest-rate exchange agreements.

Consolidated Obligations. For the three months ended March 31, 2007, we recognized a loss of $927,000 on interest-rate exchange agreements
used to hedge consolidated obligations, compared to a gain of $1.6 million for the same period in 2006.

Economic Hedges. We
held $300.0 million notional amount of interest-rate caps as of March 31, 2007 and 2006, and $150.0 million notional amount of interest-rate floors as of March 31, 2007, that are used to economically hedge changes in the fair value of our
assets and liabilities caused by changes in interest rates. Our recorded gains or losses related to interest-rate caps and floors were $202,000 of losses for the three months ended March 31, 2007, compared to $71,000 of losses for the same
period in 2006. The changes in the fair value of the interest-rate caps and interest-rate floors are recorded as net gain (loss) on derivatives and hedging activities in the Statements of Income.

Net Gain on Early Extinguishment of Consolidated Obligation Bonds. For the three months ended March 31, 2007, we recognized $327,000 in gains
related to the cancellation of interest-rate exchange agreements hedging consolidated obligations. There was no similar activity for the three months ended March 31, 2006. We cancelled these agreements primarily as a part of our risk management
strategy. See Item 3. Qualitative and Quantitative Disclosures about Market Risk in this report for additional information.

Other Expense

Other expense includes operating expenses, Finance Board and Office of Finance assessments, and other items,
which consist primarily of mortgage loan administrative fees paid to vendors related to our mortgage loans held for portfolio. The following table presents the components of our other expense for the three months ended March 31, 2007 and 2006.



|                                   |      |                                      |        |  |                             |        |  |       |  
|---------------------------------- | ---- | ------------------------------------ | ------ |  | --------------------------- | ------ |  | ----- | -
|Other Expenses                     |      | For the Three Months Ended March 31, |       
|                                   | 2007 |                                      | 2006   |  | PercentIncrease /(Decrease) |       
|(in thousands, except percentages) |      |                                      |        |  |                             |        | 
|Operating expenses                 |      |                                      |        |  |                             |        |  |       |  
|Salaries and benefits              |      | $                                    | 5,657  |  | $                           | 5,697  |  | (0.7  | )
|Occupancy cost                     |      |                                      | 1,366  |  |                             | 942    |  | 45.0  |  
|Other operating                    |      |                                      | 3,068  |  |                             | 3,862  |  | (20.6 | )
|Finance Board                      |      |                                      | 447    |  |                             | 459    |  | (2.6  | )
|Office of Finance                  |      |                                      | 405    |  |                             | 375    |  | 8.0   |  
|Other                              |      |                                      | 316    |  |                             | 360    |  | (12.2 | )
|                                   |      |                                      |        |  |                             |        |  |       |  
|Total expense                      |      | $                                    | 11,259 |  | $                           | 11,695 |  | (3.7  | )
|                                   |      |                                      |        |  |                             |        |  |       |  

Operating expenses decreased $410,000 for the three months ended March 31, 2007, compared to
the same period in 2006, primarily reflecting lower other operating expenses partially offset by higher occupancy expense.

Occupancy cost
primarily includes the expenses related to our leases on one office building in downtown Seattle and an emergency back-up facility outside of downtown Seattle. Occupancy cost increased by $424,000 for the three months ended March 31, 2007,
compared to the same period in 2006, primarily due to an expense recovery on the early payoff of one of our building leases in January 2006.

Other operating expenses decreased by $794,000 for the three months ended March 31, 2007, compared to the same period in 2006, primarily due to decreases in professional and other contractual service fees.

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



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Assessments

On September 13, 2006, the Finance Board adopted a final rule modifying the calculations for the FHLBanks required annual AHP contributions. Under the final rule, which became effective on
January 1, 2007, each FHLBanks required annual AHP contribution is limited to its annual net income. Under previous regulation, each FHLBank contributed annually to its AHP program the greater of 10% of its annual net earnings or its
pro-rata share of an aggregate of $100 million contributed by all of the FHLBanks, such proration being made on the basis of each FHLBanks annual net income.

Our assessments for AHP and REFCORP increased for the three months ended March 31, 2007, compared to the same period in 2006, due to increased net income. The table below presents our AHP and REFCORP assessments
for the three months ended March 31, 2007 and 2006.



|                                   |      |                                      |       |  |                             |       |  |     
|---------------------------------- | ---- | ------------------------------------ | ----- |  | --------------------------- | ----- |  | ----
|AHP and REFCORP Assessments        |      | For the Three Months Ended March 31,
|                                   | 2007 |                                      | 2006  |  | PercentIncrease /(Decrease)
|(in thousands, except percentages) |      |                                      |       |  |                             |      
|AHP                                |      | $                                    | 1,185 |  | $                           | 882   |  | 34.4
|REFCORP                            |      |                                      | 2,647 |  |                             | 2,001 |  | 32.3
|                                   |      |                                      |       |  |                             |       |  |     
|Total assessments                  |      | $                                    | 3,832 |  | $                           | 2,883 |  | 32.9
|                                   |      |                                      |       |  |                             |       |  |     

Segment Information

Our core business is traditional member finance, which includes making advances, providing letters of credit, accepting deposits, and providing securities safekeeping and other services. Historically, we offered
products and services through two operating segments, traditional member finance and the MPP. The MPP segment consisted of mortgage loans held for portfolio as a result of purchases from participating members. During the first quarter of 2005, we
decided to exit the MPP. As a result of this decision, Seattle Bank management no longer manages the business using separate operating segments. The Seattle Bank now aggregates the operating results of the former MPP segment with the traditional
member finance segment for decision-making purposes. Accordingly, we stopped reporting segment information in the third quarter of 2006 and no longer discuss our operations in separate segments. As of March 31, 2007, our MPP balance had
declined to $6.2 billion from $7.0 billion as of March 31, 2006.

Summary of Critical Accounting Policies and Estimates

We did not implement any material change to our accounting policies or estimates, nor did we implement any new accounting policy that had a material
impact on our results of operations or financial condition, during the quarter ended March 31, 2007. For accounting policies and additional information concerning estimated fair values, see Note 17 in our 2006 Audited Financials and Item
7. Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Estimates included in our 2006 annual report on Form 10-K.



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

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



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

Measurement of Market Risk

We monitor our market risk through a variety of measures. Our Board oversees policy and has
adopted four primary risk measureseffective duration of equity, effective key-rate duration of equity mismatch, effective convexity of equity, and market value of equity sensitivity. These policy measures are described below. Historically, our
risk management policy included two primary measures of market riskeffective duration of equity and market value of equity sensitivity. Based on the decline in our market value of equity since 2002, which was due primarily to mismatches
between the terms of certain of our MPP and investment securities (including the consolidated obligations in other FHLBanks) and the debt used to fund those assets as well as our failure to manage the resulting convexity risk, we revised our policy
limits at the direction of our Board to more specifically deal with the relevant market risks.

In May 2005, our Board adopted our current
risk management policy that added new risk management measures, effective convexity of equity and effective key-rate duration of equity mismatch, to the existing measures of effective duration of equity and market value of equity sensitivity. The
new policy established limits for these measures for managing and monitoring our market risk. We quantify and monitor our market risk daily and manage market risk within the policy limits. These measures and other key terms are defined below.



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



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



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



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



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



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



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



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



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Market-Risk Management

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

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

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



|                                                    |  |                     |    |  |                        |    |  |                    |  
|--------------------------------------------------- |  | ------------------- | -- |  | ---------------------- | -- |  | ------------------ | -
|Primary Risk Measure                                |  | As ofMarch 31, 2007 |    |  | As ofDecember 31, 2006 |    |  | Risk Measure Limit |  
|Effective duration of equity                        |  | 1.58                |    |  | 0.96                   |    |  | +/-5.00            |  
|Effective convexity of equity                       |  | (1.06               | )  |  | (1.96                  | )  |  | +/-5.00            |  
|Effective key-rate-duration-of-equity mismatch      |  | 1.38                |    |  | 1.09                   |    |  | +/-5.50            |  
|Market value of equity sensitivity                  |  |                     |    |  |                        |    |  |                    |  
|(+ 100 basis point shock scenario) (in percentages) |  | (1.72               | )% |  | (1.87                  | )% |  | +/-4.50            | %
|Market value of equity sensitivity                  |  |                     |    |  |                        |    |  |                    |  
|( -100 basis point shock scenario) (in percentages) |  | 0.69                | %  |  | 0.06                   | %  |  | +/-4.50            | %

As of March 31, 2007, the effective duration of equity increased .62 and the effective
convexity of equity increased 0.90, compared to December 31, 2006. The change in effective duration of equity resulted primarily from the duration contribution of our callable consolidated obligations increasing relative to the mortgage assets
that they are hedging in conjunction with the duration contribution of the swaps hedging our swapped funding increasing relative to duration contribution of the consolidated obligations they are hedging. These effects were partially offset by a
reduction in the duration contributions of our agency investment portfolio and our bullet consolidated obligations portfolio. The increase in effective convexity resulted from an increase in the convexity contribution of the callable consolidated
obligations relative to the convexity contribution of the mortgages they are hedging.



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Instruments That Address Market Risk

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

Some of the specific types of instruments we use to manage our interest-rate risk are described in the table below.



|                                                                                                               |  |                                                                                                                    |  |                                                                                                       
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------
|Hedge Instrument                                                                                               |  | Hedged Item                                                                                                        |  | Purpose of Hedge Transaction                                                                          
|Pay fixed, receive LIBOR swap; we own option to cancel swap if applicable                                      |  | Putable or callable advance; fixed-rate advance with option to cancel advance prior to maturity date               |  | To provide customized advance products to our customers at minimal risk to us                         
|                                                                                                               |  |                                                                                                                   
|Purchased interest-rate cap                                                                                    |  | Capped advance                                                                                                     |  | To provide customized advance products to our customers at minimal risk to us                         
|                                                                                                               |  |                                                                                                                   
|Pay fixed, receive LIBOR swap                                                                                  |  | Fixed-rate advance                                                                                                 |  | To provide customized advance products to our customers at minimal risk to us                         
|                                                                                                               |  |                                                                                                                   
|Pay LIBOR, receive fixed swap; pay LIBOR, receive fixed swap in which counterparty owns options to cancel swap |  | Bullet fixed-rate debt; callable fixed-rate debt in which we own option to call debt prior to stated maturity date |  | To achieve lower cost funds with minimal risk to us                                                   
|                                                                                                               |  |                                                                                                                   
|Payer or receiver swaptions                                                                                    |  | Mortgage-backed assets, including MPP mortgage loans and mortgage-backed securities                                |  | To hedge our prepayment risk on our mortgage-backed assets and manage our effective duration of equity
|                                                                                                               |  |                                                                                                                   
|Pay variable until conversion date, then pay fixed, with option to cancel swap prior to maturity date          |  | Variable-to-fixed advance with option to cancel advance prior to maturity date                                     |  | To provide customized advance products to our customers at minimal risk to us                         
|                                                                                                               |  |                                                                                                                   
|Pay LIBOR, receive floating index                                                                              |  | Floating rate consolidated obligation                                                                              |  | To achieve lower cost of funds with minimal risk to us                                                

The total notional amount of interest-rate exchange agreements outstanding was $34.3 billion as of
March 31, 2007 and $33.2 billion as of December 31, 2006. The notional amount of interest-rate exchange agreements increased during the first quarter of 2007, primarily due to increases in fair value hedges of consolidated obligations.

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

Credit-Risk Management

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

Advances

We have never experienced a credit loss on advances. We protect against credit risk on advances by requiring collateral on all advances we fund. We can also call for additional or substitute collateral during the life
of an advance to protect our security interest. The FHLBank Act limits eligible collateral to certain investment securities, residential mortgage loans, deposits with the Seattle Bank, and other real estate-related assets. The GLB Act and other
federal regulations allow the FHLBanks to expand eligible collateral for many of their members. Members that qualify as community financial institutions, defined in the GLB Act as FDIC-insured depository institutions with average assets for the past
three calendar years totaling no more than $599.0 million, may pledge small-business, small-farm, and small-agribusiness loans as collateral for advances. Advances to community financial institutions secured with expanded collateral represented
$162.3 million of the $25.6 billion of advances as of March 31, 2007 and $133.0 million of the $28.0 billion of advances as of December 31, 2006. We believe that we have the policies and procedures in place to effectively manage this
credit risk. Accordingly, we have not provided any allowance for losses on advances, including those referenced above.



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

Investments

We are subject to credit risk on some investments. We limit our unsecured credit exposure to any counterparty, other than the U.S. government or GSEs,
based on the credit quality and capital level of the counterparty and the capital level of the Seattle Bank. As of March 31, 2007 and December 31, 2006, our unsecured credit exposure was $17.2 billion and $12.3 billion, primarily
consisting of $3.0 billion and $4.2 billion of other FHLBank consolidated obligations and $9.2 billion and $2.8 billion of federal funds sold. This increase in unsecured credit exposure primarily resulted from an increase in our short-term
investments, primarily federal funds sold, as advance balances decreased and we decreased our target capital-to-assets ratio to 4.10%.

Mortgage Loans Held for Portfolio

The Seattle Bank has never experienced a credit loss nor has our SMI provider
experienced a loss claim on an MPP mortgage loan. Under the MPP, we have purchased mortgage loans from members, and the participating members continue to bear a portion of the credit risk on the outstanding loans. Our total principal of mortgage
loans outstanding through the MPP was $6.2 billion and $6.3 billion as of March 31, 2007 and December 31, 2006, which comprised $276.3 million and $292.1 million in government-insured mortgage loans and $5.9 billion and $6.0 billion in
conventional mortgage loans. The conventional mortgage loans are credit-enhanced by our participating members to a level equivalent to at least an investment-grade rating through the lender risk account and supplemental mortgage insurance. As part
of the business plan, we began to exit the MPP. However, we do not expect that this decision will impact the credit risk of the mortgage loans held for portfolio. We conduct a loss reserve analysis on a quarterly basis and have determined that no
loan loss allowance is necessary, and believe that we have the policies and procedures in place to appropriately manage this credit risk.

Derivative Credit-Risk Exposure and Counterparty Ratings

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

Our credit risk equals the estimated cost of replacing
favorable interest-rate swaps, forward agreements, and purchased caps and floors, if the counterparty defaults, net of the value of related collateral. Our maximum credit risk, taking into consideration master netting agreements but before
considering collateral, was $164.9 million and $146.9 million as of March 31, 2007 and December 31, 2006. In determining maximum credit risk, we consider accrued interest receivable and payable, and the legal right to offset assets and
liabilities by counterparty. Our net exposure after considering collateral was $160.0 million and $133.5 million as March 31, 2007 and December 31, 2006. These increases in credit risk and net exposure after considering collateral were
primarily due to changes in market conditions, including the level and slope of the yield curve during the three months ended March 31, 2007.



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Counterparty Credit Exposure

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



|                                              |                |                         |                                |  |                |         |                             |   |        |  |   |        
|--------------------------------------------- | -------------- | ----------------------- | ------------------------------ |  | -------------- | ------- | --------------------------- | - | ------ |  | - | -------
|Counterparty Credit Exposure by Credit Rating |                | As of March 31, 2007   
|                                              | NotionalAmount |                         | Total NetExposure atFair Value |  | CollateralHeld |         | Net ExposureAfterCollateral
|(dollars in thousands)                        |                |                         |                                |  |                |         |                             |  
|AA+                                           |                | $                       | 3,345,930                      |  | $              | 29,859  |                             | $ |        |  | $ | 29,859 
|AA                                            |                |                         | 15,838,096                     |  |                | 79,028  |                             |   |        |  |   | 79,028 
|AA                                           |                |                         | 11,684,300                     |  |                | 31,701  |                             |   |        |  |   | 31,701 
|A+                                            |                |                         | 3,389,000                      |  |                | 24,222  |                             |   | 4,859  |  |   | 19,363 
|A                                             |                |                         |                                |  |                |         |                             |   |        |  |   |        
|Member institutions(1)                        |                |                         | 42,500                         |  |                | 71      |                             |   |        |  |   |        
|                                              |                |                         |                                |  |                |         |                             |   |        |  |   |        
|Total                                         |                | $                       | 34,299,826                     |  | $              | 164,881 |                             | $ | 4,859  |  | $ | 159,951
|                                              |                |                         |                                |  |                |         |                             |   |        |  |   |        
|                                              |               
|Counterparty Credit Exposure by Credit Rating |                | As of December 31, 2006
|                                              | NotionalAmount |                         | Total NetExposure atFair Value |  | CollateralHeld |         | Net ExposureAfterCollateral
|(dollars in thousands)                        |                |                         |                                |  |                |         |                             |  
|AA+                                           |                | $                       | 1,132,780                      |  | $              | 3,134   |                             | $ |        |  | $ | 3,134  
|AA                                            |                |                         | 11,061,155                     |  |                | 82,672  |                             |   |        |  |   | 82,672 
|AA                                           |                |                         | 17,021,136                     |  |                | 28,811  |                             |   |        |  |   | 28,811 
|A+                                            |                |                         | 3,978,500                      |  |                | 32,324  |                             |   | 13,438 |  |   | 18,886 
|A                                             |                |                         |                                |  |                |         |                             |   |        |  |   |        
|Member institutions(1)                        |                |                         | 55,500                         |  |                |         |                             |   |        |  |   |        
|                                              |                |                         |                                |  |                |         |                             |   |        |  |   |        
|Total                                         |                | $                       | 33,249,071                     |  | $              | 146,941 |                             | $ | 13,438 |  | $ | 133,503
|                                              |                |                         |                                |  |                |         |                             |   |        |  |   |        

---

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

We have never experienced a loss on a derivative transaction due to default by a counterparty. We believe that the credit risk on our interest-rate
exchange agreements is low because we contract with counterparties that are of very high credit quality. As of March 31, 2007, 17 counterparties represented the total notional amount of our outstanding interest-rate exchange agreements
excluding agreements in which we served as intermediaries. As of March 31, 2007, 90.0% of the total notional amount of our outstanding interest-rate exchange agreements was with 14 counterparties rated AA or higher. Excluding
interest-rate exchange agreements in which we are an intermediary for members and which are fully collateralized, 100.0% as of March 31, 2007 and December 31, 2006 of the notional amount of our outstanding interest-rate exchange agreements
were with counterparties with credit ratings of A or equivalent from an NRSRO, such as Standard & Poors or Moodys.



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

Disclosure Controls and Procedures

Under the supervision and with the participation of the Seattle Banks management, including the President and Chief Executive
Officer and the Chief Financial Officer, the Seattle Bank evaluated the effectiveness of the Seattle Banks disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2007, the end of the
period covered by this report. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

The
President and Chief Executive Officer and the Chief Financial Officer conducted an evaluation of our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to determine whether any changes in our internal control over
financial reporting occurred during the quarter ended March 31, 2007 that have materially affected or which are reasonably likely to materially affect our internal control over financial reporting. Based on that evaluation, no such change
occurred during such period.



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Part II  OTHER INFORMATION



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

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



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

Our 2006 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 2006 annual report on Form 10-K for the year ended December 31,
2006.

The Seattle Bank and the other FHLBanks are governed by laws and regulations relating to the FHLBank System, changes to which
could negatively impact our business.

The FHLBanks are GSEs supervised and regulated by the Finance Board under the FHLBank Act and
the rules and regulations promulgated by the Finance Board. From time to time, Congress has amended the FHLBank Act in ways that have significantly affected the rights and obligations of the FHLBanks and the manner in which the FHLBanks carry out
their housing-finance mission and business operations. Furthermore, actions by the Finance Board regarding the FHLBank System or the Seattle Bank can specifically affect the Seattle Banks operations. For example, the Finance Board must approve
amendments to our Capital Plan and may impose various restrictions and limitations to our business, such as increasing our minimum capital-to-assets ratio requirement.

In recent years, there has been increased congressional scrutiny of GSEs, including the FHLBanks. For example, in April 2007, the House Financial Services Committee passed a bill that would, among other things, create
a new regulator for Fannie Mae, Freddie Mac, and the FHLBanks and address other GSE reform issues have been considered over the last several years. At this time, it is impossible to predict what, if any, provisions affecting the FHLBanks and their
regulation may ultimately be included and enacted in legislation or when any changes would go into effect.

Any new or amended legislation
enacted by Congress or new regulatory requirements adopted by the Finance Board, as well as failure of anticipated changes or interpretations to take effect, could have a negative effect on our ability to conduct our business, including the costs,
size, and scope of our 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
|------- | ---------------------------------------------------

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



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

In April 2007, the Finance Board
appointed Les AuCoin , Frederick C. Kiga, Michael W. McGowan, and Cynthia A. Parker to the Board effective April 24, 2007. Mr. McGowan and Mr. AuCoin were appointed to fill the remainder of three-year terms that began on
January 1, 2006. Ms. Parker and Mr. Kiga were appointed to fill the remainder of three-year terms that began on January 1, 2007. The Finance Board has yet to make appointments for the two remaining director positions on the
Board.

In April 26, 2007, the Board declared a $1.29 per share dividend on average Class A stock outstanding during the first
quarter of 2007 and a $0.15 per share dividend on average Class B stock outstanding during the quarter of 2007. The dividend will be paid prior to the end of the second quarter.



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##### Table of Contents

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





|           |  |                                                                                                                                                                     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibits                                                                                                                                                            
|10.3       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for President and CEO as of January 1, 2007.                                
|           | 
|10.4       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Long-term Incentive Plans as of January 1, 2007.                                        
|           | 
|10.5       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for Exempt Staff and Officers January 1, 2007.                              
|           | 
|31.1       |  | Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|           | 
|31.2       |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             
|           | 
|32.1       |  | Certification of the President and Chief Executive Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|           | 
|32.2       |  | Certification of the Chief Financial Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              



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##### Table of Contents

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 14, 2007
|                                  |  | Richard M. Riccobono President and Chief Executive
Officer         |  |  |  |  |  |                    
|                                  |  |                                                                    |  | 
|By:                               |  | /s/ Mark R. Szczpaniak                                             |  |  |  |  |  | Dated: May 14, 2007
|                                  |  | Mark R. Szczepaniak Senior Vice President, Chief
Financial Officer |  |  |  |  |  |                    



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EXHIBITS





|           |  |                                                                                                                                                                     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Exhibits                                                                                                                                                            
|10.3       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for President and CEO as of January 1, 2007.                                
|           | 
|10.4       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Long-term Incentive Plans as of January 1, 2007.                                        
|           | 
|10.5       |  | Federal Home Loan Bank of Seattle Bank Incentive Compensation Plan (BICP) - Annual Plan for Exempt Staff and Officers January 1, 2007.                              
|           | 
|31.1       |  | Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                               
|           | 
|31.2       |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                             
|           | 
|32.1       |  | Certification of the President and Chief Executive Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|           | 
|32.2       |  | Certification of the Chief Financial Officer pursuant to 18.U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.              



52