10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2008

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 number 000-51845

FEDERAL HOME LOAN BANK OF ATLANTA

(Exact name of registrant as specified in its charter)

Federally chartered corporation	56-6000442
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1475 Peachtree Street, NE, Atlanta, Ga.	30309
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (404) 888-8000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Class B Stock, par value $100

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    x  No

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.    x  Yes    ¨  No

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

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

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

Registrant’s stock is not publicly traded and is only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. At June 30, 2008, the aggregate par value of the stock held by current and former members of the registrant was approximately $7,872,537,100, and 78,725,371 total shares were outstanding as of that date. At February 28, 2009, 79,441,782 total shares were outstanding.

Table of Contents

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
PART II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	83
Item 8.	Financial Statements and Supplementary Data	84
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	140
Item 9A.	Controls and Procedures	140
Item 9A(T).	Controls and Procedures	140
Item 9B.	Other Information	140
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	141
Item 11.	Executive Compensation	147
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	164
Item 13.	Certain Relationships, Related Transactions and Director Independence	166
Item 14.	Principal Accountant Fees and Services	167
PART IV
Item 15.	Exhibits and Financial Statement Schedules	168
SIGNATURES		S-1

Important Notice About Information in this Annual Report

In this annual report on Form 10-K, which we refer to as this “Report,” unless the context suggests otherwise, references to the “Bank” mean the Federal Home Loan Bank of Atlanta. “FHLBanks” means the 12 district Federal Home Loan Banks, including the Bank, and “FHLBank System” means the Federal Home Loan Bank System, as regulated by the Federal Housing Finance Agency, or the “Finance Agency”, successor to the Federal Housing Finance Board (the “Finance Board”) effective on July 30, 2008. “FHLBank Act” means the Federal Home Loan Bank Act of 1932, as amended.

The information contained in this Report is accurate only as of the date of this Report and as of the dates specified herein.

The product and service names used in this Report are the property of the Bank and, in some cases, the other FHLBanks. Where the context suggests otherwise, the products, services, and company names mentioned in this Report are the property of their respective owners.

Special Cautionary Notice Regarding Forward-looking Statements

Some of the statements made in this Report may be “forward-looking statements,” which include statements with respect to the Bank’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, many of which may be beyond the Bank’s control and which may cause the Bank’s actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. The reader can identify these forward-looking statements through the Bank’s use of words such as “may,” “will,” “anticipate,” “hope,” “project,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “point to,” “could,” “intend,” “seek,” “target,” and other similar words and expressions of the future. Such forward-looking statements include statements regarding any one or more of the following topics:

• The Bank’s business strategy and changes in operations, including, without limitation, product growth and change in product mix

• Future performance, including profitability, dividends, developments, or market forecasts

• Forward-looking accounting and financial statement effects.

It is important to note that the description of the Bank’s business is a statement about the Bank’s operations as of a specific date. It is not meant to be construed as a policy, and the Bank’s operations, including the portfolio of assets held by the Bank, are subject to reevaluation and change without notice.

The forward-looking statements may not be realized due to a variety of factors, including, without limitation, any one or more of the following factors:

• Future economic and market conditions, including, for example, inflation and deflation, the timing and volume of market activity, general consumer confidence and spending habits, the strength of local economies in which the Bank conducts its business, and interest-rate changes that affect the housing markets

• Demand for Bank advances resulting from changes in members’ deposit flows and credit demands, as well as from other sources of funding and liquidity available to members

• Volatility of market prices, rates, and indices that could affect the value of collateral held by the Bank as security for the obligations of Bank members and counterparties to interest-rate exchange agreements and similar agreements

• The risks of changes in interest rates on the Bank’s interest-rate sensitive assets and liabilities

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• Changes in various governmental monetary or fiscal policies, as well as legislative and regulatory changes, including changes in accounting principles generally accepted in the United States of America, or “GAAP,” and related industry practices and standards, or the application thereof

• Political, national, and world events, including acts of war, terrorism, natural disasters or other catastrophic events, and legislative, regulatory, judicial, or other developments that affect the economy, the Bank’s market area, the Bank, its members, counterparties, its federal regulator, and/or investors in the consolidated obligations of the 12 FHLBanks

• Competitive forces, including other sources of funding available to Bank members, other entities borrowing funds in the capital markets, and the ability to attract and retain skilled individuals

• The Bank’s ability to develop, implement, promote the efficient performance of, and support technology and information systems, including the Internet, sufficient to measure and manage effectively the risks of the Bank’s business

• Changes in investor demand for consolidated obligations of the FHLBanks and/or the terms of interest-rate exchange agreements and similar agreements, including changes in investor preference and demand for certain terms of these instruments, which may be less attractive to the Bank, or which the Bank may be unable to offer

• The Bank’s ability to introduce, support, and manage the growth of new products and services and to manage successfully the risks associated with those products and services

• The Bank’s ability to manage successfully the risks associated with any new types of collateral securing advances

• The availability from acceptable counterparties, upon acceptable terms, of options, interest-rate and currency swaps, and other derivative financial instruments of the types and in the quantities needed for investment funding and risk-management purposes

• The uncertainty and costs of litigation, including litigation filed against one or more of the 12 FHLBanks

• Changes in the FHLBank Act or Finance Agency regulations that affect FHLBank operations and regulatory oversight

• Adverse developments or events, including financial restatements, affecting or involving one or more other FHLBanks or the FHLBank System in general

• Other factors and other information discussed herein under the caption “Risk Factors” and elsewhere in this Report, as well as information included in the Bank’s future filings with the Securities and Exchange Commission (“SEC”).

The forward-looking statements may not be realized due to a variety of factors, including, without limitation, those risk factors provided under Item 1A of this Report and in future reports and other filings made by the Bank with the SEC. The Bank operates in a changing economic environment, and new risk factors emerge from time to time. Management cannot predict any new factors, nor can it assess the effect, if any, of any new factors on the business of the Bank or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those implied by any forward-looking statements.

All written or oral statements that are made by or are attributable to the Bank are expressly qualified in their entirety by this cautionary notice. The reader should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. The Bank has no obligation and does not undertake publicly to update, revise, or correct any of the forward-looking statements after the date of this Report, or after the respective dates on which these statements otherwise are made, whether as a result of new information, future events, or otherwise, except as otherwise may be required by law.

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PART I.

Item 1. Business.

Overview

The Bank is a federally chartered corporation organized in 1932 and one of 12 district FHLBanks. The FHLBanks, along with the Finance Agency and the Federal Home Loan Banks Office of Finance (“Office of Finance”), comprise the FHLBank System. The FHLBanks are U.S. government-sponsored enterprises (“GSEs”) organized under the authority of the FHLBank Act. Each FHLBank operates as a separate entity within a defined geographic district and has its own management, employees, and board of directors. The Bank’s defined geographic district includes Alabama, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, and the District of Columbia.

The Bank is a cooperative owned by member institutions that are required to purchase capital stock in the Bank as a condition of membership. All federally insured depository institutions, insurance companies and certified community development financial institutions chartered in the Bank’s defined geographic district and engaged in residential housing finance are eligible to apply for membership. The Bank’s stock is owned entirely by current or former members and is not publicly traded. As of December 31, 2008, the Bank’s membership totaled 1,238 financial institutions, comprising 909 commercial banks, 126 savings banks, 45 thrifts, 144 credit unions, and 14 insurance companies.

The primary function of the Bank is to provide a readily available, competitively priced source of funds to these member institutions. The Bank serves the public by providing its member institutions with a source of liquidity, thereby enhancing the availability of credit for residential mortgages and targeted community development. In addition, the Bank has in the past given members a means of selling to the Bank home mortgage loans satisfying prescribed criteria through its mortgage purchase programs.

A primary source of funds for the Bank is proceeds from the sale to the public of FHLBank debt instruments, known as “consolidated obligations,” or “COs,” which are the joint and several obligations of all of the FHLBanks. Deposits, other borrowings, and the issuance of capital stock provide additional funds to the Bank. The Bank accepts deposits from both member and eligible nonmember financial institutions and federal instrumentalities. The Bank also provides members and nonmembers with correspondent banking services such as safekeeping, wire transfer, and cash management.

The Bank is exempt from ordinary federal, state, and local taxation, except real property taxes, and it does not have any subsidiaries nor does it sponsor any off-balance sheet special purpose entities.

As of December 31, 2008, the Bank had total assets of $208.6 billion, total advances of $165.9 billion, total deposits of $3.6 billion, total consolidated obligations of $193.4 billion, and a retained earnings balance of $434.9 million. The Bank’s net income for the year ended December 31, 2008 was $253.8 million.

As of December 31, 2008, the FHLBanks’ consolidated debt obligations were rated Aaa/P-1 by Moody’s Investors Service (“Moody’s”) and AAA/A-1+ by Standard & Poor’s (“S&P”), which are the highest ratings available from these nationally recognized statistical rating organizations (“NRSROs”). These ratings indicate that Moody’s and S&P have concluded that the FHLBanks have an extremely strong capacity to meet their commitments to pay principal and interest on consolidated obligations, and that consolidated obligations are judged to be of the highest quality, with minimal credit risk. The ratings also reflect the FHLBank System’s status as a GSE. Individually, the Bank’s deposit rating at December 31, 2008 was Aaa/P-1 from Moody’s and its long-term counterparty credit rating was AAA/A-1+ from S&P. Investors should understand that these ratings are not a recommendation to buy, sell or hold securities and they may be subject to revision or withdrawal at any time by the NRSRO. The ratings from each of the NRSROs should be evaluated independently.

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The Finance Board, an independent agency in the executive branch of the U.S. government, supervised and regulated the FHLBanks and the Office of Finance through July 29, 2008. With the passage of the Housing and Economic Recovery Act of 2008 (the “Housing Act”), the Finance Agency was established and became the new independent Federal regulator of the FHLBanks, effective July 30, 2008. The Finance Board was merged into the Finance Agency as of October 27, 2008. The Finance Agency is responsible for ensuring that (1) the FHLBanks operate in a safe and sound manner, including maintenance of adequate capital and internal controls; (2) the operations and activities of the FHLBanks foster liquid, efficient, competitive and resilient national housing finance markets; (3) the FHLBanks comply with applicable laws and regulations; and (4) the FHLBanks carry out their housing finance mission through authorized activities that are consistent with the public interest. The Office of Finance, a joint office of the FHLBanks established by the Finance Board, facilitates the issuing and servicing of the FHLBank’s debt instruments, known as consolidated obligations, and prepares the combined quarterly and annual financial reports of all 12 FHLBanks.

Products and Services

The Bank’s products and services include the following:

• Credit Products

• Mortgage Loan Purchase Programs

• Community Investment Services

• Cash Management and Other Services

Credit Products

The credit products that the Bank offers to its members include both advances and standby letters of credit.

Advances

Advances are the Bank’s primary product. Advances are fully secured loans made to members and eligible housing finance agencies, called housing associates. The book value of the Bank’s outstanding advances was $165.9 billion and $142.9 billion as of December 31, 2008 and 2007, respectively, and advances represented approximately 79.5 percent and 75.6 percent of total assets as of December 31, 2008 and 2007, respectively. Advances generated 71.2 percent, 74.5 percent, and 73.1 percent of total interest income for the years ended December 31, 2008, 2007 and 2006, respectively.

Advances serve as a funding source to the Bank’s members for a variety of conforming and nonconforming mortgages. Thus, advances support important housing markets, including those focused on low- and moderate-income households. For those members that choose to sell or securitize their mortgages, advances can supply interim funding.

The Bank does not restrict the purpose for which members may use advances, other than indirectly through limitations on eligible collateral and as described below. Generally, member institutions use the Bank’s advances for one or more of the following purposes:

• Providing funding for single-family mortgages and multifamily mortgages held in the member’s portfolio, including both conforming and nonconforming mortgages

• Providing temporary funding during the origination, packaging, and sale of mortgages into the secondary market

• Providing funding for commercial real estate loans

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• Assisting with asset-liability management by matching the maturity and prepayment characteristics of mortgage loans or adjusting the sensitivity of the member’s balance sheet to interest-rate changes

• Providing a cost-effective alternative to meet contingent liquidity needs.

Pursuant to statutory and regulatory requirements, the Bank may make long-term advances only for the purpose of enabling a member to purchase or fund new or existing residential housing finance assets, which include, for community financial institutions, defined small business loans, small farm loans, small agri-business loans, and community development activities.

The Bank obtains a security interest in eligible collateral to secure a member’s advance prior to the time it originates or renews an advance. Eligible collateral is defined by the Bank’s credit and collateral policy, the FHLBank Act, and Finance Agency regulations. The Bank requires its borrowers to execute an advances and security agreement that establishes the Bank’s security interest in all collateral pledged by the borrower. The Bank perfects its security interest in collateral prior to making an advance to the borrower. As additional security for a member’s indebtedness, the Bank has a statutory and contractual lien on the member’s capital stock in the Bank. The Bank also may require additional or substitute collateral from a borrower, as provided in the FHLBank Act and the financing documents between the Bank and its borrowers.

The Bank assesses member creditworthiness and financial condition typically on a quarterly basis to determine the term and maximum dollar amount of the advances the Bank will lend to a particular member. In addition, the Bank discounts eligible collateral and periodically revalues the collateral pledged by each member to secure its outstanding advances. The Bank has never experienced a credit loss on an advance.

The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), other than claims and rights that (1) would be entitled to priority under otherwise applicable law and (2) are held by actual bona fide purchasers for value or by actual secured parties that are secured by actual perfected security interests.

Pursuant to its regulations, the Federal Deposit Insurance Corporation (“FDIC”) has recognized the priority of an FHLBank’s security interest under the FHLBank Act, and the right of an FHLBank to require delivery of collateral held by the FDIC as receiver for a failed depository institution.

The following table describes the more standard advance products that the Bank offered at December 31, 2008:

Product	Description	Maturity	Percent of Advances
Adjustable Rate Credit (ARC Advance)	Long-term financing with rate resets at periodic intervals	Up to 10 years	12.9
Fixed Rate Credit (FRC Advance)	Fixed-rate funds with principal due at maturity	From one month to 10 years; may be shorter or longer if requested	8.9
Daily Rate Credit	Short-term funding with rate resets on a daily basis; similar to federal funds lines	From one day to 24 months	3.2

Advances also are typically customized to fit member needs. The Bank’s customized advances include, among other products, the following:

Callable Advance. The callable advance is a fixed- or variable-rate advance with a fixed maturity and the option for the member to prepay the advance on an option exercise date(s) before maturity without a fee. The options

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can be Bermudan (periodically during the life of the advance) or European (one-time). The Bank offers this product with a maturity of up to 15 years with options from three months to 15 years.

Hybrid Advance. The hybrid advance is a fixed- or variable-rate advance that allows the inclusion of interest-rate caps and/or floors.

Convertible Advance. The Bank purchases an option from the member that allows the Bank to modify the interest rate on the advance from fixed to variable on certain specified dates. The Bank’s option can be Bermudan or European. The Bank offers this product with a maturity of up to 15 years with options from three months to 15 years.

Capped and Floored Advances. The capped advance includes an interest-rate cap, while the floored advance includes an interest-rate floor. The interest rate on the advance adjusts according to the difference between the interest-rate cap/floor and the established index. The Bank offers this product with a maturity of one year to 15 years.

Expander Advance. The expander advance is a fixed-rate advance with a fixed maturity and an option by the borrower to increase the amount of the advance in the future at a predetermined interest rate. The option may be Bermudan or European. The Bank has established internal limits on the amount of such options that may be sold to mature in any given quarter. The Bank offers this product with a maturity of two years to 30 years with an option exercise date that can be set from one month to 10 years.

The following table sets forth the par amount of these customized advances outstanding (in thousands):

	As of December 31,
	2008		2007
Callable advances	$	6,000	$	90,000
Hybrid advances		67,958,600		60,581,900
Convertible advances		30,156,995		30,105,085
Capped/floor advances		21,486,000		21,233,500
Expander advances		1,312,600		1,441,600

The Bank establishes interest rates on advances using the Bank’s cost of funds and the interest-rate swap market. For short-term advances, interest rates are primarily driven by the Bank’s discount note pricing, and for longer term advances, interest rates are primarily driven by CO and interest-rate swap pricing. The Bank establishes an interest rate applicable to each type of advance each day and then adjusts those rates during the day to reflect changes in the cost of funds and interest rates.

The Bank includes prepayment fee provisions in all advance transactions except Daily Rate Credit advances and one type of ARC advance. With respect to callable advances, prepayment fees apply to prepayments on a date other than an option exercise date(s). As required by Finance Agency regulations, the prepayment fee is intended to make the Bank economically indifferent to a borrower’s decision to prepay an advance before maturity or, with respect to a callable advance, on a date other than an option exercise date.

In addition to making advances to member institutions, the Bank makes advances to “housing associates”—nonmembers that are approved mortgagees under Title II of the National Housing Act. Housing associates must be legally chartered and subject to inspection and supervision by a governmental agency. Additionally, their principal activity in the mortgage field must be the lending of their own funds. Housing associates are not subject to certain provisions of the FHLBank Act applicable to members, such as the capital stock purchase requirements. However, with respect to advances, housing associates generally are subject to similar regulatory and policy lending requirements, except that most advances to housing associates are collateralized by cash and securities. Advances to housing associates represented $111.0 million and $8.3 million of the outstanding advances as of December 31, 2008 and 2007, respectively.

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The following table presents information on the Bank’s 10 largest borrowers (dollar amounts in thousands):

10 Largest Borrowers As of December 31, 2008
Institution	City, State	Advances Par Value		Percentage of Total Advances	Weighted Average Interest Rate %(*)
Countrywide Bank, FSB	Alexandria, VA	$	42,700,000	27.32	4.46
SunTrust Bank	Atlanta, GA		10,179,960	6.52	4.58
Branch Banking and Trust Company	Winston Salem, NC		10,083,299	6.45	4.11
Regions Bank	Birmingham, AL		9,432,431	6.04	3.69
Navy Federal Credit Union	Vienna, VA		7,809,672	5.00	4.66
Wachovia Bank, National Association	Charlotte, NC		5,508,161	3.52	2.54
BankUnited, FSB	Coral Gables, FL		5,054,350	3.23	3.92
Capital One, National Association	McLean, VA		4,250,000	2.72	2.40
E*TRADE Bank	Arlington, VA		3,903,600	2.50	4.40
Bank of America, National Association	Charlotte, NC		3,763,960	2.41	1.37
Subtotal (10 largest borrowers)			102,685,433	65.71	4.10
Subtotal (all other borrowers)			53,583,723	34.29	3.56
Total		$	156,269,156	100.00

* The average interest rate of the member’s advance portfolio weighted by each advance’s outstanding balance.

A description of the Bank’s credit risk management and valuation methodology as it relates to its advance activity is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk.”

Standby Letters of Credit

The Bank provides members with irrevocable standby letters of credit to support certain obligations of the members to third parties. Members may use standby letters of credit for residential housing finance and community lending or for liquidity and asset-liability management. The Bank requires its borrowers to collateralize fully the face amount of any letter of credit issued by the Bank during the term of the letter of credit. If the Bank is required to make payment for a beneficiary’s draw, these amounts are converted into an advance to the member. The Bank’s underwriting and collateral requirements for standby letters of credit are the same as the underwriting and collateral requirements for advances. The Bank had approximately $10.2 billion and $6.4 billion of outstanding standby letters of credit as of December 31, 2008 and 2007, respectively.

Mortgage Loan Purchase Programs

Until the middle of 2008, the Bank offered mortgage loan purchase programs to members to provide them an alternative to holding mortgage loans in portfolio or selling them into the secondary market. These programs, the Mortgage Partnership Finance^® Program (“MPF^® Program”) and the Mortgage Purchase Program (“MPP”), are authorized under applicable regulations. Under both the MPF Program and MPP, the Bank purchased loans directly from participating financial institutions (“PFIs”) and not through an intermediary such as a trust. The loans consisted of one-to-four family residential properties with original maturities ranging from five years to 30 years. Depending upon the program, the acquired loans may have included qualifying conventional conforming, government Federal Housing Administration (“FHA”) insured, and Veterans Administration (“VA”) guaranteed fixed-rate mortgage loans. Before 2006, the Bank also purchased participation interests in loans through its Affordable Multifamily Participation Program (“AMPP”).

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The Bank stopped accepting additional MPF master commitments as of February 4, 2008, and as of March 31, 2008, ceased purchasing assets under the MPF Program. Early in the third quarter of 2008, the Bank suspended new acquisitions of mortgage loans under the MPP. The Bank plans to continue to support its existing portfolio of MPP and MPF loans.

Regulatory interpretive guidance provides that an FHLBank may sell loans acquired through its mortgage loan purchase programs, so long as it also sells the related credit enhancement obligation, which is discussed below. The Bank currently is not selling loans it has acquired through its mortgage loan purchase programs.

The following table identifies the PFIs from which the Bank has made more than 10 percent of its mortgage purchases through the above programs.

	Years Ended December 31,
	2008		2007
	Percent of total MPF	Percent of total MPP	Percent of total MPF	Percent of total MPP
First Federal Savings & Loan Association of Charleston	54.03	—	16.45	—
Branch Banking and Trust Company	41.72	—	63.05	—
Eastern Financial Florida Credit Union	*	23.73	20.50	—
Robins Federal Credit Union	—	24.17	—	24.88
Lee Financial Corporation	—	19.53	—	*
Bank of Dudley	—	15.65	—	11.84
First Federal Savings Bank of Florida	—	*	—	44.37

* Represents less than 10 percent.

The Bank requires each PFI to make certain representations and warranties to the Bank indicating that it meets the various requirements set forth in the program guides and documents for the MPF Program and MPP. If a PFI breaches its representations or warranties with respect to a loan that the PFI sold to the Bank, the Bank may require the PFI to repurchase the mortgage loan. During 2008, PFIs repurchased nine loans from the Bank related to the MPF Program with outstanding principal and interest of approximately $1.3 million and PFIs repurchased three loans from the Bank related to MPP with outstanding principal and interest of approximately $553 thousand.

Descriptions of the MPF Program and MPP underwriting and eligibility standards and credit enhancement structures are contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk.”

MPF Program

The unpaid principal balance of MPF loans held by the Bank was $2.9 billion and $3.2 billion at December 31, 2008 and 2007, respectively. There are several different products available under the MPF Program, which specify varying levels of loss allocation and credit enhancement structures. These products include: Original MPF^®, MPF^® 100, MPF^® 125, and MPF^® Plus. The following table shows the unpaid principal loan balances for certain of the Bank’s MPF Program products (in thousands):

	Original MPF®		MPF® 100		MPF® 125		MPF® Plus
As of December 31, 2008	$	283,053	$	2,235	$	113,291	$	2,179,167
As of December 31, 2007		302,684		2,435		127,018		2,457,359

Through another program, MPF^® Government products, the Bank purchased FHA-insured and VA-guaranteed loans from PFIs. These government-insured/guaranteed loans are not subject to the credit enhancement obligations applicable to other products of the MPF Program. The Bank held $289.1 million and $294.2 million in FHA/VA loans under this program as of December 31, 2008 and 2007, respectively.

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As of December 31, 2008, one of the Bank’s MPF PFI’s, Branch Banking and Trust Company, which like all PFI’s is currently inactive, was among the Bank’s top 10 borrowers.

MPP

The unpaid principal balance of MPP loans held by the Bank was $369.6 million and $327.1 million as of December 31, 2008 and 2007, respectively. The purpose and design of MPP is similar to the MPF program discussed above. However, because the Bank operates its MPP independently of other FHLBanks, it has greater control over the prices offered to its customers, the quality of customer service, the relationship with any third-party service provider, and program changes. Certain benefits of greater Bank control include the Bank’s ability to control operating costs and to manage its regulatory relationship directly with the Finance Agency.

Under MPP, a PFI that originates or purchases fixed-rate residential mortgages may sell qualifying loans to the Bank under a master commitment. The Bank is responsible for the development and maintenance of the program including origination, servicing and underwriting standards, operational support, marketing MPP to its members and funding loans acquired through the program.

The PFIs may retain or sell servicing to third parties. The Bank does not service the loans, nor does it own any servicing rights. The Bank must approve any servicer, including a member-servicer, and any transfers of servicing to third parties. The PFIs or servicers are responsible for servicing loans, for which they receive a servicing fee, in accordance with MPP servicing guidelines. The Bank has appointed Washington Mutual Mortgage Securities Corp. as the MPP master servicer. Washington Mutual Mortgage Securities Corp. was acquired by JP Morgan Chase in September of 2008. As of December 31, 2008, there were no MPP PFIs that were among the Bank’s top 10 borrowers.

Under MPP, the Bank also could purchase FHA loans from PFIs. These government-insured loans are not subject to the same credit enhancement obligations applicable to other products of the MPP. The Bank held no FHA loans under MPP as of December 31, 2008 or 2007.

Affordable Multifamily Participation Program

Prior to 2006, the Bank offered AMPP. Through AMPP, members and participants in housing consortia could sell to the Bank participation interests in loans on affordable multifamily rental properties. The Bank held participation interests in AMPP loans with an unpaid principal balance of $22.8 million and $23.3 million as of December 31, 2008 and 2007, respectively. In 2006, the Bank stopped purchasing assets under this program but retains its existing portfolio.

Community Investment Services

Each FHLBank contributes 10 percent of its annual regulatory net income to its Affordable Housing Program (“AHP”), or such additional prorated sums as may be required to assure that the aggregate annual contribution of the FHLBanks is not less than $100 million.

AHP provides direct subsidy funds or subsidized advances to members to support the financing of rental and for-sale housing for very low-income, low-income, and moderate-income individuals and families. The Bank’s AHP is a competitive program that supports projects that provide affordable housing to those individuals and families. In addition to the competitive AHP, the Bank offers the following programs to facilitate affordable housing and promote community economic development:

• The First-time Homebuyer Program (“FHP”), which provides funds through member financial institutions to be used for down payment and closing costs to families at or below 80 percent of the area median income

• The Community Investment Program, or “CIP,” and the Economic Development Program, or “EDP,” each of which provides the Bank’s members with access to low-cost funding to create affordable rental and

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homeownership opportunities and to engage in commercial and economic development activities that benefit low- and moderate-income individuals and neighborhoods.

For the years ended December 31, 2008 and 2007, AHP assessments were $28.4 million and $50.7 million, respectively. Historically, the Bank has allocated up to 15 percent of its annual AHP contribution to fund the First-time Homebuyer Program. In 2008, the Bank increased the allocation of its annual AHP contribution to fund the First-time Homebuyer Program from 15 percent to up to 35 percent.

In 2008, the Bank adopted certain changes to its AHP program to position AHP and FHP as a resource to address the credit and foreclosure crisis in the Bank’s district. These changes included a revised AHP application scoring framework that rewards projects that are a part of a locally-coordinated foreclosure recovery initiative and projects that benefit from funding from Bank members. Other changes include the incorporation of a district-wide foreclosure prevention counseling platform for FHP customers.

Cash Management and Other Services

The Bank historically has provided a variety of services to help members meet day-to-day cash management needs. These services have included certain cash management services, such as daily investment accounts, disbursement accounts, settlement services, term deposits, ACH and custodial mortgage accounts. In addition to cash management services, the Bank provides other noncredit services, including wire transfer services and safekeeping services. These cash management, wire transfer, and safekeeping services do not generate material amounts of income and are performed primarily as ancillary services for the Bank’s members. Beginning in mid-2008, cash management services were limited to those that support member advance activity, such as daily investment accounts, ACH and custodial mortgage accounts. The Bank’s noncredit services, wire transfer services and safekeeping services continue.

The Bank also acts as an intermediary for its members that have limited or no access to the capital markets but need to enter into interest-rate exchange agreements. This service assists members with asset-liability management by giving them indirect access to the capital markets. These intermediary transactions involve the Bank’s entering into an interest-rate exchange agreement with a member and then entering into a mirror-image interest-rate exchange agreement with one of the Bank’s approved counterparties. The interest-rate exchange agreements entered into by the Bank as a result of its intermediary activities do not qualify for hedge accounting treatment and are separately marked to fair value through earnings. The Bank attempts to earn income from this service sufficient to cover its operating expenses through the minor difference in rates on these mirror-image interest-rate exchange agreements. The net result of the accounting for these interest-rate exchange agreements is not material to the operating results of the Bank. The Bank requires both the member and the counterparty to post collateral for any market value exposure that may exist during the life of the transaction.

Investments

The Bank maintains a portfolio of short-term and long-term investments for liquidity purposes, to provide for the availability of funds to meet member credit needs and to provide additional earnings for the Bank. Investment income also enhances the Bank’s capacity to meet its commitments to affordable housing and community investment, cover operating expenses and satisfy the Bank’s annual Resolution Funding Corporation (“REFCORP”) assessment, discussed below. The long-term investment portfolio generally provides the Bank with higher returns than those available in short-term investments.

The Bank’s short-term and long-term investments were $10.8 billion and $27.6 billion, respectively, as of December 31, 2008, representing approximately 18.4 percent of total assets. The Bank’s short-term and long-term investments were $15.6 billion and $25.9 billion, respectively, as of December 31, 2007, representing approximately 22.0 percent of total assets. These investments generated 25.9, 23.4 and 24.8 percent of total interest income for the years ended December 31, 2008, 2007 and 2006, respectively.

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The Bank’s short-term investments consist of overnight and term federal funds, and interest-bearing deposits. The Bank’s long-term investments consist of mortgage-backed securities (“MBS”) issued by government-sponsored mortgage agencies or private securities that carry the highest rating from Moody’s or S&P at the time of purchase, securities issued by the U.S. government or U.S. government agencies, and consolidated obligations issued by other FHLBanks.

The Bank’s MBS investment practice is to purchase MBS from a select group of Bank-approved dealers, which may include “primary dealers.” Primary dealers are banks and securities brokerages that trade in U.S. Government securities with the Federal Reserve System. The Bank does not purchase MBS from its members, except in the case in which a member or its affiliate is a dealer on the Bank’s list of approved dealers. The Bank bases its investment decisions in all cases on the relative rates of return of competing investments and does not consider whether an MBS is being purchased from or issued by a member or an affiliate of a member. The Bank’s MBS investment totaled $23.0 billion and $21.1 billion as of December 31, 2008 and 2007, respectively. The MBS balance as of December 31, 2008 and 2007 includes approximately $6.7 billion and $7.8 billion, respectively, in MBS issued by two of the Bank’s members and their affiliates. See Note 5 to the audited financial statements for a tabular presentation of the held-to-maturity securities issued by members or affiliates of members.

Finance Agency regulations prohibit the Bank from investing in certain types of securities. These restrictions are set out in more detail in “Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk.”

Finance Agency regulations further limit the Bank’s investment in MBS and asset-backed securities by requiring that the total book value of MBS owned by the Bank not exceed 300 percent, or in certain cases 600 percent, of the Bank’s previous month-end capital plus mandatorily redeemable capital stock on the day it purchases the securities. For discussion regarding the Bank’s compliance with this regulatory requirement, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition–Investments.”

The Bank periodically invests in the outstanding consolidated obligations issued by other FHLBanks as a part of its investment strategy. A description of the FHLBanks’ consolidated obligations appears below under the heading “Funding Sources–Consolidated Obligations.” The terms of these consolidated obligations generally are similar to the terms of consolidated obligations issued by the Bank. The purchase of these investments is funded by a pool of liabilities and capital of the Bank and is not funded by specific or “matched” consolidated obligations issued by the Bank.

The Bank purchases consolidated obligations issued by other FHLBanks through third-party dealers as long-term investments. These investments provide a relatively predictable source of liquidity while at the same time maximizing earnings and the Bank’s leveraged capital ratio (as these longer-term investments typically earn a higher yield than short-term investments such as term federal funds sold). The Bank purchases long-term debt issued by other GSEs for the same reason, and, generally, the rates of return on such other long-term debt are similar to those on consolidated obligations of the same maturity.

In determining whether to invest in consolidated obligations issued by other FHLBanks, the Bank, as in the case of any of its investment decisions, compares the features of such investments, including rates of return, terms of maturity, and overall structure, to alternative permissible uses of available funds for investment, including the repayment of outstanding indebtedness of the Bank. At the time of such investment decision, however, indebtedness of the Bank may not be available for repurchase.

While the Bank seeks to manage its entire portfolio of investments to achieve an overall rate of return in excess of the Bank’s funding costs, certain individual investments, including consolidated obligations issued by other FHLBanks, may have a stated interest rate that is less than the Bank’s cost of funds at the time of purchase as a

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result of various factors, such as the changing nature of market interest rates and the hedging strategies adopted by the Bank. Although the stated interest rate on any series of consolidated obligations is based in part on the joint and several liability of the FHLBanks, particular series of consolidated obligations may have different structures and remaining maturities and, consequently, different rates of return to investors, including the Bank. The Bank’s joint and several liability is the same for all consolidated obligations issued by the FHLBanks, regardless of whether the Bank owns a particular series of them. Normally, at the time of purchase of these investments, the Bank also enters into interest-rate exchange agreements with mirror-image terms to the investments to offset price movements in the investment. This hedging helps maintain an appropriate repricing balance between assets and liabilities. These interest-rate exchange agreements are accounted for under Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities—Deferral of Effective Date of FASB Statement No. 133, SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, and SFAS No. 155, Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statement No. 133 and 140 (collectively, “SFAS 133”).

Investment by the Bank in consolidated obligations issued by other FHLBanks is not currently, nor is it anticipated to be, precluded by Finance Agency regulations. Current regulations do not impose any express limitation on the ability of the Bank to receive payments on consolidated obligations issued by other FHLBanks in the event that the issuing FHLBank is unable to make such payments itself, and the other FHLBanks, including the Bank, are required to make such payments. However, 12 CFR Section 966.8(c) prohibits consolidated obligations from being placed directly with any FHLBank. Regulatory interpretative guidance on this provision has clarified that the regulation also prohibits purchases from underwriters in an initial offering of consolidated obligations. The Bank does not purchase consolidated obligations issued by other FHLBanks during their period of initial issuance, so this guidance has not affected its investment strategy in this regard. At the request of the Office of Finance, the Finance Board approved a waiver to Section 966.8(c) in December 2005 to permit the direct placement by an FHLBank of consolidated obligations with another FHLBank to ensure the timely payment by an FHLBank of all the principal and interest due on consolidated obligations on a particular day. The request resulted from a revision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) to its daylight overdraft policies. Under the Federal Reserve Board’s policies, the Federal Reserve System will not make payments on consolidated obligations until it has received sufficient funds from the obligor FHLBank through its fiscal agent, the Office of Finance.

The following table sets forth the Bank’s investments in other FHLBank bonds and other GSE securities (dollar amounts in thousands):

	As of December 31,
	2008					2007
	Amount		Percent of Total Investments	Weighted Average Coupon		Amount		Percent of Total Investments	Weighted Average Coupon
Other FHLBanks’ Bonds	$	300,135	0.78	7.41	%	$	284,542	0.69	6.96	%
Government-sponsored enterprises:
Debt obligations		4,171,725	10.87	5.34	%		4,283,519	10.32	5.85	%
Mortgage-backed securities		7,060,082	18.40	4.72	%		2,968,441	7.15	4.97	%

The Bank is subject to credit and market risk on certain investments. For discussion as to how the Bank manages these risks, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management.”

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Funding Sources

Consolidated Obligations

Consolidated obligations or “COs,” consisting of bonds and discount notes, are the joint and several obligations of the FHLBanks, backed only by the financial resources of the 12 FHLBanks. COs are not obligations of the U.S. government, and the United States does not guarantee the COs. The Bank, working through the Office of Finance, is able to customize COs to meet investor demands. Customized features can include different indices and embedded interest-rate derivatives. These customized features are offset predominately by interest-rate exchange agreements to reduce the market risk associated with the COs.

Although the Bank is primarily liable for its portion of COs (i.e., those issued on its behalf), the Bank also is jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on COs of all the FHLBanks. If the principal or interest on any CO issued on behalf of the Bank is not paid in full when due, the Bank may not pay any extraordinary expenses or pay dividends to, or redeem or repurchase shares of stock from, any member of the Bank. The Finance Agency, under 12 CFR Section 966.9(d), may at any time require any FHLBank to make principal or interest payments due on any COs, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation.

To the extent that an FHLBank makes any payment on a CO on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the noncomplying FHLBank. However, if the Finance Agency determines that the noncomplying FHLBank is unable to satisfy its obligations, the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all COs outstanding or on any other basis the Finance Agency may determine.

Finance Agency regulations also state that the Bank must maintain the following types of assets free from any lien or pledge in an aggregate amount at least equal to the amount of the Bank’s portion of the COs outstanding:

• Cash

• Obligations of, or fully guaranteed by, the United States

• Secured advances

• Mortgages that have any guaranty, insurance, or commitment from the United States or any agency of the United States

• Investments described in Section 16(a) of the FHLBank Act which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located

• Other securities that have been assigned a rating or assessment by a NRSRO that is equivalent to or higher than the rating or assessment assigned by that NRSRO to the COs (currently Aaa by Moody’s or AAA by S&P).

The following table presents the Bank’s compliance with this requirement (in thousands):

	Outstanding Debt		Aggregate Unencumbered Assets
As of December 31, 2008	$	193,376,111	$	207,181,050
As of December 31, 2007		170,584,981		188,152,253

The Office of Finance has responsibility for facilitating and executing the issuance of the COs. It also services all outstanding debt.

Consolidated Obligation Bonds. Consolidated obligation bonds satisfy longer-term funding requirements. Typically, the maturity of these securities ranges from one year to 10 years, but the maturity is not subject to any statutory or regulatory limit. Consolidated obligation bonds can be issued and distributed through negotiated or

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competitively bid transactions with approved underwriters or selling group members. The FHLBanks also use the TAP issue program for fixed-rate, noncallable bonds. Under this program, the FHLBanks offer debt obligations at specific maturities that may be reopened daily generally during a three-month period through competitive auctions. The goal of the TAP program is to aggregate frequent smaller issues into a larger bond issue that may have greater market liquidity.

Consolidated Obligation Discount Notes. Through the Office of Finance, the FHLBanks also issue consolidated obligation discount notes to provide short-term funds for advances to members, for the Bank’s short-term investments, and for the Bank’s variable-rate and convertible advance programs. These securities have maturities up to 366 days and are offered daily through a consolidated obligation discount-note selling group. Discount notes are issued at a discount and mature at par.

The following table shows the net amount of the Bank’s outstanding consolidated obligation bonds and discount notes (in thousands). The net amount is described in more detail in the table summarizing the Bank’s participation in COs outstanding included within Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Liabilities and Capital–Consolidated Obligations.”

	As of December 31,
	2008		2007
Consolidated obligations, net:
Bonds	$	138,181,334	$	142,237,042
Discount notes		55,194,777		28,347,939
Total	$	193,376,111	$	170,584,981

Certification and Reporting Obligations. Under Finance Agency regulations, before the end of each calendar quarter and before paying any dividends for that quarter, the president of the Bank must certify to the Finance Agency that, based upon known current facts and financial information, the Bank will remain in compliance with applicable liquidity requirements and will remain capable of making full and timely payment of all current obligations (which includes the Bank’s obligation to pay principal and interest on COs issued on its behalf through the Office of Finance) coming due during the next quarter. The Bank is required to provide notice to the Finance Agency upon the occurrence of any of the following:

• The Bank is unable to provide the required certification

• The Bank projects at any time that it will fail to comply with its liquidity requirements or will be unable to meet all of its current obligations due during the quarter

• The Bank actually fails to comply with its liquidity requirements or to meet all of its current obligations due during the quarter

• The Bank negotiates to enter or enters into an agreement with one or more other FHLBanks to obtain financial assistance to meet its current obligations due during the quarter.

An FHLBank must file a consolidated obligation payment plan for Finance Agency approval upon the occurrence of any of the following:

• The FHLBank becomes a noncomplying FHLBank as a result of failing to provide a required certification related to liquidity requirements and ability to meet all current obligations

• The FHLBank becomes a noncomplying FHLBank as a result of being required to provide notice to the Finance Agency of certain matters related to liquidity requirements or inability to meet current obligations

• The Finance Agency determines that the FHLBank will cease to be in compliance with its liquidity requirements or will lack the capacity to meet all of its current obligations due during the quarter.

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Regulations permit a noncompliant FHLBank to continue to incur and pay normal operating expenses in the regular course of business. However, a noncompliant FHLBank may not incur or pay any extraordinary expenses, declare or pay dividends, or redeem any capital stock until such time as the Finance Agency has approved the FHLBank’s CO payment plan or inter-FHLBank assistance agreement or has ordered another remedy, and the noncompliant FHLBank has paid all its direct obligations.

Deposits

The FHLBank Act allows the Bank to accept deposits from its members, any institution for which it is providing correspondent services, other FHLBanks, or other governmental instrumentalities. Deposit programs provide some of the Bank’s funding resources while also giving members a low-risk earning asset that satisfies their regulatory liquidity requirements. In 2008 and 2007, the Bank offered several types of deposit programs, including demand and overnight deposits. In June 2007, the Bank discontinued offering term deposits and the last term deposit matured in October 2007. In May 2008, the Bank discontinued acting as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks. The following table shows categories of the Bank’s deposits (in thousands):

	As of December 31,
	2008		2007
Interest-bearing deposits:
Demand and overnight	$	3,572,709	$	7,115,183
Noninterest-bearing deposits:
Pass-through reserve deposits		—		19,844
Total	$	3,572,709	$	7,135,027

To support its member deposits, the FHLBank Act requires the Bank to have as a reserve an amount equal to or greater than its current deposits from members. These reserves are required to be invested in obligations of the United States, deposits in eligible banks or trust companies, or certain advances with maturities not exceeding five years. As of December 31, 2008 and 2007, the Bank had excess deposit reserves of $133.2 billion and $118.6 billion, respectively.

Capital, Capital Rules, Retained Earnings, and Dividends

Capital and Capital Rules

The Bank is required to comply with regulatory requirements for total capital, leverage capital, and risk-based capital. Under these requirements, the Bank must maintain total capital in an amount equal to at least four percent of total assets and weighted leverage capital in an amount equal to at least five percent of total assets. “Weighted leverage capital” is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times. In addition, the Bank must maintain permanent capital, defined by the FHLBank Act and applicable regulations as the sum of paid-in capital for Class B stock and retained earnings, in an amount equal to or greater than the risk-based capital (“RBC”) requirements set forth in the Gramm-Leach-Bliley Act of 1999. The regulatory definition of permanent capital results in a calculation of permanent capital different from that determined in accordance with GAAP, as the regulatory definition uses paid-in capital without adjusting for the effects of SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”). RBC is the sum of credit, market, and operating risk capital requirements.

Credit risk capital is the sum of the capital charges for the Bank’s assets, off-balance sheet items, and derivatives contracts. The Bank calculates these charges using the methodology and risk weights assigned to each classification by the Finance Agency. Market risk capital is the sum of the market value of the Bank’s portfolio at risk from movement in interest rates, foreign exchange rates, commodity prices, and equity prices that could

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occur during times of market stress and the amount, if any, by which the market value of total capital is less than 85 percent of the book value of total capital. Operations risk capital is equal to 30 percent of the sum of the credit risk capital component and the market risk capital component. Regulations define “total capital” as the sum of:

• Permanent capital

• The amount paid-in for Class A stock, if any (the Bank does not issue Class A stock)

• The amount of the Bank’s general allowance for losses (if any)

• The amount of any other instruments identified in the Bank’s capital plan that the Finance Agency has determined to be available to absorb losses.

To satisfy these capital requirements, the Bank implemented a new capital plan on December 17, 2004. Each member’s minimum stock requirement is an amount equal to the sum of a “membership” stock component and an “activity-based” stock component under the plan. The FHLBank Act and applicable regulations require that the minimum stock requirement for members must be sufficient to enable the Bank to meet its minimum leverage and risk-based capital requirements. If necessary, the Bank may adjust the minimum stock requirement from time to time within the ranges established in the capital plan. Each member is required to comply promptly with any adjustment to the minimum stock requirement.

The capital plan permits the Bank’s board of directors to set the membership and activity-based stock requirements within a range as set forth in the capital plan. As of December 31, 2008, the membership stock requirement was 0.18 percent (18 basis points) of the member’s total assets, subject to a cap of $25 million. Effective as of March 30, 2009, the cap will change to $26 million.

As of December 31, 2008, the activity-based stock requirement was the sum of the following:

• 4.50 percent of the member’s outstanding principal balance of advances

• 8.00 percent of any outstanding targeted debt/equity investment (investments similar to AMPP assets) sold by the member to the Bank on or after December 17, 2004.

In addition, the activity-based stock requirement may include a percentage of any outstanding balance of acquired member assets (such as MPF and MPP assets), although this percentage was set at zero percent as of December 31, 2008. As of December 31, 2008, all of the Bank’s AMPP assets had been acquired from a non-member, and, therefore, the 8.00 percent activity-based stock requirement did not apply with respect to those AMPP assets.

Although applicable regulations allow the Bank to issue Class A stock or Class B stock, or both, to its members, the Bank’s capital plan allows it to issue only Class B stock. For additional information regarding the Bank’s stock, refer to Item 5, “Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

Retained Earnings and Dividends

The Bank has established a capital management policy to help preserve the value of the members’ investment in the Bank and reasonably mitigate the effect on capital of unanticipated operating and accounting events. At least quarterly, the Bank assesses the adequacy of its retained earnings. This assessment considers forecasted income, SFAS 133 and SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”), adjustments, market risk, operational risk and credit risk. Quarterly, the board sets the targeted amount of retained earnings the Bank is required to hold after the payment of dividends based on this assessment. Based upon this quantitative analysis, the board of directors established the target amount of retained earnings at approximately $469.4 million as of December 31, 2008. The Bank’s retained earnings at December 31, 2008 were lower than this target due to the Bank’s establishment of a $170.5 million reserve for a receivable from

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Lehman Brothers Special Financing Inc. (“LBSF”) in light of the bankruptcy filings of LBSF and its parent, Lehman Brothers Holdings Inc. and amounts due to the Bank from LBSF under certain swap transactions, and the recording of an $186.1 million other-than-temporary impairment loss for the year ended December 31, 2008, each of which is discussed in more detail in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

The Bank may pay dividends on its capital stock only out of its retained earnings or current net earnings. The Bank’s board of directors has discretion to declare or not declare dividends and to determine the rate of any dividends declared. The board of directors may neither declare nor require the Bank to pay dividends when it is not in compliance with all of its capital requirements or, if after giving effect to the dividend, the Bank would fail to meet any of its capital requirements. The Bank also may not declare a dividend if the dividend would create a financial safety and soundness issue for the Bank.

The Finance Agency limits excess stock in any FHLBank to one percent of that FHLBank’s total assets and prohibits an FHLBank from issuing dividends in the form of stock if it would cause this one percent limitation to be exceeded. As of December 31, 2008, the Bank’s excess stock was 0.006 percent, or less than one basis point, of the Bank’s total assets.

Derivatives

Finance Agency regulations and policy and the Bank’s Risk Management Policy (“RMP”) establish guidelines for derivatives. These policies and regulations prohibit trading in or the speculative use of these instruments and limit permissible credit risk arising from these instruments. The Bank enters into derivatives only to manage the interest-rate risk exposures inherent in otherwise unhedged assets and funding positions, and to achieve the Bank’s risk management objectives. These derivatives consist of interest-rate swaps (including callable swaps and putable swaps), swaptions, interest-rate cap and floor agreements, and futures and forward contracts. Generally, the Bank uses derivatives in its overall interest-rate risk management to accomplish one or more of the following objectives:

• Reduce the interest-rate net sensitivity of consolidated obligations, advances, investments, and mortgage loans by, in effect, converting them to a short-term interest rate, usually based on the London Interbank Offered Rate (“LIBOR”)

• Manage embedded options in assets and liabilities

• Hedge the market value of existing assets or liabilities

• Hedge the duration risk of pre-payable instruments.

The total notional amount of the Bank’s outstanding derivatives was $240.2 billion and $222.9 billion as of December 31, 2008 and 2007, respectively. The contractual or notional amount of a derivative is not a measure of the amount of credit risk from that transaction. Rather, the notional amount serves as a basis for calculating periodic interest payments or cash flows.

The Bank may enter into derivatives concurrently with the issuance of consolidated obligations with embedded options. The strategy of issuing bonds while simultaneously entering into derivatives converts, in effect, fixed-rate liabilities into variable-rate liabilities. The continued attractiveness of such debt depends on price relationships in both the bond market and interest-rate exchange markets. If conditions in these markets change, the Bank may alter the types or terms of the bonds issued. Similarly, the Bank may enter into derivatives in conjunction with the origination of fixed-rate advances to create the equivalent of variable-rate earning assets.

The Bank is subject to credit risk in all derivatives transactions due to potential nonperformance by the derivative counterparty. The Bank reduces this risk by executing derivatives transactions only with highly-rated financial institutions. In addition, the legal agreements governing the Bank’s derivatives transactions require the credit exposure of all derivatives transactions with each counterparty to be netted. As of December 31, 2008, the Bank

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had credit risk exposure to nine counterparties, before considering collateral, in an aggregate amount of $111.0 million. The Bank’s net uncollateralized exposure to these counterparties was approximately $41.3 million as of December 31, 2008.

The market risk of derivatives can be measured meaningfully only on a portfolio basis, taking into account the entire balance sheet and all derivatives transactions. The market risk of the derivatives and the hedged items is included in the measurement of the Bank’s effective duration gap (the difference between the expected weighted average maturities of the Bank’s assets and liabilities). As of December 31, 2008, the Bank’s effective duration gap was 0.5 months. A low positive effective duration gap means that the Bank’s exposure to rising interest rates is lower than if the effective duration gap were a higher positive number.

For further discussion as to how the Bank manages its credit risk and market risk on its derivatives see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Risk Management.”

Competition

Advances. A number of factors affect demand for the Bank’s advances, including, but not limited to, the cost of other available sources of liquidity for the Bank’s members, such as brokered deposits and the repurchase market. The Bank individually competes with other suppliers of secured and unsecured wholesale funding. Such other suppliers may include investment banks, commercial banks, and, in certain circumstances, other FHLBanks. Smaller members may have access to alternative funding sources through sales of securities under agreements to repurchase, while larger members may have access to all the alternatives listed. Large members also may have independent access to the national and global credit markets. The availability of alternative funding sources to members can influence significantly the demand for the Bank’s advances and can vary as a result of a number of factors including, among others, market conditions, members’ creditworthiness, and availability of collateral. The Bank has begun to face competition from several government programs created in light of the credit crisis, which have provided competitive alternatives to the Bank’s members, including the Troubled Asset Relief Program (“TARP”), the Federal Reserve’s Term Auction Facility, and the Temporary Liquidity Guarantee Program (“TLGP”).

Debt Issuance. The Bank competes with Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lesser amounts of debt issued at the same cost than otherwise would be the case. In addition, the availability and cost of funds raised through the issuance of certain types of unsecured debt may be affected adversely by regulatory initiatives that tend to reduce investments by certain depository institutions in unsecured debt with greater price volatility or interest-rate sensitivity than fixed-rate, fixed-maturity instruments of the same maturity. Further, a perceived or actual higher level of government support for other GSEs may increase demand for their debt securities relative to similar FHLBank securities.

Interest-rate Exchange Agreements. The sale of callable debt and the simultaneous execution of callable interest-rate swaps that mirror the debt have been important sources of competitive funding for the Bank. As such, the availability of markets for callable debt and interest-rate swaps may be an important determinant of the Bank’s relative cost of funds. There is considerable competition among high credit quality issuers in the markets for these instruments.

Regulatory Oversight, Audits, and Examinations

The Finance Agency, an independent agency in the executive branch of the federal government, supervises and regulates the FHLBanks. The Finance Agency is responsible for ensuring that (1) the FHLBanks operate in a safe and sound manner, including maintenance of adequate capital and internal controls; (2) the operations and activities of the FHLBanks foster liquid, efficient, competitive and resilient national housing finance markets;

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(3) the FHLBanks comply with applicable laws and regulations; and (4) the FHLBanks carry out their housing finance mission through authorized activities that are consistent with the public interest. In this capacity, the Finance Agency issues regulations and policies that govern, among other things, the permissible activities, powers, investments, risk-management practices, and capital requirements of the FHLBanks, and the authorities and duties of FHLBank directors. The Finance Agency conducts annual, on-site examinations of the Bank as well as periodic off-site reviews. In addition, the Bank must submit to the Finance Agency monthly financial information on the condition and results of operations of the Bank.

Effective May 16, 2006, in accordance with the Finance Board’s regulation, the Bank registered its Class B stock with the SEC under Section 12(g)(1) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Housing Act codified the regulatory requirement that the FHLBanks register a class of its common stock under Section 12(g) of the Exchange Act. As a result of this registration, the Bank is required to comply with the disclosure and reporting requirements of the Exchange Act and to file with the SEC annual, quarterly, and current reports, as well as meet other SEC requirements, subject to certain exemptive relief obtained from the SEC by the Bank and under the Housing Act.

The Government Corporation Control Act provides that, before a government corporation (which includes the FHLBanks) issues and offers obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the time and manner in which issued; and the selling price. Under the Housing Act, the Secretary of the Treasury has the authority, at his or her discretion, to purchase COs, subject to the federal debt ceiling limits. Previously, the FHLBank Act had authorized the Secretary of the Treasury, at his or her discretion, to purchase COs up to an aggregate principal amount of $4 billion. No borrowings under this latter authority have been outstanding since 1977. The U.S. Department of the Treasury receives the Finance Agency’s annual report to the Congress, weekly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks. The Department of the Treasury recently has adopted additional procedures relating to the review of other GSE debt issuance and may review the procedures under which the FHLBanks issue debt.

The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the Bank and to decide the extent to which they fairly and effectively fulfill the purposes of the FHLBank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, he or she must report the results and provide his or her recommendations to the Congress, the Office of Management and Budget, and the FHLBank in question. The Comptroller General also may conduct his or her own audit of any financial statements of the Bank.

The Bank has an internal audit department, the Bank’s board of directors has an audit committee, and an independent registered public accounting firm audits the annual financial statements of the Bank. The independent registered public accounting firm conducts these audits following the standards of the Public Company Accounting Oversight Board (United States) and Government Auditing Standards issued by the Comptroller General. The FHLBanks, the Finance Agency, and the Congress receive the Bank’s Report and audited financial statements. The Bank must submit annual management reports to the Congress, the President of the United States, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent registered public accounting firm on the financial statements.

Personnel

As of December 31, 2008, the Bank employed 368 full-time and 15 part-time employees.

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Taxation/Assessments

Although the Bank is exempt from all federal, state, and local taxation, except for real property taxes, the Bank is obligated to make payments to REFCORP. Each FHLBank is required to pay to REFCORP 20 percent of its annual income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP.

The FHLBanks will continue to expense and pay these amounts until the aggregate amounts actually paid by all 12 FHLBanks are equivalent to a $300 million annual annuity (or a scheduled payment of $75 million per quarter) whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be fully satisfied. The cumulative amount to be paid to REFCORP by the Bank is not determinable at this time because it depends on the future earnings of all FHLBanks and interest rates. If the Bank experienced a net loss during a quarter but still had net income for the year, the Bank’s obligation to the REFCORP would be calculated based on the Bank’s year-to-date GAAP net income. If the Bank had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. The Bank would be entitled to either a refund or a credit for amounts paid for the full year that were in excess of its calculated annual obligation. If the Bank experienced a net loss for a full year, the Bank would have no obligation to the REFCORP for the year. At December 31, 2008, the Bank had overpaid $14.0 million in REFCORP assessments and is entitled to credit this amount against future REFCORP assessments.

The Finance Agency is required to extend the term of the FHLBanks’ obligation to the REFCORP for each calendar quarter in which the FHLBanks’ quarterly payment falls short of $75 million.

The FHLBanks’ aggregate payments have generally exceeded $300 million per year, effectively accelerating payment of the REFCORP obligation and shortening its remaining term to April 15, 2013, effective December 31, 2008. The FHLBanks’ aggregate payments through 2008 have satisfied $42.5 million of the $75 million scheduled payment due for the second quarter of 2013 and all scheduled payments thereafter. This date assumes that the FHLBanks will pay exactly $300 million annually after December 31, 2008 until the annuity is satisfied.

The benchmark payments or portions of them could be reinstated if the actual REFCORP payments of the FHLBanks fall short of $75 million in a quarter. During the fourth quarter of 2008, the FHLBanks’ benchmark payments or portions of them were reinstated due to actual REFCORP payments falling short of the $300 million annual requirement. The maturity date of the REFCORP obligation may be extended beyond April 15, 2030 if such extension is necessary to ensure that the value of the aggregate amounts paid by the FHLBanks exactly equals a $300 million annual annuity. Any payment beyond April 15, 2030, will be paid to the Department of Treasury.

Each year the Bank must set aside for its AHP 10 percent of its regulatory income, or such prorated sums as may be required to assure that the aggregate contribution of the FHLBanks is not less than $100 million. Regulatory income is defined as GAAP income before interest expense related to mandatorily redeemable capital stock under SFAS 150 and the assessment for AHP, but after the assessment for REFCORP. If an FHLBank experienced a regulatory loss for a full year, the FHLBank would have no obligation to the AHP for that year, since each FHLBank’s required annual AHP contribution is limited to its annual net earnings.

REFCORP has been designated as the calculation agent for AHP and REFCORP assessments. The combined REFCORP and AHP assessments for the Bank were $91.8 million for the year ended December 31, 2008. These assessments were the equivalent of a 26.6 percent effective annual income tax rate for the Bank.

Item 1A. Risk Factors.

The following discussion summarizes some of the more important risks that the Bank faces. This discussion is not exhaustive, and there may be other risks that the Bank faces, which are not described below. These risks should be read in conjunction with the other information included in this Report, including, without limitation, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the financial

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statements and notes and “Special Cautionary Notice Regarding Forward-looking Statements.” The risks described below, if realized, could affect negatively the Bank’s business operations, financial condition, and future results of operations and, among other things, could result in the Bank’s inability to pay dividends on its capital stock.

The Bank is jointly and severally liable for payment of principal and interest on the consolidated obligations issued by the other 11 FHLBanks.

Each of the FHLBanks relies upon the issuance of COs as a primary source of funds. COs are the joint and several obligations of all of the FHLBanks, backed only by the financial resources of the FHLBanks. Accordingly, the Bank is jointly and severally liable with the other FHLBanks for the COs issued by the FHLBanks through the Office of Finance, regardless of whether the Bank receives all or any portion of the proceeds from any particular issuance of COs. Further, under the Lending Agreement with the U.S. Treasury, any extensions of credit by the U.S. Treasury to the FHLBanks, or any FHLBank, would be the joint and several obligations of all 12 of the FHLBanks and would be COs pursuant to part 966 of the rules of the Finance Agency (12 C.F.R. part 966).

The Finance Agency may by regulation require any FHLBank to make principal or interest payments due on any COs at any time, whether or not the FHLBank that was the primary obligor has defaulted on the payment of that obligation. The Finance Agency may allocate the liability among one or more FHLBanks on a pro rata basis or on any other basis the Finance Agency may determine. Accordingly, the Bank could incur significant liability beyond its primary obligation under COs due to the failure of other FHLBanks to meet their obligations, which could affect negatively the Bank’s financial condition and results of operations.

Several FHLBanks have recently announced matters related to net losses, suspension of dividends, suspension of stock repurchases and possible risk-based capital deficiencies, primarily in light of declines in the value of private-label MBS due to the ongoing turmoil in the capital and mortgage markets, in addition to general increases in funding costs and difficulty in issuing long-term debt. The Bank is continuing to monitor these developments.

To date, no FHLBank has defaulted on its principal or interest payments under any consolidated obligation, and the Bank has never been required to make payments under any consolidated obligation as a result of the failure of another FHLBank to meet its obligations.

The Bank’s funding depends upon its ability to access the capital markets.

The Bank seeks to be in a position to meet its members’ credit and liquidity needs and pay its obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. The Bank’s primary source of funds is the sale of consolidated obligations in the capital markets, including the short-term discount note market. The Bank’s ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of the reduction of liquidity in financial markets, which are beyond the Bank’s control.

The severe financial and economic disruptions, and the U.S. government’s dramatic measures enacted to mitigate their effects, have changed the traditional bases on which market participants value GSE debt securities and consequently have affected the Bank’s funding costs and practices. During the second half of 2008, the Bank’s funding costs associated with issuing long-term consolidated obligation bonds became more volatile and rose sharply compared to LIBOR and U.S. Treasury securities, reflecting dealers’ reluctance to sponsor, and investors’ current reluctance to buy longer-term GSE debt, coupled with strong investor demand for high-quality, short-term debt instruments, such as U.S. Treasury securities and FHLBank consolidated obligation discount

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notes. As a result, the Bank generally decreased its term money market holdings and maintained the bulk of its liquidity in overnight investments. The Bank has also become more reliant on the issuance of consolidated obligation discount notes, with maturities of one year or less, for funding. Any significant disruption in the short-term debt markets could have a serious effect on the Bank. If these conditions continued indefinitely, the Bank may not be able to obtain funding on acceptable terms and the higher cost of longer-term liabilities would likely cause a corresponding increase in the Bank’s advance rates, which could adversely affect demand for advances and, in turn, the Bank’s result of operations. Alternatively, continuing to fund longer-term assets with very short-term liabilities could adversely affect the Bank’s results of operations if the cost of those short-term liabilities rises to levels above the yields on the assets being funded. Accordingly, the Bank cannot make any assurance that it will be able to obtain funding on terms acceptable to the Bank, if at all. If the Bank cannot access funding when needed on acceptable terms, its ability to support and continue its operations could be adversely affected, which could negatively affect its financial condition and results of operations, and the value of Bank membership.

The Bank relies heavily on advances as its primary product offering and primary source of total interest income.

For the year ended December 31, 2008, interest income from the Bank’s advances represented approximately 71.2 percent of the Bank’s total interest income, and interest income constituted a substantial majority of the Bank’s total income. The Bank expects that advances will continue to account for a significant portion of the Bank’s total interest income, and interest income will continue to account for a substantial majority of total income, for the foreseeable future. In addition, at December 31, 2008, advances represented 79.5 percent of the Bank’s total assets.

The Bank competes with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks, and, in certain circumstances, other FHLBanks. The Bank’s members have access to alternative funding sources, which may offer more favorable terms on their loans than the Bank does on its advances, including more flexible credit or collateral standards. In addition, many of the Bank’s competitors are not subject to the same body of regulation applicable to the Bank, which enables those competitors to offer products and terms that the Bank is not able to offer.

Several government programs created in light of the credit crisis have provided competitive alternatives to the Bank’s members, including the TARP, the Federal Reserve’s Term Auction Facility, and the TLGP. The availability of alternative funding sources to the Bank’s members that are more attractive than those funding products offered by the Bank may decrease significantly the demand for the Bank’s advances. Any change made by the Bank in the pricing of its advances in an effort to compete effectively with these competitive funding sources may decrease the Bank’s profitability on advances. A decrease in the demand for the Bank’s advances or a decrease in the Bank’s profitability on advances could have a material adverse effect on the Bank’s financial condition and results of operations.

The Bank’s efforts to make advance pricing attractive to members may affect earnings.

The board of directors and management believe that the primary benefits of Bank membership should accrue to borrowing members in the form of low-cost advances. However, any decision to lower advance spreads further to gain volume or increase the benefits to borrowing members could result in lower earnings, which could result in lower dividend yields to members.

The Bank is subject to a complex body of laws and regulations, which could change in a manner detrimental to the Bank’s operations.

The FHLBanks are GSEs, organized under the authority of the FHLBank Act, and, as such, are governed by federal laws and regulations as adopted and applied by the Finance Agency. From time to time, Congress has amended the FHLBank Act in ways that have affected the rights and obligations of the FHLBanks and the

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manner in which the FHLBanks carry out their housing finance mission and business operations. New or modified legislation enacted by Congress or regulations adopted by the Finance Agency could have a negative effect on the Bank’s ability to conduct business or on the cost of doing business.

On July 30, 2008, President Bush signed into law the Housing Act. The Housing Act is designed to, among other things, address the current housing finance crisis, expand the Federal Housing Administration’s financing authority and address GSE reform issues. The Housing Act abolished both the Finance Board and the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development and established the Finance Agency as the single regulator of Fannie Mae, Freddie Mac, the FHLBanks and the Office of Finance. The Bank will be responsible for its share of the operating expenses for both the Finance Agency and the Finance Board.

Changes in regulatory requirements could result in, among other things, an increase in the FHLBanks’ cost of funding and regulatory compliance, a change in permissible business activities, or a decrease in the size, scope, or nature of the FHLBanks’ lending activities, which could affect the Bank’s financial condition and results of operations.

Recent government actions in response to the credit crisis can adversely affect the Bank’s business.

On September 7, 2008, the Finance Agency announced that it had placed both Fannie Mae and Freddie Mac into conservatorship. Although these actions resulted in somewhat decreased spreads on U.S. agency debt, including FHLBank debt relative to U.S. Treasury securities, investor concerns about U.S. agency debt may adversely affect the FHLBanks’ competitive position and result in higher funding costs, which could negatively affect the Bank’s business and financial condition. The special status of Fannie Mae and Freddie Mac debt securities could result in higher funding costs on Bank debt. Investors and dealers have exercised caution with respect to longer-term debt of the FHLBanks due to confusion about the level of government support for Fannie Mae and Freddie Mac relative to the FHLBanks. As a result of these factors, the Bank may have to pay a higher rate of interest on consolidated obligations to make them attractive to investors. The increased cost of issuing consolidated obligations could negatively affect the Bank’s financial condition and results of operations.

On October 7, 2008, federal bank and thrift regulatory agencies announced they would request public comment on proposed regulatory action to lower the risk weight for select obligations of Fannie Mae and Freddie Mac from 20 percent to 10 percent (the “Risk Weighting Proposal”). The agencies also requested comment on whether to reduce the risk weight for FHLBank debt in the same manner. This regulation, if adopted without a corresponding change in the risk weight for FHLBank debt, could result in higher investor demand for Fannie Mae and Freddie Mac debt securities relative to similar FHLBank debt securities.

On November 21, 2008, the FDIC adopted the final rule implementing the TLGP, which was announced on October 14, 2008. The TLGP is a program pursuant to which the FDIC guarantees new senior unsecured debt issued prior to October 31, 2009 by domestic banks and thrift institutions. This program has affected, and may continue to affect, member demand for advances, by providing members with alternative sources of funding.

On February 27, 2009, the FDIC approved a final rule to raise an insured institution’s base assessment rate based upon its ratio of secured liabilities to domestic deposits. Under the rule, an institution’s ratio of secured liabilities to domestic deposits (if greater than 25 percent) would increase its assessment rate, but the resulting base assessment rate after any such increase could be no more than 50 percent greater than it was before the adjustment. The rule becomes effective on April 1, 2009. Because all of the Bank’s advances are secured liabilities, the rule may affect member demand for advances.

Federal legislation has been proposed that would allow bankruptcy cramdowns on first mortgages of owner-occupied homes. The proposed legislation would allow a bankruptcy court in a Chapter 13 consumer bankruptcy to modify residential mortgage loans by reducing the balance (“cramdown”) of a mortgage securing a principal

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residence to the current value of the debt, reducing the interest rate, or by extending the repayment period. Utilization of the cramdown provision, if signed into law in its current form, may increase the Bank’s credit losses on MBS, since bankruptcy losses may be shared equally among or have different loss priorities depending on how each investment allocates the bankruptcy cramdown losses to the various prime and subordinate investor classes. Application of the cramdown provision may also make the determination that MBS are other-than-temporarily impaired more likely, thereby increasing the mark-to-market accounting losses flowing through the income statement. The value of collateral supporting advances may also be reduced, requiring members to pledge additional qualifying collateral. Since final passage and the scope of the law’s application are undetermined, it is impossible to predict the actual effects of this proposed legislation on the Bank’s collateral valuations and MBS.

The Bank is exposed to risks because of customer concentration.

The Bank is subject to customer concentration risk as a result of the Bank’s reliance on a relatively small number of member institutions for a large portion of the Bank’s total advances and resulting interest income. As of December 31, 2008 and December 31, 2007, the Bank’s largest borrower, Countrywide Bank, FSB, accounted for $42.7 billion and $47.7 billion, respectively, of the Bank’s total advances then outstanding, which represented 27.3 percent and 34.0 percent, respectively, of the Bank’s total advances then outstanding. In 2008, Bank of America Corporation, parent of a top ten borrower of the Bank at December 31, 2008, acquired Countrywide Financial Corporation, parent of Countrywide Bank, FSB. As of December 31, 2008 and December 31, 2007, 10 of the Bank’s member institutions (including Countrywide Bank, FSB and Bank of America, NA) collectively accounted for $102.7 billion and $97.6 billion, respectively, of the Bank’s total advances then outstanding, which represented 65.7 percent and 69.6 percent, respectively, of the Bank’s total advances then outstanding. If, for any reason, the Bank were to lose, or experience a decrease in the amount of, its business relationships with its largest borrower or a combination of several of its large borrowers—whether as the result of any such member becoming a party to a merger or other transaction, or as a result of market conditions, competition or otherwise—the Bank’s financial condition and results of operations could be affected negatively.

Member consolidation may result in a loss of business.

The financial services industry has been experiencing consolidation. This consolidation may reduce the number of potential members in the Bank’s district, resulting in a loss of business for the Bank. Further, to the extent that more of the Bank’s advances are concentrated in a small number of members, the Bank faces increased risk of loss of business because of a single event, such as the loss of a member’s business due to acquisition by a nonmember.

Changes in interest rates could affect significantly the Bank’s earnings.

Like many financial institutions, the Bank realizes income primarily from the spread between interest earned on the Bank’s outstanding loans and investments and interest paid on the Bank’s borrowings and other liabilities. Although the Bank uses a number of measures to monitor and attempt to manage changes in interest rates, the Bank may experience “gaps” in the interest-rate sensitivities of its assets and liabilities resulting from both duration and convexity mismatches. The existence of gaps in interest-rate sensitivities means that either the Bank’s interest-bearing liabilities will be more sensitive to changes in interest rates than its interest-earning assets, or vice versa. In either case, if interest rates move contrary to the Bank’s position, any such gap could affect adversely the net present value of the Bank’s interest-sensitive assets and liabilities, which could affect negatively the Bank’s financial condition and results of operations.

The Bank relies upon derivative instruments to reduce its interest-rate risk, and the Bank may not be able to enter into effective derivative instruments on acceptable terms.

The Bank uses derivative instruments to attempt to reduce its interest-rate risk and mortgage prepayment risk. The Bank’s management determines the nature and quantity of hedging transactions based on various factors,

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including market conditions and the expected volume and terms of advances. As a result, the Bank’s effective use of these instruments depends upon the ability of the Bank’s management to determine the appropriate hedging positions in light of the Bank’s assets, liabilities, and prevailing and anticipated market conditions. In addition, the effectiveness of the Bank’s hedging strategy depends upon the Bank’s ability to enter into these instruments with acceptable parties, upon terms satisfactory to the Bank, and in the quantities necessary to hedge the Bank’s corresponding obligations. If the Bank is unable to manage its hedging positions properly or is unable to enter into hedging instruments upon acceptable terms, the Bank may be unable to manage its interest-rate and other risks, or may be required to decrease its MBS holdings, which could affect the Bank’s financial condition and results of operations.

Please refer to the information set forth below under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operation—Hedging Activities” for a discussion of the effect of the Bank’s use of derivative instruments on the Bank’s net income.

Prepayment risks in mortgage assets could affect earnings.

The Bank invests in both MBS and whole mortgage loans. Changes in interest rates can affect significantly the prepayment patterns of these assets, and such prepayment patterns could affect the Bank’s earnings. In management’s experience, it is difficult to hedge prepayment risk in mortgage loans. Therefore, this risk could have an adverse effect on the income of the Bank.

Counterparty credit risk could affect the Bank adversely.

The Bank assumes credit risk when entering into securities transactions, money market transactions, supplemental mortgage insurance agreements and derivative contracts with counterparties. The Bank routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. The insolvency or other inability of a significant counterparty to perform its obligations under a derivative contract or other agreement could have an adverse effect on the Bank’s financial condition and results of operations. In addition, the Bank’s credit risk may be exacerbated based on market movements or when the collateral pledged to the Bank cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Bank. As discussed elsewhere in this Report, LBSF, a derivative counterparty of the Bank, has filed for bankruptcy court protection and the net amount owed to the Bank by LBSF, as of the early termination date, is approximately $189.4 million. There can be no assurance whether, and to what extent, the Bank will be able to recover this amount.

The Bank uses master derivatives contracts that contain provisions that require the Bank to net the exposure under all transactions with the counterparty to one amount to calculate collateral requirements. At times, the Bank enters into derivative contracts with foreign counterparties in jurisdictions in which it is uncertain whether the netting provisions would be enforceable in the event of insolvency of the foreign counterparty. Although the Bank attempts to monitor the credit rating of all counterparties, it is possible that the Bank may not be able to terminate the agreement with a foreign counterparty before the counterparty would become subject to an insolvency proceeding.

Changes in the Bank’s credit ratings may affect adversely the Bank’s ability to issue consolidated obligations on acceptable terms.

The Bank currently has the highest credit rating from Moody’s and S&P. In addition, the consolidated obligations of the FHLBanks have been rated Aaa/P-1 by Moody’s and AAA/A-1+ by S&P. These ratings are subject to revision or withdrawal at any time by the rating agencies; therefore, the Bank may not be able to maintain these credit ratings. Negative ratings actions or negative guidance may affect adversely the Bank’s cost of funds and ability to issue consolidated obligations on acceptable terms, which could have a negative effect on the Bank’s financial condition and results of operations.

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An increase in the percentage of AHP contributions that the Bank is required to make could decrease the Bank’s dividends payable to its members.

If the aggregate AHP contributions of the 12 FHLBanks were to fall below $100 million, the Finance Agency would prorate the remaining sums among the FHLBanks, subject to certain conditions, as may be required to meet the minimum $100 million annual contribution. Increasing the Bank’s AHP contribution in such a scenario would reduce the Bank’s earnings and potentially reduce the dividend paid to members.

An economic downturn or natural disaster in the Bank’s region could affect the Bank’s profitability and financial condition adversely.

Economic recession over a prolonged period or other unfavorable economic conditions in the Bank’s region could have an adverse effect on the Bank’s business, including the demand for Bank products and services, and the value of the Bank’s collateral securing advances, investments and mortgage loans held in portfolio. Portions of the Bank’s region also are subject to risks from hurricanes, tornadoes, floods or other natural disasters. These natural disasters could damage or dislocate the facilities of the Bank’s members, may damage or destroy collateral that members have pledged to secure advances, may affect adversely the viability of the Bank’s mortgage purchase programs or the livelihood of borrowers of the Bank’s members, or otherwise could cause significant economic dislocation in the affected areas of the Bank’s region.

The Bank relies heavily upon information systems and other technology.

The Bank relies heavily upon information systems and other technology to conduct and manage its business. The Bank owns some of these systems and technology, and third parties own and provide to the Bank some of the systems and technology. To the extent that the Bank experiences a failure or interruption in any of these systems or other technology, the Bank may be unable to conduct and manage its business effectively, including, without limitation, its hedging and advances activities. The Bank can make no assurance that it will be able to prevent, timely and adequately address, or mitigate the negative effects of, any such failure or interruption. Any failure or interruption could harm significantly the Bank’s customer relations, risk management, and profitability, which could have a negative effect on the Bank’s financial condition and results of operations.

The Bank may not be able to pay dividends at rates consistent with past practices.

The Bank’s board of directors may declare dividends on the Bank’s capital stock, payable to members, from the Bank’s retained earnings and current net earnings. The Bank’s ability to pay dividends also is subject to statutory and regulatory liquidity requirements. For example, the Bank has adopted a capital management policy to address regulatory guidance on retained earnings issued to all FHLBanks. The Bank’s capital management policy requires the Bank to establish a target amount of retained earnings by considering factors such as forecasted income, SFAS 133 and SFAS 115 adjustments, market risk, operational risk, and credit risk, all of which may be influenced by events beyond the Bank’s control. Accordingly, events such as changes in interest rates, collateral value, credit quality of members and any future other-than-temporary impairment losses may affect the adequacy of the Bank’s retained earnings and may require the Bank to reduce its dividends from historical ratios to achieve and maintain the targeted amount of retained earnings.

The Bank’s exposure to credit risk could have an adverse effect on the Bank’s financial condition and results of operations.

Any substantial devaluation of the collateral, an inability to liquidate collateral, or any disruptions in the servicing of collateral in the event of a default could create credit losses for the Bank, which, if significant, could have an adverse effect on the Bank’s financial condition and results of operations. In addition, a significant failure to properly perfect the Bank’s security interests in the property pledged by members could have an adverse effect on the Bank’s financial condition and results of operations.

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The Bank is exposed to credit risk on its investments.

The Bank invests in agency (Fannie Mae, Freddie Mac and Ginnie Mae) and private-label MBS rated AAA by S&P or Fitch or Aaa by Moody’s at the time of purchase. As of December 31, 2008, a substantial portion of the Bank’s MBS portfolio consisted of private-label MBS. Market prices for many of the private-label MBS the Bank holds have deteriorated during 2008 due to market uncertainty and illiquidity. The significant widening of credit spreads that has occurred during 2008 further reduced the fair value of the Bank’s MBS portfolio. For the year ended December 31, 2008, the Bank recorded a $186.1 million impairment loss related to its private-label MBS.

Credit losses in the Bank’s MBS portfolio, if significant, could have an adverse effect on the Bank’s financial condition and results of operations. Given current market conditions and the significant judgments involved, there is a risk that further declines in fair value in the Bank’s MBS portfolio may occur and that the Bank may record additional material other-than-temporary impairment losses in future periods, which could materially adversely affect the Bank’s earnings and retained earnings and the value of Bank membership.

Member failures may affect the Bank’s business adversely.

The financial services industry has seen an increase in the number of failed financial institutions, including seven in the Bank’s district during 2008. If the number of member failures continues to increase, it may reduce the number of potential members in the Bank’s district, resulting in a loss of business for the Bank.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The Bank owns approximately 235,000 square feet of office space at 1475 Peachtree Street, NE, Atlanta, Georgia 30309. The Bank occupies approximately 200,000 square feet of this space. The Bank leases 18,032 square feet of office space in an off-site backup facility located in Norcross, Georgia. The Bank also leases 3,193 square feet of office space located in Washington, D.C. for its government relations personnel. The Bank believes these facilities are well maintained and are adequate for the purposes for which they currently are used.

Item 3. Legal Proceedings.

The Bank is subject to various legal proceedings and actions from time to time in the ordinary course of its business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of those matters presently known to the Bank will have a material adverse effect on the Bank’s financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

The only matter on which shareholders are entitled to vote is the election of directors. In the fourth quarter of 2008, the Bank submitted ballots to its members to elect independent directors. Voting and nominating rights with respect to the election of directors are established by 12 U.S.C. §1427 and 12 C.F.R Part 1261.

The record date for the Bank’s 2008 director elections to fill the two independent directorships becoming available on January 1, 2009 was December 31, 2007. In September 2008, the Director of the Finance Agency issued an order changing the designation of directors on the Bank’s board of directors by reducing the number of independent directors from eight to seven. Accordingly, in the 2008 independent director elections, Bank members elected two independent directors.

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Of the 1,216 members eligible to vote in the 2008 independent directorship elections, 381 members participated, casting a total of 11,917,952 votes.

On December 16, 2008, the Bank declared elected the below incumbent candidates:

Name	Votes Received
F. Gary Garczynski	5,976,199
LaSalle D. Leffall, III	5,941,753

These directors four-year terms began on January 1, 2009 and end on December 31, 2012.

Because all director terms expire on December 31, all of the directors who were serving on the board before and during the 2008 election of directors continue to serve on the board immediately following the election, although those directors whose terms expire on December 31, 2008 and who were not reelected will no longer serve on the board after that date. Each current director, and his or her term of office, is listed in the table below.

Directors in Member Directorships:		Term Expiration December 31,
Alabama
W. Russell Carothers, II	Citizens Bank of Winfield	2009
Bedford Kyle Goodwin, III	First Financial Bank	2009
District of Columbia
Thomas H. Webber, III	IDB-IIC Federal Credit Union	2009
Florida
Miriam Lopez	TransAtlantic Bank	2010
Georgia
William F. Easterlin, III	Queensborough National Bank & Trust Co.	2010
Maryland
John M. Bond, Jr.	The Columbia Bank	2010
North Carolina
Donna Goodrich	BB&T Corporation	2012
South Carolina
J. Thomas Johnson	First Community Bank	2009
Virginia
Scott C. Harvard	Shore Bank	2012
Edward J. Woodard	Bank of the Commonwealth	2011
Directors in Independent Directorships:
F. Gary Garczynski		2012
William C. Handorf		2009
Linwood Parker Harrell, Jr.		2010
Jonathan Kislak		2010
LaSalle D. Leffall, III		2012
Henry Gary Pannell		2010
Robert L. Strickland		2009

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PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Bank’s members or former members own all the stock of the Bank. The Bank’s stock is not publicly traded or quoted, and there is no established marketplace for it, nor does the Bank expect a market to develop. The Bank’s capital plan prohibits the trading of its capital stock, except in connection with merger or acquisition activity.

A member may request that the Bank redeem at par its “excess stock” five years after the Bank receives a written request by the member, subject to certain regulatory requirements and to the satisfaction of any ongoing stock investment requirements applicable to the member. Excess stock is Bank capital stock not required to be held by the member to meet its minimum stock requirement under the Bank’s capital plan. In addition, any member may withdraw from membership upon five years’ written notice to the Bank. Subject to the member’s satisfaction of any outstanding indebtedness and other statutory requirements, the Bank shall redeem at par the member’s stock upon withdrawal from membership. The Bank, in its discretion, may repurchase shares held by a member in excess of its required stock holdings. The par value of all capital stock is $100 per share. As of December 31, 2008, the Bank had 1,238 members and 85,074,230 shares of its common stock outstanding (including mandatorily redeemable shares).

The Bank declared quarterly cash dividends for 2008 and 2007 as outlined in the table below (dollar amount in thousands):

Quarterly Dividends Declared

	2008			2007
	Amount		Annualized Rate (%)	Amount		Annualized Rate (%)
First	$	114,439	6.00	$	83,929	5.90
Second		114,292	5.75		85,624	6.00
Third		58,946	2.89		99,019	6.00
Fourth		—	—		113,928	6.00

The Bank may pay dividends on its capital stock only out of its retained earnings or current net earnings. The Bank’s board of directors has discretion to declare or not declare dividends and to determine the rate of any dividends declared. The Bank’s board of directors may neither declare nor require the Bank to pay dividends if, after giving effect to the dividend, the Bank would fail to meet any of its capital requirements. The Bank also may not declare any dividend when it is not in compliance with all of its capital requirements or if it is determined that the dividend would create a financial safety and soundness issue for the Bank.

The Bank’s board of directors has adopted a capital management policy that includes a targeted amount of retained earnings. In the near future, dividends paid, if any, may be lower than dividends paid in previous quarters, reflecting a conservative financial management approach during this period of continued volatility.

Because only member institutions, not individuals, may own the Bank’s capital stock, the Bank has no equity compensation plans.

The Bank also issues letters of credit in the ordinary course of its business. From time to time, the Bank provides standby letters of credit to support members’ letters of credit or obligations issued to support unaffiliated, third-party offerings of notes, bonds, or other securities. The Bank provided $5.7 billion, $5.7 billion, and $1.1 billion of such credit support in each of 2008, 2007, and 2006, respectively. To the extent that these letters of credit are securities for purposes of the Securities Act of 1933, the issuance of the letter of credit by the Bank is exempt from registration pursuant to section 3(a)(2) thereof.

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Item 6. Selected Financial Data.

The following selected historical financial data of the Bank should be read in conjunction with the audited financial statements and related notes thereto, and with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this Report. The following data, insofar as it relates to each of the years 2004 to 2008, have been derived from annual financial statements, including the statement of condition at December 31, 2008 and 2007 and the related statements of income and of cash flows for the three years ended December 31, 2008 and notes thereto appearing elsewhere in this Report. The financial information presented in the following table, and in the financial statements included in this Report, is not necessarily indicative of the financial condition, results of operations, or cash flows of any other interim or yearly periods (dollar amounts in thousands):

	For the Years Ended December 31,
	2008			2007			2006			2005			2004
Statements of Condition (at year end)
Total assets (1)	$	208,564,340		$	188,937,764		$	140,533,763		$	142,992,260		$	133,658,482
Mortgage loans held for portfolio, net		3,251,074			3,526,582			3,003,399			2,859,982			2,215,653
Advances, net		165,855,546			142,867,373			101,476,335			101,264,208			95,867,345
Investments (2)		27,604,052			26,688,062			24,553,020			24,988,817			23,691,932
REFCORP prepayment		14,028			—			—			—			—
Federal funds sold		10,769,000			14,835,000			10,532,000			13,028,500			11,196,500
Deposits (1)		3,572,709			7,135,027			4,478,109			5,157,809			5,248,738
Consolidated obligations, net :
Discount notes		55,194,777			28,347,939			4,934,073			9,579,425			13,013,797
Bonds		138,181,334			142,237,042			122,067,636			119,172,487			105,920,803
Total consolidated obligations, net (3)		193,376,111			170,584,981			127,001,709			128,751,912			118,934,600
Affordable Housing Program liability		139,300			156,184			130,006			105,911			86,338
Payable to REFCORP		—			30,681			23,606			20,766			8,700
Retained earnings		434,883			468,779			406,376			328,369			216,640
Capital stock—putable		8,462,995			7,556,016			5,771,798			5,753,203			5,225,149
Statements of Income
Net interest income		846,028			703,548			671,219			633,707			565,948
Provision for credit losses on mortgage loans held for portfolio		10			72			217			17			364
Net (losses) gains on derivatives and hedging activities		(229,289	)		(96,424	)		91,176			136,520			(42,208	)
Other income (loss) (4)		15,294			109,948			(94,999	)		(210,614	)		(53,011	)
Other expenses		286,432			110,181			102,381			86,190			69,976
Income before assessments		345,591			606,819			564,798			473,406			400,389
Assessments		91,810			161,916			150,600			126,365			106,328
Income before cumulative effect of change in accounting principle		253,781			444,903			414,198			347,041			294,061
Cumulative effect of change in accounting principle (5)		—			—			—			(2,905	)		—
Net income		253,781			444,903			414,198			344,136			294,061
Return on average equity (6)		2.95	%		6.47	%		6.59	%		5.83	%		5.41	%
Return on average assets		0.13	%		0.28	%		0.29	%		0.25	%		0.24	%
Net interest margin (7)		0.42	%		0.44	%		0.48	%		0.46	%		0.46	%
Total capital ratio (at period end) (8)		4.29	%		4.28	%		4.55	%		4.35	%		4.25	%
Ratio of earnings to fixed charges		1.06			1.08			1.09			1.11			1.18
Total average equity to average assets		4.25	%		4.27	%		4.41	%		4.26	%		4.36	%

(1) Effective January 1, 2008, the Bank adopted FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP FIN 39-1”) which permits an entity to offset fair value amounts for cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty. The Bank recognized the effects of applying FSP FIN 39-1 as a change in accounting principal through retrospective application for all prior periods presented.

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(2) During 2008, on a retrospective basis, the Bank reclassified its investments in certificates of deposit, previously reported as interest-bearing deposits, as held-to-maturity securities as they meet the definition of a security under SFAS 115.

(3) The amounts presented are the Bank’s primary obligations on consolidated obligation outstanding. The par value of the FHLBank’s outstanding consolidated obligations for which the Bank is jointly and severally liable were approximately $1.1 trillion and $1.0 trillion at December 31, 2008 and 2007, respectively.

(4) Other income (loss) includes service fees, net gains (losses) on trading securities, realized loss on held -to-maturity and other.

(5) Effective January 1, 2005, the Bank changed its method of accounting for deferred premiums and discounts on mortgage-backed securities under SFAS No. 91, Accounting for Non refundable Fees and Costs Associated with Originating and Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”), from estimated life method to contractual method.

(6) Calculated as net income divided by total average equity.

(7) Net interest margin is net interest income as a percentage of average earning assets.

(8) Total capital ratio is regulatory capital stock plus retained earnings as a percentage of total assets at year end. See Note 11 to the 2008 financial statements for a discussion of regulatory capital.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis relates to the Bank’s financial condition as of December 31, 2008 and 2007, and results of operations for the years ended December 31, 2008, 2007, and 2006. This section explains the changes in certain key items in the Bank’s financial statements from year to year, the primary factors driving those changes, the Bank’s risk management processes and results, known trends or uncertainties which the Bank believes may have a material effect on the Bank’s future performance, as well as how certain accounting principles affect the Bank’s financial statements.

This discussion should be read in conjunction with the Bank’s audited financial statements and related notes for the year ended December 31, 2008 included in Item 8 of this Report. Readers also should review carefully “Special Cautionary Notice Regarding Forward-looking Statements” and Item 1A, “Risk Factors” for a description of the forward-looking statements in this Report and a discussion of the factors that might cause the Bank’s actual results to differ, perhaps materially, from these forward-looking statements.

Executive Summary

General Overview

During the year ended December 31, 2008, unprecedented instability in the financial markets affected financial institutions, including GSEs. While this instability produced some positive results for the Bank during the first half of 2008, during the second half of 2008, this instability significantly increased the volatility in GSE debt pricing, funding and demand.

During the first half of 2008, advance demand continued to rise due to general illiquidity in the marketplace. The FHLBank System continued to experience favorable CO debt funding costs in light of the then current credit market situation.

However, as the year progressed, a series of events and U.S government actions to address the general credit crisis began to have negative effects on the Bank. Commencing with the initiation of the rescue of Fannie Mae and Freddie Mac, followed by their conservatorship and subsequent U.S. government actions to address the general credit crisis, investors and dealers became cautious about buying or trading longer-term GSE debt, which increased the Bank’s funding costs and reduced demand for the Bank’s longer-term debt.

During the third and fourth quarters of 2008, FHLBank funding costs associated with issuing long-maturity senior debt, as compared to three-month LIBOR on a swapped cash flow basis, rose sharply relative to short-term debt. This change in the slope of the funding curve reflected general investor reluctance to buy longer-term obligations of the GSEs, coupled with strong investor demand for short-term, high-quality assets. As long-term investors struggled with price declines of longer-term GSE debt, money market funds provided a strong bid for short-term GSE debt. As such, during this time, the FHLBanks issued large quantities of discount notes, floating-rate notes, short-term callable bonds and short-term bullet bonds in order to meet this demand. As of December 31, 2008, discount notes comprised 28.5 percent of the Bank’s consolidated obligations, as compared to 16.6 percent as of December 31, 2007.

Advance demand continued to rise during the second half of 2008 as a result of the persistent general illiquidity in the marketplace. While the Federal Reserve took actions to lower interest rates throughout the year, which affects the Bank’s earnings on capital, this was mitigated somewhat by increased capital resulting from the increased advance demand.

For the year ended December 31, 2008, the Bank recorded an other-than-temporary impairment loss of $186.1 million related to five private-label MBS in the Bank’s held-to-maturity securities portfolio. In addition, during the third quarter of 2008, the Bank recorded a $170.5 million reserve for a receivable from LBSF in light of the bankruptcy filings of LBSF and its parent, Lehman Brothers Holdings Inc. and amounts due to the Bank from LBSF under certain swap transactions.

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Financial Condition

As of December 31, 2008, total assets were $208.6 billion, an increase of $19.6 billion, or 10.4 percent, from December 31, 2007. The increase in total assets was primarily a result of a $23.0 billion, or 16.1 percent, increase in advances during the period. Advances represented 79.5 percent and 75.6 percent of total assets as of December 31, 2008 and 2007, respectively. The significant increase in advances during the period primarily resulted from increased liquidity needs of the Bank’s members in light of unanticipated disruptions in the credit markets during 2008. The Bank experienced demand from its member institutions spread throughout the Bank’s district.

As of December 31, 2008, total liabilities were $199.7 billion, an increase of $18.8 billion, or 10.4 percent, from December 31, 2007. This increase in total liabilities was primarily a result of a $22.8 billion, or 13.4 percent, increase in consolidated obligations during the period. Consolidated obligations represented 96.8 percent and 94.3 percent of total liabilities as of December 31, 2008 and 2007, respectively. The significant increase in consolidated obligations during the period corresponds to the Bank’s need to fund the increased demand for advances by the Bank’s members during 2008. Consolidated obligation discount notes increased by $26.8 billion, or 94.7 percent, and consolidated obligation bonds decreased by $4.1 billion, or 2.85 percent, during the period, due to difficulties the Bank experienced in the second half of 2008 in issuing long-term debt, which is discussed above.

As of December 31, 2008, total capital was $8.9 billion, an increase of $870.7 million, or 10.9 percent, from December 31, 2007. The increase in total capital was primarily a result of an increase in the Bank’s activity-based stock during the period that corresponds to the increase in advances. The Bank’s retained earnings decreased during 2008 by $33.9 million to $434.9 million as of December 31, 2008. The Bank continues to meet regulatory capital-to-assets ratios and liquidity requirements.

Results of Operations

The Bank’s net income for 2008 was $253.8 million, a $191.1 million, or 43.0 percent, decrease from net income of $444.9 million for 2007. The decrease in net income for 2008 compared to 2007 was due primarily to the establishment of a $170.5 million reserve for a credit loss on the LBSF receivable, with a corresponding charge to other expense, and the recording of an other-than-temporary impairment loss of $186.1 million on the Bank’s private-label MBS. These amounts were offset partially by a $142.5 million increase in net interest income for 2008 compared to 2007.

The Bank attempts to provide a return on investment which, when combined with providing members access to competitively-priced funding, will be competitive with comparable investments. The Bank assesses the effectiveness of its dividend goal by comparing the dividend rate on its capital stock to three-month average LIBOR. This benchmark is consistent with the Bank’s interest rate risk and capital management goals.

The Bank’s annualized return on equity (“ROE”) was 2.95 percent for the year ended December 31, 2008, compared to 6.47 percent for the year ended December 31, 2007. ROE spread to three-month average LIBOR decreased between the periods, equaling 0.02 percent for the year ended December 31, 2008 as compared to 1.17 percent for the year ended December 31, 2007. The decrease in this spread was due primarily to the $191.1 million decrease in net income during the period, resulting in a decrease in ROE and ROE spread to three-month average LIBOR.

The Bank’s interest rate spread increased by five basis points for the year ended December 31, 2008 as compared to the year ended December 31, 2007. The increase in interest rate spread during the periods was due to an increase in the use of short-term, lower rate funding. Short-term funding rates decreased by more than long-term funding rates during the period.

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The Bank’s net income for 2007 was $444.9 million, a $30.7 million, or 7.41 percent, increase from net income of $414.2 million for 2006. The increase in net income for 2007 compared to 2006 was due to an increase in both net interest income and other income. The increase in net interest income primarily resulted from the increase in advance demand. However, the inability of the Bank to fully invest its excess liquidity in MBS affected net interest income because the Bank held those funds in shorter-term, lower yielding assets. The increase in other income resulted from the effect of the interaction of interest rates on the Bank’s trading securities and derivative and hedging activities. The increases in net interest and other income were offset partially by an increase in non-interest expense and a three basis point decrease in interest rate spread.

Business Outlook

The continued instability of the markets, along with a number of outstanding proposals by the government, could continue to impact negatively the Bank’s funding costs, ability to issue long-term debt, and advance demand.

Advance Demand

On November 21, 2008, the FDIC adopted the final rule implementing the TLGP, which was announced on October 14, 2008. The TLGP is a program pursuant to which the FDIC guarantees new senior unsecured debt issued prior to October 31, 2009 by domestic banks and thrift institutions. This program has affected, and may continue to affect, member demand for advances, by providing members with alternative sources of funding. On March 17, 2009, the FDIC announced that it would impose a surcharge on debt issued with a maturity of one-year or more and issued on or after April 1, 2009 to gradually phase out the program.

On February 27, 2009, the FDIC approved a final rule to raise an insured institution’s base assessment rate based upon its ratio of secured liabilities to domestic deposits. Under the rule, an institution’s ratio of secured liabilities to domestic deposits (if greater than 25 percent) would increase its assessment rate, but the resulting base assessment rate after any such increase could be no more than 50 percent greater than it was before the adjustment. The rule becomes effective on April 1, 2009. Because all of the Bank’s advances are secured liabilities, the rule may affect member demand for advances.

While advance demand increased significantly during the year ended December 31, 2008 as a result of the general illiquidity of markets, the Bank expects that outstanding advances will decrease during 2009 in light of maturing advances, an anticipated reduced need for funding by the Bank’s members and the government programs discussed above. Further, to the extent that the Bank pays dividends at spreads less than those historically paid by the Bank, this may affect adversely member demand for advances.

Debt Issuance

On October 7, 2008, federal bank and thrift regulatory agencies announced they would request public comment on proposed regulatory action to lower the risk weight for select obligations of Fannie Mae and Freddie Mac from 20 percent to 10 percent (the “Risk Weighting Proposal”). The agencies also requested comment on whether to reduce the risk weight for FHLBank debt in the same manner. This regulation, if adopted without a corresponding change in the risk weight for FHLBank debt, could result in higher investor demand for Fannie Mae and Freddie Mac debt securities relative to similar FHLBank debt securities.

To the extent that the FHLBanks’ cost of funds increase, member institutions, in turn, experience higher costs for advance borrowings. The continued inability of the Bank to issue long-term debt at attractive pricing could have a material adverse effect on the Bank’s results of operations, although the Bank expects that its funding needs in 2009 will be less than 2008 due to its anticipated decrease in advance demand. However, to the extent that the Bank’s cost of funds or liquidity is affected negatively for an extended period of time, the Bank’s business and ability to offer advances could be materially adversely affected.

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Other Matters That May Affect the Bank

As a result of recent market conditions, delinquency and foreclosure rates have increased significantly nationwide. Additionally, home prices have fallen in many areas, increasing the likelihood and magnitude of potential losses to lenders of foreclosed real estate. These trends may continue throughout 2009 and into the foreseeable future. The uncertainty as to the depth and duration of these trends has led to a significant reduction in the market values of MBS. For the year ended December 31, 2008, the Bank recorded an other-than-temporary impairment loss of $186.1 million related to five private-label MBS in the Bank’s held-to-maturity securities portfolio. Given the current market conditions and the significant judgments involved, there is a continuing risk that further declines in fair value may occur and that the Bank may record additional material other-than-temporary impairment losses in future periods, which could affect the Bank’s earnings and retained earnings.

On March 17, 2009, the Financial Accounting Standards Board (“FASB”) staff issued two proposed rules. The first proposal would modify other-than-temporary impairment accounting guidance whereby impairment losses would be separated between (a) amounts related to credit losses and (b) losses related to all other factors. The portion of the other-than-temporary impairment related to credit losses would be included in earnings and losses related to all other factors would be included in other comprehensive income. The second proposal that the FASB staff issued relates to fair value measurement. Specifically, the proposed rule relates to determining whether a market is inactive and whether a transaction is considered to be distressed. It is expected that the proposed rules, if adopted, would be applied prospectively for interim and annual periods ending after March 15, 2009 (March 31, 2009 for the Bank). Although the Bank cannot determine the content of the final rules or whether they would be adopted, if the proposed rules are adopted as currently proposed, they could materially affect the Bank’s results of operations.

According to the FDIC, during 2008, 23 FDIC-insured institutions were closed and the FDIC was named receiver, compared to three institutions that were closed during 2007. Seven of the institutions that were closed during 2008 were members of the Bank. All outstanding advances to these seven institutions were paid in full and there was no material effect to the Bank’s financial condition or results of operations. At the time of their closure, these seven institutions were assigned a credit risk rating of 10 by the Bank (10 being the greatest amount of credit risk). As of December 31, 2008, 50 Bank members were assigned a credit risk rating of 10 by the Bank, compared to 30 at June 30, 2008. This trend has continued into 2009 and if a material number of the Bank’s members were to fail, it could have a material negative effect on the Bank’s earnings and results of operations.

The Bank’s annualized dividend rate decreased for each quarter of 2008. Because of continued volatility in the financial markets and a more conservative financial management approach in light of these conditions, future dividends, if any, may continue to be affected, which may adversely affect member demand for advances or reduce the attractiveness of Bank membership, which could negatively affect the Bank’s earnings and results of operations.

On February 27, 2009, the Bank announced certain capital management changes that the Bank believes will facilitate capital management. These changes included an increase in the Subclass B1 membership stock requirement cap from $25 million to $26 million and a change in the process for evaluating and approving excess activity-based stock repurchases from a daily to a quarterly review cycle. While the Bank took these steps to manage capital until markets improve and greater clarity is available on the fair-value accounting treatment of the Bank’s MBS portfolio, these changes could affect demand for member advances or reduce the attractiveness of Bank membership, which could negatively affect the Bank’s earnings and results of operations.

Management expects to continue to use interest-rate derivatives to hedge the Bank’s MBS and mortgage portfolios. These derivatives assist in mitigating interest-rate and prepayment risk. However, to the extent that they do not qualify for hedge accounting treatment under GAAP, their use could result in earnings volatility. Management also uses derivative instruments to hedge other macro-level risks that do not qualify for hedge

36

accounting treatment under GAAP. However, management seeks to contain the magnitude of mark-to-market adjustments by limiting the use of derivative instruments to hedge macro-level risks.

Financial Condition

The Bank’s principal assets consist of advances, short- and long-term investments, and mortgage loans held for portfolio. The Bank obtains funding to support its business primarily through the issuance by the Office of Finance on the Bank’s behalf of debt securities in the form of consolidated obligations.

The following table presents the distribution of the Bank’s total assets, liabilities, and capital by major class as of the dates indicated (dollar amounts in thousands). These items are discussed in more detail below.

	As of December 31,
	2008					2007					Increase/(Decrease)
	Amount			Percent of Total		Amount			Percent of Total		Amount			Percent
Advances, net	$	165,855,546		79.52		$	142,867,373		75.62		$	22,988,173		16.09
Long-term investments		27,604,052		13.24			25,888,062		13.70			1,715,990		6.63
Federal funds sold		10,769,000		5.16			14,835,000		7.85			(4,066,000	)	(27.41	)
Mortgage loans, net		3,251,074		1.56			3,526,582		1.87			(275,508	)	(7.81	)
Deposits with other FHLBanks		2,888		—			3,403		—			(515	)	(15.13	)
Certificates of deposit		—		—			800,000		0.42			(800,000	)	(100.00	)
Other assets		1,081,780		0.52			1,017,344		0.54			64,436		6.33
Total assets	$	208,564,340		100.00		$	188,937,764		100.00		$	19,626,576		10.39
Consolidated obligations, net:
Bonds	$	138,181,334		69.20		$	142,237,042		78.62		$	(4,055,708	)	(2.85	)
Discount notes		55,194,777		27.64			28,347,939		15.67			26,846,838		94.70
Deposits		3,572,709		1.79			7,135,027		3.94			(3,562,318	)	(49.93	)
Other liabilities		2,722,584		1.37			3,195,520		1.77			(472,936	)	(14.80	)
Total liabilities	$	199,671,404		100.00		$	180,915,528		100.00		$	18,755,876		10.37
Capital stock	$	8,462,995		95.17		$	7,556,016		94.19		$	906,979		12.00
Retained earnings		434,883		4.89			468,779		5.84			(33,896	)	(7.23	)
Accumulated other comprehensive loss		(4,942	)	(0.06	)		(2,559	)	(0.03	)		(2,383	)	(93.12	)
Total capital	$	8,892,936		100.00		$	8,022,236		100.00		$	870,700		10.85

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Advances

The following table sets forth the Bank’s advances outstanding by year of maturity and the related weighted- average interest rate (dollar amounts in thousands):

	As of December 31,
	2008				2007
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Year of contractual maturity:
Overdrawn demand deposit accounts	$	550		5.46	$	18,219		9.40
Due in one year or less		39,739,223		2.97		34,062,503		4.77
Due after one year through two years		34,187,680		4.09		19,356,806		4.76
Due after two years through three years		23,761,810		4.61		22,684,160		4.98
Due after three years through four years		17,692,714		4.32		18,326,931		5.11
Due after four years through five years		10,566,914		4.06		16,430,434		4.86
Due after five years		30,320,265		3.94		29,350,652		4.30
Total par value		156,269,156		3.88		140,229,705		4.76
Discount on AHP advances		(14,028	)			(13,461	)
Discount on EDGE advances		(13,253	)			(14,091	)
SFAS 133 hedging adjustments		9,617,925				2,667,120
Deferred commitment fees		(4,254	)			(1,900	)
Total	$	165,855,546			$	142,867,373

Advances were $165.9 billion as of December 31, 2008, an increase of $23.0 billion, or 16.1 percent, from December 31, 2007. The increase in advances was due primarily to increased liquidity needs of the Bank’s members during the credit markets disruptions during 2008. At December 31, 2008, 18.5 percent of the Bank’s advances were variable-rate, compared to 17.4 percent as of December 31, 2007. The majority of the variable-rate advances were indexed to the LIBOR. The Bank also offers variable-rate advances tied to the federal funds rate, prime rate and CMS (constant maturity swap) rates.

The concentration of the Bank’s advances to its 10 largest borrowing member institutions was as follows (dollar amounts in billions):

	Advances to 10 largest borrowing member institutions		Percent of total advances outstanding
December 31, 2008	$	102.7	65.7
December 31, 2007		97.6	69.6

A breakdown of these advance holdings as of December 31, 2008 is contained in Item 1, “Business—Credit Products—Advances.” Management believes that the Bank holds sufficient collateral, on a member-specific basis, to secure the advances to these 10 institutions, and the Bank does not expect to incur any credit losses on these advances.

Given the concentration of advances to a few members, it appears possible that a significant reduction in advance balances for one of these customers could have a materially adverse effect on the Bank’s earnings. However, the Bank’s balance sheet is designed to adjust for such changes. A decrease in advance balances initially would generate increased liquidity, which would be reinvested into other earning assets. The need for capital would be diminished, and the Bank could reduce its capital by repurchasing the stock that supported the repaid advances. In addition, the Bank’s issuance of consolidated obligations would decrease and certain consolidated obligations outstanding might be called and paid earlier. There could be implications for hedging activity as the Bank might

38

need to unwind certain hedging transactions before calling any consolidated obligations. As a result, a significant decrease in advances may not affect materially the Bank’s ability to pay dividends and cover its interest expenses.

Supplementary financial data on the Bank’s advances is set forth under Item 8, “Financial Statements and Supplementary Information.”

Investments

The Bank maintains a portfolio of investments for liquidity purposes, to provide for the availability of funds to meet member credit needs and to provide additional earnings. Investment income also enhances the Bank’s capacity to meet its commitment to affordable housing and community investment, to cover operating expenses, and to satisfy the Bank’s annual REFCORP assessment.

The Bank’s short-term investments consist of overnight and term federal funds, certificates of deposit and interest-bearing deposits. The Bank’s long-term investments consist of MBS issued by government-sponsored mortgage agencies or private securities that, at purchase, carry the highest rating from Moody’s or S&P, securities issued by the U.S. government or U.S. government agencies, and consolidated obligations issued by other FHLBanks. The long-term investment portfolio generally provides the Bank with higher returns than those available in the short-term money markets. The following table sets forth more detailed information regarding short- and long-term investments held by the Bank (dollar amounts in thousands):

	As of December 31,				Increase/ (Decrease)
	2008		2007		Amount			Percent
Short-term investments:
Deposits with other FHLBanks	$	2,888	$	3,403	$	(515	)	(15.13	)
Held-to-maturity-Certificates of deposit		—		800,000		(800,000	)	(100.00	)
Federal funds sold		10,769,000		14,835,000		(4,066,000	)	(27.41	)
Total short-term investments	$	10,771,888	$	15,638,403	$	(4,866,515	)	(31.12	)
Long-term investments:
Trading securities:
Government-sponsored enterprises debt obligations	$	4,171,725	$	4,283,519	$	(111,794	)	(2.61	)
Other FHLBanks’ bonds		300,135		284,542		15,593		5.48
State or local housing agency obligations		14,069		59,484		(45,415	)	(76.35	)
Held-to-maturity securities:
State or local housing agency obligations		101,105		117,988		(16,883	)	(14.31	)
Mortgage-backed securities:
U.S. agency obligations-guaranteed		38,545		47,460		(8,915	)	(18.78	)
Government-sponsored enterprises		7,060,082		2,968,441		4,091,641		137.84
Private label		15,918,391		18,126,628		(2,208,237	)	(12.18	)
Total long-term investments	$	27,604,052	$	25,888,062	$	1,715,990		6.63

As of December 31, 2008, total short-term investments were $10.8 billion, a decrease of $4.9 billion from December 31, 2007. This decrease was due primarily to a $3.2 billion decrease in term federal funds sold and $800.0 million in maturing certificates of deposit during the period. The Bank’s focus on overnight federal funds, and less on term federal funds, during the third and fourth quarters of 2008 was primarily to increase its liquidity position in light of increased advance demand.

As of December 31, 2008, total long-term investments were $27.6 billion, an increase of $1.7 billion from December 31, 2007. This increase was due primarily to a $4.1 billion increase in the Bank’s agency MBS

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portfolio. The purchase of agency MBS was offset partially by a $2.2 billion decrease in the Bank’s private-label MBS portfolio during the period due primarily to principal repayments and maturities.

The total MBS investment balance was $23.0 billion at December 31, 2008, compared to $21.1 billion at December 31, 2007. The MBS balance at December 31, 2008 and 2007 included approximately $6.7 billion and $7.8 billion, respectively, in MBS issued by two of the Bank’s members and their affiliates with dealer relationships.

The Finance Agency limits an FHLBank’s investment in MBS and asset-backed securities by requiring that the total book value of MBS owned by the FHLBank generally may not exceed 300 percent or, in certain circumstances 600 percent, of the FHLBank’s previous month-end capital plus its mandatorily redeemable capital stock on the day it purchases the securities. In light of current market conditions, the Bank attempts to maintain this ratio at 250 percent to 275 percent to help to maximize and stabilize earnings. These investments amounted to 258 percent and 262 percent of total capital plus mandatorily redeemable capital stock at December 31, 2008 and 2007, respectively. The amount of MBS investments has been at the lower end of management’s target due to the Bank’s efforts to increase its liquidity position in light of increased advance demand, as well as the lack of attractive MBS securities available for purchase.

The Bank’s held-to-maturity portfolio had a total of 279 securities in an unrealized loss position, with total gross unrealized losses of $3.7 billion as of December 31, 2008, compared to a total of 300 securities in an unrealized loss position, with total gross unrealized losses of $500.0 million as of December 31, 2007. The Bank evaluates its individual held-to-maturity investment securities holdings for other-than-temporary impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired. As part of its impairment analysis, the Bank considers its ability and intent to hold each security for a sufficient time to allow for any anticipated recovery of any unrealized losses.

To determine which individual securities are at risk for other-than-temporary impairment, the Bank considers various characteristics of each security including, but not limited to, the following: the credit rating; the duration and amount of the unrealized loss; and any credit enhancements. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment. As a result of this security-level review, the Bank identifies individual securities believed to be at risk for other-than-temporary impairment, which are evaluated further by analyzing the performance of the security and other qualitative factors. These securities are evaluated by estimating projected cash flows based on the structure of the security and certain assumptions, such as prepayments, default rates and loss severity, to determine whether the Bank expects to receive all of the contractual cash flows as scheduled.

Based on the Bank’s impairment analysis, the Bank recognized an other-than-temporary impairment loss of $186.1 million related to five private-label MBS in its held-to-maturity securities portfolio for the year ended December 31, 2008. This other-than-temporary impairment loss is reported in the Statements of Income as “Realized loss on held-to-maturity securities.” The Bank recognizes an other-than-temporary impairment loss when it is probable that the Bank will not receive all of the investment security’s cash flows according to the security’s contractual terms. The amount of other-than-temporary impairment is calculated as the difference between the security’s current carrying value and its fair value.

For the year ended December 31, 2008, the Bank’s expected loss of contractual cash flows for the five private-label MBS for which the Bank recorded the other-than-temporary impairment loss was a small amount. The Bank concluded that these securities were other-than-temporarily impaired based on an analysis of both quantitative and qualitative factors, including rating agency actions, default rates, loss severity, home price depreciation and the potential for continued adverse developments.

The current market pricing of MBS, which reflects a significant discount to cost, has been adversely affected by a significant reduction in the liquidity of these securities. As a result, the current fair value of these five

40

private-label securities is substantially less than what the Bank believes is indicated by the performance of the collateral underlying them and the Bank’s calculation of their expected cash flows. Although the Bank has recognized an other-than-temporary impairment loss equal to the difference between the carrying value and the fair value of these securities, the Bank anticipates at this time that it will recover a substantial portion of these impairment amounts.

The remainder of the Bank’s held-to-maturity securities portfolio that has not been designated as other-than-temporarily impaired has experienced unrealized losses and decreases in fair value due to interest rate volatility, illiquidity in the marketplace, and credit deterioration in the U.S. mortgage markets. This decline in fair value is considered temporary as the Bank expects to collect all contractual cash flows and the Bank has the ability and intent to hold these investments to maturity. The ability and intent of the Bank is demonstrated by the fact that the Bank is well capitalized, has sufficient liquidity and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would impact such intent and ability.

No other-than-temporary impairment loss was recognized for the years ended December 31, 2007 and 2006.

Supplementary financial data on the Bank’s investment securities is set forth under Item 8, “Financial Statements and Supplementary Data.”

Mortgage Loans Held for Portfolio

Mortgage loans held for portfolio were $3.3 billion at December 31, 2008, a decrease of $275.5 million, or 7.81 percent, from December 31, 2007. Mortgage loans comprised 1.56 percent of the Bank’s total assets as of December 31, 2008, compared to 1.87 percent as of December 31, 2007. Mortgage loans held under MPP increased by $41.9 million from December 31, 2007 to December 31, 2008. Mortgage loans held under the MPF Program and AMPP decreased by $316.8 million and $618 thousand, respectively, during this same period due to the maturity of assets purchased. In 2006, the Bank ceased purchasing assets under AMPP, and in 2008 the Bank ceased purchasing assets under the MPF Program. Early in the third quarter of 2008, the Bank suspended acquisitions of mortgage loans under MPP and the increase in the MPP balance for the period is attributable primarily to purchases during the first half of 2008.

The following table presents information on mortgage loans held for portfolio (in thousands):

	As of December 31,
	2008			2007
Mortgage loans held for portfolio:
Fixed-rate medium-term* single-family mortgages	$	813,351		$	946,439
Fixed-rate long-term single-family mortgages		2,421,652			2,564,175
Multifamily mortgages		22,762			23,256
Total unpaid principal balance		3,257,765			3,533,870
Premiums		15,882			14,265
Discounts		(21,896	)		(20,487	)
SFAS 133 delivery commitments basis adjustments		179			(220	)
Total	$	3,251,930		$	3,527,428

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

As of December 31, 2008 and 2007, the Bank’s mortgage loan portfolio was concentrated in the southeastern United States because those members selling loans to the Bank were located primarily in that region.

Supplementary financial data on the Bank’s mortgage loans is set forth under Item 8, “Financial Statements and Supplementary Data.”

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Consolidated Obligations

The Bank funds its assets primarily through the issuance of consolidated obligation bonds and, to a lesser extent, consolidated obligation discount notes. Consolidated obligation issuances financed 92.7 percent of the $208.6 billion in total assets at December 31, 2008, a slight increase from the financing ratio of 90.3 percent as of December 31, 2007.

As of December 31, 2008, the Bank had consolidated obligation bonds outstanding totaling $138.2 billion, compared to $142.2 billion as of December 31, 2007. Consolidated obligation bonds outstanding at December 31, 2008 and December 31, 2007 were primarily fixed-rate debt. However, the Bank often enters into derivatives simultaneously with the issuance of consolidated obligation bonds to convert them, in effect, into a short-term interest rate, usually based upon LIBOR. Of the $135.7 billion par value of consolidated obligation bonds outstanding as of December 31, 2008, $92.7 billion, or 68.3 percent, had their terms reconfigured through the use of interest rate exchange agreements. The comparable notional amount of such outstanding derivatives at December 31, 2007 was $102.7 billion, or 72.4 percent, of the total par value of consolidated obligation bonds.

Consolidated obligation discount notes were $55.2 billion at December 31, 2008, an increase of $26.8 billion, or 94.7 percent, from December 31, 2007. The increase in consolidated obligation discount notes during the period was due to increased demand in the marketplace for short-term debt and a corresponding decrease in demand for long-term debt in light of market conditions. As such, during the third and fourth quarters of 2008, the Bank issued large quantities of consolidated obligation discount notes.

As of December 31, 2008, callable consolidated obligation bonds constituted 31.8 percent of the total par value of consolidated obligation bonds outstanding, compared to 49.8 percent at December 31, 2007. This decrease was due to market conditions that made the issuance of noncallable fixed maturity debt more attractive to the Bank. The derivatives that the Bank may employ to hedge against the interest-rate risk associated with the Bank’s consolidated obligation bonds generally are callable by the counterparty. The Bank generally would call the hedged consolidated obligation bond if the call features of the derivatives were exercised. These call features could require the Bank to refinance a substantial portion of outstanding liabilities during times of decreasing interest rates. Call options on unhedged callable consolidated obligation bonds generally are exercised when the bond can be replaced at a lower economic cost.

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding (dollar amounts in thousands):

	As of December 31,
	2008				2007
	Amount			Weighted- average Interest Rate (%)	Amount			Weighted- average Interest Rate (%)
Year of contractual maturity:
Due in one year or less	$	73,667,975		2.63	$	62,826,705		4.56
Due after one year through two years		22,242,000		3.40		29,721,925		4.64
Due after two years through three years		8,245,900		3.90		14,448,245		4.63
Due after three years through four years		5,402,015		4.57		4,665,400		4.93
Due after four years through five years		13,548,750		4.13		7,851,500		5.06
Due after five years		12,631,750		5.13		22,406,100		5.08
Total par value		135,738,390		3.30		141,919,875		4.70
Premiums		100,767				19,479
Discounts		(109,228	)			(375,211	)
SFAS 133 hedging adjustments		2,452,134				673,965
Deferred net losses on terminated hedges		(729	)			(1,066	)
Total	$	138,181,334			$	142,237,042

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The Bank’s consolidated obligation bonds outstanding consist of the following (in thousands):

	As of December 31,
	2008		2007
Par value of consolidated bonds:
Noncallable	$	92,597,640	$	71,188,475
Callable		43,140,750		70,731,400
Total	$	135,738,390	$	141,919,875

Supplementary financial data on the Bank’s short-term borrowings is set forth under Item 8, “Financial Statements and Supplementary Data.”

Deposits

In 2008 and 2007, the Bank offered several types of deposit programs, including demand and overnight deposits. In June 2007, the Bank discontinued offering term deposits and the last term deposit matured in October 2007. In May 2008, the Bank discontinued acting as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks.

The Bank offers demand and overnight deposit programs to members primarily as a liquidity management service. In addition, a member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of those funds to the owners of the mortgage loan. For demand deposits, the Bank pays interest at the overnight rate. Most of these deposits represent member liquidity investments, which members may withdraw on demand. Therefore, the total account balance of the Bank’s deposits may be volatile. As a matter of prudence, the Bank typically invests deposit funds in liquid short-term assets. Member loan demand, deposit flows, and liquidity management strategies influence the amount and volatility of deposit balances carried with the Bank. Deposits totaled $3.6 billion as of December 31, 2008, compared to $7.1 billion as of December 31, 2007.

To support its member deposits, the FHLBank Act requires the Bank to have as a reserve an amount equal to or greater than the current deposits received from members. These reserves are required to be invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. The Bank was in compliance with this depository liquidity requirement as of December 31, 2008.

Other Liabilities

Other liabilities were $2.7 billion at December 31, 2008, a decrease of $472.9 million, or 14.8 percent, from December 31, 2007. This decrease was due primarily to a $421.1 million decrease in accrued interest payable related to the decrease in consolidated obligation bonds outstanding at December 31, 2008 compared to December 31, 2007.

Capital and Retained Earnings

As of December 31, 2008, total capital was $8.9 billion, an increase of $870.7 million, or 10.9 percent, from December 31, 2007. The increase in total capital was primarily a result of an increase in the Bank’s activity-based stock during the period that corresponds to the increase in advances.

The Bank’s retained earnings were $434.9 million, a decrease of $33.9 million, or 7.23 percent, from December 31, 2007. The reduction in retained earnings was due to the establishment of a $170.5 million reserve for a credit loss on the LBSF receivable and the $186.1 million other-than-temporary impairment loss for the year ended December 31, 2008.

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The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank must maintain (i) total capital in an amount equal to at least four percent of its total assets, (ii) leverage capital in an amount equal to at least five percent of its total assets, and (iii) permanent capital in an amount equal to at least its regulatory risk-based capital requirement. Permanent capital is defined by the FHLBank Act and applicable regulations as the sum of paid-in capital for Class B stock and retained earnings. Mandatorily redeemable capital stock is considered capital for regulatory purposes.

The Bank was in compliance with these regulatory capital rules and requirements as shown in the following table (dollar amounts in thousands):

	As of December 31,
	2008						2007
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk based capital	$	5,715,678		$	8,942,306		$	981,647		$	8,080,333
Total capital-to-assets ratio		4.00	%		4.29	%		4.00	%		4.28	%
Total regulatory capital*	$	8,342,574		$	8,942,306		$	7,557,511		$	8,080,333
Leverage ratio		5.00	%		6.43	%		5.00	%		6.42	%
Leverage capital	$	10,428,217		$	13,413,459		$	9,446,888		$	12,120,499

* Mandatorily redeemable capital stock is considered capital for regulatory purposes, and “total regulatory capital” includes the Bank’s $44.4 million and $55.5 million in mandatorily redeemable capital stock at December 31, 2008 and 2007, respectively.

As required by the Housing Act, effective on January 30, 2009, the Director of the Finance Agency issued an interim final rule that established criteria based on the amount and type of capital held by a FHLBank for four capital classifications as follows:

• Adequately Capitalized—FHLBank meets both risk-based and minimum capital requirements

• Undercapitalized—FHLBank does not meet one or both of its risk-based or minimum capital requirements

• Significantly Undercapitalized—FHLBank has less than 75 percent of one or both of its risk-based or minimum capital requirements

• Critically Undercapitalized—FHLBank total capital is two percent or less of total assets

The regulation also requested comment on whether to establish a fifth classification, “Well Capitalized”, and generally defined this as meeting 110 percent of the adequately capitalized classification.

Under the regulation, the Director will make a capital classification for each FHLBank at least quarterly and notify the FHLBank in writing of any proposed action and provide an opportunity for the FHLBank to submit information relevant to such action. The Director is permitted to make discretionary classifications. An FHLBank must provide written notice to the Finance Agency within 10 days of any event or development that has caused or is likely to cause its permanent or total capital to fall below the level required to maintain its most recent capital classification or reclassification. The regulation delineates the types of prompt corrective actions the Director may order in the event an FHLBank is not adequately capitalized, including submission of a capital restoration plan by the FHLBank and restrictions on its dividends, stock redemptions, executive compensation, new business activities, or any other actions the Director determines will ensure safe and sound operations and capital compliance by the FHLBank. As of March 18, 2009, the Bank had not received notice from the Director regarding the Bank’s capital classification.

As of December 31, 2008, the Bank had capital stock subject to mandatory redemption from 13 members and former members, consisting of B2 activity-based stock. The Bank is not required to redeem or repurchase such

44

stock until the expiration of the five-year redemption period or, with respect to activity-based stock, until the later of the expiration of the five-year redemption period or the activity no longer remains outstanding. During 2008, if activity-based stock became excess stock as a result of an activity no longer remaining outstanding, the Bank generally repurchased the excess activity-based stock if the dollar amount of excess stock exceeded the threshold specified by the Bank, which in 2008 was $100 thousand. As of December 31, 2008 and 2007, the Bank’s activity-based stock included $13.2 million and $12.4 million, respectively, of excess shares subject to repurchase by the Bank at its discretion. The Bank’s excess stock threshold and standard repurchase practice may be changed at the Bank’s discretion with proper notice to members. On February 27, 2009, the Bank notified members of an increase in the excess stock threshold amount to $2.5 billion and a change from the automatic daily repurchase of excess stock to a quarterly evaluation process.

Results of Operations

The following is a discussion and analysis of the Bank’s results of operations for the years ended December 31, 2008, 2007, and 2006.

Net Income

The following table sets forth the Bank’s significant income and expense items for the years ended December 31, 2008, 2007, and 2006, and provides information regarding the changes during each of these periods (dollar amounts in thousands):

	For the Years Ended December 31,					Increase/ (Decrease) 2008/2007			Increase/ (Decrease) % 2008/2007		For the Year Ended December 31, 2006			Increase/ (Decrease) 2007/2006		Increase/ (Decrease) % 2007/2006
	2008			2007
Net interest income	$	846,028		$	703,548	$	142,480		20.25		$	671,219		$	32,329	4.82
Other income (loss)		(213,995	)		13,524		(227,519	)	(1,682.34	)		(3,823	)		17,347	453.75
Other expense		286,432			110,181		176,251		159.96			102,381			7,800	7.62
Total assessments		91,810			161,916		(70,106	)	(43.30	)		150,600			11,316	7.51
Net income		253,781			444,903		(191,122	)	(42.96	)		414,198			30,705	7.41

The Bank’s net income decreased for the year ended December 31, 2008, compared to the year ended December 31, 2007, due primarily to the establishment of a $170.5 million reserve for a credit loss on a receivable due from LBSF, which declared bankruptcy on October 3, 2008, with a corresponding charge to other expense, and a $186.1 million other-than-temporary impairment loss on the Bank’s private-label MBS. These losses were partially offset by a $142.5 million increase in net interest income during the period.

The increase in the Bank’s net income for the year ended December 31, 2007, compared to the year ended December 31, 2006, was due to both an increase in net interest income and other income.

Net Interest Income

The primary source of the Bank’s earnings is net interest income. Net interest income equals interest earned on assets (including member advances, mortgage loans, MBS held in portfolio, and other investments), less the interest expense incurred on consolidated obligations, deposits, and other borrowings. Also included in net interest income are miscellaneous related items such as prepayment fees earned and the amortization of debt issuance discounts, concession fees and SFAS 133-related adjustments. Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Accounting for Derivatives and Hedging Activities” section below for further discussion on SFAS 133-related effects on net interest income.

For the year ended December 31, 2008, net interest income increased by $142.5 million, or 20.3 percent, compared to the year ended December 31, 2007. This increase was due primarily to reduced interest expense on

45

COs resulting from increased demand in the marketplace for short-term debt and a corresponding decrease in demand for long-term debt. This reduction in borrowing costs more than offset the reduction in interest income on interest-earning assets due to declining interest rates during the period.

For the year ended December 31, 2007, net interest income increased by $32.3 million, or 4.82 percent, compared to the year ended December 31, 2006. This increase was due primarily to the following:

• An increase in interest income on advances of $1.0 billion due to the increases in both the rates on and the volume of advances

• An increase in the interest income on federal funds sold of $162.1 million due primarily to an increase in the volume of federal funds sold necessary to meet increased liquidity demands

• The increase in interest income was offset by a $1.2 billion increase in interest expense on consolidated obligations due to the increases in both the rates on and the volume of consolidated obligations to meet the increased demand for advances.

The following table summarizes key components of net interest income for the periods presented (in thousands):

	Years Ended December 31,
	2008		2007		2006
Interest income
Advances	$	4,729,461	$	6,272,406	$	5,255,030
Investments		1,720,928		1,967,693		1,779,582
Mortgage loans held for portfolio		182,721		175,679		152,167
Loans to other FHLBanks		77		60		109
Total		6,633,187		8,415,838		7,186,888
Interest expense
Consolidated obligations		5,673,829		7,419,087		6,263,775
Deposits		109,726		266,562		218,831
Other		3,604		26,641		33,063
Total		5,787,159		7,712,290		6,515,669
Net interest income	$	846,028	$	703,548	$	671,219

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The following table presents spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the years ended December 31, 2008, 2007 and 2006 (dollar amounts in thousands). The interest rate spread is affected by the inclusion or exclusion of net interest income/expense associated with the Bank’s derivatives. For example, if the derivatives qualify for fair-value hedge accounting under SFAS 133, the net interest income/expense associated with the derivative is included in the calculation of interest rate spread. If the derivatives do not qualify for fair-value hedge accounting under SFAS 133 (“SFAS 133 non-qualifying hedges”), the net interest income/expense associated with the derivatives is excluded from the calculation of the interest rate spread. Net interest income includes the interest earned on trading securities, which was $284.0 million, $265.7 million and $282.6 million for the years ended December 31, 2008, 2007, and 2006, respectively. The interest income (expense) on the associated interest rate swaps used to hedge these securities is recorded in other income (loss). There are also numerous amortizations associated with SFAS 133 basis adjustments that are reflected in net interest income, which affect interest rate spread. As noted in the table below, the interest rate spread increased by five basis points for the year ended December 31, 2008 compared to the year ended December 31, 2007. This increase was due primarily to an increase in the use of short-term, lower rate funding. Short-term funding rates also decreased more than long-term funding rates during the period. The interest rate spread decreased by three basis points for the year ended December 31, 2007 compared to the year ended December 31, 2006 due primarily to the inability of the Bank to be fully invested in MBS.

Spread and Yield Analysis

	For the Years Ended December 31,
	2008							2007							2006
	Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate		Average Balance			Interest		Yield/ Rate
Assets
Federal funds sold	$	11,994,159		$	239,198	1.99	%	$	13,433,764		$	697,244	5.19	%	$	10,499,760		$	535,144	5.10	%
Interest-bearing deposits (1)		1,839,302			28,887	1.57	%		177,636			8,557	4.82	%		158,225			8,151	5.15	%
Certificates of deposit		553,210			17,384	3.14	%		784,610			42,115	5.37	%		511,707			26,540	5.19	%
Long-term investments (2)		28,426,447			1,435,459	5.05	%		23,816,403			1,219,777	5.12	%		24,114,523			1,209,747	5.02	%
Advances		153,841,077			4,729,461	3.07	%		116,626,559			6,272,406	5.38	%		101,860,607			5,255,030	5.16	%
Mortgage loans held for portfolio (3)		3,420,441			182,721	5.34	%		3,299,680			175,679	5.32	%		2,958,527			152,167	5.14	%
Loans to other FHLBanks		3,604			77	2.14	%		1,170			60	5.13	%		2,088			109	5.22	%
Total interest-earning assets		200,078,240			6,633,187	3.32	%		158,139,822			8,415,838	5.32	%		140,105,437			7,186,888	5.13	%
Allowance for credit losses on mortgage loans		(925	)						(738	)						(555	)
Other assets		2,631,277							2,826,822							2,411,250
Total assets	$	202,708,592						$	160,965,906						$	142,516,132
Liabilities and Capital
Demand and overnight deposits	$	5,738,281			109,291	1.90	%	$	5,178,340			260,440	5.03	%	$	4,232,137			208,151	4.92	%
Term deposits		—			—	—			8,018			323	4.03	%		25,499			1,239	4.86	%
Other interest-bearing deposits (4)		26,405			435	1.65	%		109,508			5,799	5.30	%		185,964			9,441	5.08	%
Short-term borrowings		38,505,038			988,758	2.57	%		13,661,082			671,466	4.92	%		7,147,236			353,263	4.94	%
Long-term debt		143,613,951			4,685,564	3.26	%		130,744,063			6,748,405	5.16	%		120,543,114			5,911,141	4.90	%
Other borrowings		104,142			3,111	2.99	%		482,496			25,857	5.36	%		662,830			32,434	4.89	%
Total interest-bearing liabilities		187,987,817			5,787,159	3.08	%		150,183,507			7,712,290	5.13	%		132,796,780			6,515,669	4.91	%
Noninterest-bearing deposits		5,965							25,666							28,489
Other liabilities		6,101,964							3,882,182							3,404,110
Total capital		8,612,846							6,874,551							6,286,753
Total liabilities and capital	$	202,708,592						$	160,965,906						$	142,516,132
Net interest income and net yield on interest-earning assets				$	846,028	0.42	%				$	703,548	0.44	%				$	671,219	0.48	%
Interest rate spread						0.24	%						0.19	%						0.22	%
Average interest-earning assets to interest-bearing liabilities						106.43	%						105.30	%						105.50	%

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Notes

(1) Interest-bearing deposits includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.

(2) Trading securities are included in the Long-term investments line at fair value.

(3) Nonperforming loans are included in average balances used to determine average rate.

(4) Other interest-bearing deposits includes amounts recognized for the right to return cash collateral received under agreements with derivative counterparties.

Net interest income for the periods presented was affected by changes in average balances (volume change) and changes in average rates (rate change) of interest-earning assets and interest-bearing liabilities. The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected the Bank’s interest income and interest expense (in thousands). As noted in the tables, changes in net interest income between 2008 and 2007 and between 2007 and 2006 were primarily volume related.

Volume and Rate Table *

	2008 vs. 2007									2007 vs. 2006
	Volume			Rate			Increase (Decrease)			Volume			Rate			Increase (Decrease)
Increase (decrease) in interest income:
Federal funds sold	$	(67,899	)	$	(390,147	)	$	(458,046	)	$	152,113		$	9,987		$	162,100
Interest-bearing deposits		29,723			(9,393	)		20,330			957			(551	)		406
Certificate of deposits		(10,280	)		(14,451	)		(24,731	)		14,618			957			15,575
Long-term investments		233,019			(17,337	)		215,682			(15,072	)		25,102			10,030
Advances		1,635,453			(3,178,398	)		(1,542,945	)		786,808			230,568			1,017,376
Mortgage loans held for portfolio		6,449			593			7,042			18,019			5,493			23,512
Loans to other FHLBanks		68			(51	)		17			(47	)		(2	)		(49	)
Total		1,826,533			(3,609,184	)		(1,782,651	)		957,396			271,554			1,228,950
Increase (decrease) in interest expense:
Demand and overnight deposits		25,568			(176,717	)		(151,149	)		47,491			4,798			52,289
Term deposits		(161	)		(162	)		(323	)		(733	)		(183	)		(916	)
Other interest-bearing deposits		(2,812	)		(2,552	)		(5,364	)		(4,033	)		391			(3,642	)
Short-term borrowings		759,249			(441,957	)		317,292			320,178			(1,975	)		318,203
Long-term debt		612,698			(2,675,539	)		(2,062,841	)		516,450			320,814			837,264
Other borrowings		(14,540	)		(8,206	)		(22,746	)		(9,446	)		2,869			(6,577	)
Total		1,380,002			(3,305,133	)		(1,925,131	)		869,907			326,714			1,196,621
Increase (decrease) in net interest income	$	446,531		$	(304,051	)	$	142,480		$	87,489		$	(55,160	)	$	32,329

* Volume change is calculated as the change in volume multiplied by the previous rate, while rate change is the change in rate multiplied by the previous volume. The rate/volume change, change in rate multiplied by change in volume, is allocated between volume change and rate change at the ratio each component bears to the absolute value of its total.

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Other Income (Loss)

The following table presents the components of other income (loss) (in thousands):

	For the Years Ended December 31,									Increase (Decrease)
	2008			2007			2006			2008/2007			2007/2006
Other Income (Loss):
Service fees	$	2,336		$	2,488		$	2,354		$	(152	)	$	134
Net gains (losses) on trading securities		200,373			106,718			(99,241	)		93,655			205,959
Realized loss on held-to-maturity securities		(186,063	)		—			—			(186,063	)		—
Net (losses) gains on derivatives and hedging activities		(229,289	)		(96,424	)		91,176			(132,865	)		(187,600	)
Other		(1,352	)		742			1,888			(2,094	)		(1,146	)
Total other (loss) income	$	(213,995	)	$	13,524		$	(3,823	)	$	(227,519	)	$	17,347

The Bank hedges trading securities with derivative transactions, and the income effect of the market-value change for these securities under SFAS 115 during the reported periods was offset by market-value changes in the related derivatives. The overall changes in other income (loss) during 2008 compared to 2007, and during 2007 compared to 2006, was due primarily to adjustments required to report trading securities at fair value, as required by GAAP, and hedging-related adjustments, which are reported in the overall hedging activities (including those related to trading securities). In addition, the Bank recorded a $186.1 million other-than-temporary impairment loss on its private-label MBS for the year ended December 31, 2008.

When a derivative qualifies as a SFAS 133 hedging instrument, the change in fair value of the derivative is recognized in earnings with a corresponding change in the fair value related to the designated risk of the hedged item also recognized in earnings. The difference between the changes in fair value recognized on the two instruments represents the degree of ineffectiveness in the hedging relationship. The Bank records the changes in fair value of the derivative and the hedged item of qualifying SFAS 133 hedging relationships in the net (losses) gains on derivatives and hedging activities component of other income (loss). Any interest paid or received for these qualifying SFAS 133 hedging relationships is recorded in net interest income as discussed in the section below.

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The Bank also records all gains or losses, comprising changes in fair value and interest paid or received, on derivatives not designated in SFAS 133 hedging relationships (“SFAS 133 non-qualifying hedges”) in the net (losses) gains on derivatives and hedging activities classification. The following table details each of these components of net (losses) gains on derivatives and hedging activities (in thousands):

Net (Losses) Gains on Derivatives and Hedging Activities

	Advances			Purchased Options, Macro Hedging and Synthetic Macro Funding			Investments			MPF/MPP Loans			Consolidated Obligations Bonds		Consolidated Obligations Discount Notes		Intermediary Positions and Other			Total
For the Year Ended December 31, 2008
Interest-related	$	—		$	(46,366	)	$	(108,481	)	$	—		$	—	$	—	$	57		$	(154,790	)
SFAS 133 qualifying fair value hedges		(71,511	)		—			—			—			15,286		9,683		—			(46,542	)
SFAS 133 non-qualifying hedges and other		—			(2,412	)		(349,920	)		(204	)		—		—		324,579			(27,957	)
Total (losses) gains	$	(71,511	)	$	(48,778	)	$	(458,401	)	$	(204	)	$	15,286	$	9,683	$	324,636		$	(229,289	)
For the Year Ended December 31, 2007
Interest-related	$	—		$	(9,890	)	$	(14,578	)	$	—		$	—	$	—	$	100		$	(24,368	)
SFAS 133 qualifying fair value hedges		12,117			—			61			—			16,495		665		—			29,338
SFAS 133 non-qualifying hedges and other		—			12,571			(114,461	)		546			—		—		(50	)		(101,394	)
Total gains (losses)	$	12,117		$	2,681		$	(128,978	)	$	546		$	16,495	$	665	$	50		$	(96,424	)
For the Year Ended December 31, 2006
Interest-related	$	—		$	(5,950	)	$	(32,376	)	$	—		$	—	$	—	$	112		$	(38,214	)
SFAS 133 qualifying fair value hedges		32,830			—			—			—			3,214		—		—			36,044
SFAS 133 non-qualifying hedges and other		—			3,845			89,910			(232	)		—		—		(177	)		93,346
Total gains (losses)	$	32,830		$	(2,105	)	$	57,534		$	(232	)	$	3,214	$	—	$	(65	)	$	91,176

Management generally uses derivative instruments to hedge net interest income, with a primary goal of stabilizing the interest-rate spread over time and mitigating interest-rate risk and cash-flow variability.

Accounting for Derivatives & Hedging Activities

SFAS 133 requires the Bank to record all derivatives at fair value and to recognize unrealized gains or losses on derivative positions, regardless of whether offsetting gains or losses applicable to the underlying hedged assets or liabilities may be recognized in a symmetrical manner. Therefore, SFAS 133 introduces the potential for the income statement to reflect considerable timing differences between the current market valuation of the hedge instruments and the delayed effect from related hedged assets or liabilities, often resulting in income statement volatility.

If a hedging activity qualifies for hedge accounting treatment under SFAS 133, the Bank includes the related interest income or interest expense of the hedge instrument in the relevant income statement caption consistent with the hedged asset or liability. In addition, the Bank reports as a component of other income (loss) the fair

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values of both the hedge instrument and the hedged item. If the hedging relationship is discontinued, the Bank will cease marking the hedged item to fair value and will begin to amortize the cumulative fair-value adjustment that has occurred as a part of the hedge as interest income or interest expense over the life of the hedged asset or liability.

As discussed above, if a hedging relationship does not qualify for hedge accounting treatment under SFAS 133, the Bank reports the hedging instrument’s components of interest income or interest expense, together with the effect of the valuation, as components of other income (loss). However, there is no corresponding fair value adjustment for the hedged asset or liability.

The table below outlines the overall effect of hedging activities on net interest income and other income (loss) related results (in thousands):

	For the Years Ended December 31,
	2008			2007			2006
Net interest income	$	846,028		$	703,548		$	671,219
Interest components of hedging activities included in net interest income:
Hedging advances	$	(1,394,959	)	$	639,994		$	558,593
Hedging consolidated obligations		771,507			(398,172	)		(772,833	)
Hedging related amortization		(97,391	)		(28,948	)		(33,585	)
Net (decrease) increase in net interest income	$	(720,843	)	$	212,874		$	(247,825	)
Interest components of derivative activity included in other income (loss):
Purchased options	$	22,500		$	1,138		$	5,141
Synthetic macro funding		(68,866	)		(11,028	)		(11,091	)
Trading securities		(108,481	)		(14,578	)		(32,376	)
Other		57			100			112
Net decrease in other income (loss)	$	(154,790	)	$	(24,368	)	$	(38,214	)

The following discussion provides information on each of the components presented in the table above.

Hedged Advances and Hedged Consolidated Obligations. Management generally uses hedging instruments to change, in effect, fixed interest rates into variable interest rates for advances and consolidated obligations, which, during recent periods, initially were lower than fixed rates. However, as the interest-rate environment changes over time, the variable interest rates may increase above the fixed interest rate existing at the time the hedge was established. The hedging activities generally use interest-rate swaps to convert the interest rates on both advances and consolidated obligations to a short-term interest rate, usually based on LIBOR.

When this type of hedging relationship qualifies for hedge accounting treatment under SFAS 133, the interest components shown above are included in net interest income. The combined result of these activities on interest income and interest expense may increase or decrease net interest income. Because the purpose of management’s hedging activities is to protect the interest-rate spread related to net interest income from interest-rate risk, the absolute increase or decrease for either interest income from advances or interest expense on consolidated obligations is not as important as the relationship of the various hedging activities to overall net interest income and the interest-rate spread. The effect of such hedging activities varies from year to year, depending on interest-rate movements and the amount of the Bank’s hedging activity.

Hedging-related Amortization. If a hedging relationship is discontinued, the Bank will cease marking the hedged item to fair value and will amortize the cumulative fair-value adjustment that has occurred as a part of the hedge

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as interest income or interest expense over the remaining life of the associated hedged item. The associated derivative will continue to be marked to fair value through earnings until it matures or is terminated. Therefore, the amount and nature of the fair-value adjustment may change dramatically from period to period, depending on the mix of hedging strategies, the amortization periods of various items, and whether the amortization is associated primarily with assets or liabilities.

The above table illustrates that, due to hedging activities and hedging related amortization, net interest income decreased by $720.8 million for the year ended December 31, 2008, increased by $212.9 million for the year ended December 31, 2007, and decreased by $247.8 million for the year ended December 31, 2006. These net effects are due to the interplay between short-term interest rates and the underlying contractual interest rates for the advances and consolidated obligations being hedged.

The amounts reflected above for the following items must be considered in conjunction with the discussion set forth under “Other Income (Loss)” as the interest on these derivatives will appear as a component of “Other Income (Loss).”

Purchased Options. This component relates to hedging activities in which the Bank generally has paid for protection against future interest-rate movements, but which generally do not qualify for hedge accounting treatment under SFAS 133. Often these activities are used to hedge exposure to prepayment activity in the mortgage loan portfolio. Generally, one would expect that these hedging actions would result in an expense over time because the Bank is purchasing protection. However, if conditions arise that are favorable for exercising the option, the benefit of increased income or reduced expense can be significant. The above table shows that the interest component derived from purchased option activity was $22.5 million for the year ended December 31, 2008, due to a decrease in interest rates. Since these options are derivatives, both changes in fair value and any related interest income or interest expense, if exercised, are recognized currently in the income statement as a component of “Other Income (Loss).”

Synthetic Macro Funding. This component relates to the Bank using derivatives to create a profile similar to that of having longer-term debt outstanding than the actual underlying debt. Because there is only the existing short-term debt and long-term debt outstanding, these activities are called “synthetic.” Consequently, these activities do not qualify for hedge accounting treatment under SFAS 133 because they do not have a direct link to a hedged item and are considered SFAS 133 non-qualifying hedges. These structures contain a derivative, and therefore changes in the fair value of the derivative are recognized in the income statement as a component of “Other Income (Loss).”

Trading Securities Hedging. As discussed above, management hedges the Bank’s exposure to the fair-value fluctuations related to marking trading securities to market through earnings, but the related hedging activity does not qualify for hedge accounting treatment under SFAS 133. The hedge is intended to mirror the trading security to convert, in effect, the trading securities into variable-rate instruments. The effect of this synthetic variable-rate instrument can be seen by combining the interest received on the security with the net amount paid or received on the derivative. Through hedging activities, the yield on trading securities is targeted to correlate with short-term interest rates. The tables in the “Other Income (Loss)” section presented above disclose the hedging of the mark-to-market adjustments for trading securities. The “Other Income (Loss)” caption also includes the fair-value adjustment from the interest-rate swaps used to hedge the trading securities. Changes in these adjustments normally occur due to changes in the spread relationships between government agency securities and the swap curve.

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Non-interest Expense

The following table presents non-interest expense (in thousands):

	For the Years Ended December 31,						Increase (Decrease) 2008/2007			Increase (Decrease) 2007/2006
	2008		2007		2006
Other expense:
Compensation and benefits	$	64,800	$	64,564	$	56,170	$	236		$	8,394
Occupancy cost		3,457		3,453		3,676		4			(223	)
Other operating expenses		35,519		29,887		32,301		5,632			(2,414	)
Total operating expenses		103,776		97,904		92,147		5,872			5,757
Finance Agency and Office of Finance		10,840		9,073		7,266		1,767			1,807
Provision for losses on receivable		170,486		—		—		170,486			—
Other		1,330		3,204		2,968		(1,874	)		236
Total other expense		286,432		110,181		102,381		176,251			7,800
Assessments:
Affordable Housing Program		28,365		50,690		47,048		(22,325	)		3,642
REFCORP		63,445		111,226		103,552		(47,781	)		7,674
Total assessments		91,810		161,916		150,600		(70,106	)		11,316
Total non-interest expense	$	378,242	$	272,097	$	252,981	$	106,145		$	19,116

Non-interest expense increased 39.0 percent in 2008 compared to 2007 and increased 7.56 percent in 2007 compared to 2006. The increase in 2008 was primarily due to a $170.5 million provision for credit loss on the LBSF receivable recorded in other expense during the third quarter of 2008, partially offset by lower assessments in 2008. The 2007 increase was primarily due to increased AHP and REFCORP assessments and an increase in operating expenses caused by an increase in compensation and benefits expense. The REFCORP assessment is established as a fixed percent of GAAP net income, and the AHP assessment is established as a fixed percent of regulatory net income (which is the Bank’s net income before interest expense related to mandatorily redeemable capital stock under SFAS 150).

Liquidity and Capital Resources

Liquidity is necessary to satisfy members’ borrowing needs on a timely basis, repay maturing and called consolidated obligations, and meet other obligations and operating requirements. Many members rely on the Bank as a source of standby liquidity, and the Bank attempts to be in a position to meet member funding needs on a timely basis.

Finance Agency regulations and Bank policy require the Bank to maintain contingent liquidity in an amount sufficient to meet its liquidity needs for five business days if it is unable to access the capital markets. In addition, the Bank attempts to maintain sufficient liquidity to service debt obligations for at least 90 days, assuming restricted debt market access. At times during the second half of 2008, the Bank did not meet its 90-day debt service goal due to an increased reliance on consolidated obligation discount notes and other short-term debt because of their attractive pricing and the lack of availability of long-term debt.

In light of stress and instability in domestic and international credit markets, the Finance Agency in September 2008 provided liquidity guidance to each FHLBank. In March 2009, the Finance Agency updated this guidance, generally to provide ranges of days within which each FHLBank should maintain positive cash balances based upon different assumptions and scenarios. The Bank has operated within these ranges since the Finance Agency issued this guidance.

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The Bank’s principal source of liquidity is consolidated obligation debt instruments, which enjoy government-sponsored enterprise status and are rated Aaa/P-1 by Moody’s and AAA/A-1+ by S&P. To provide liquidity, the Bank also may use other short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase, and loans from other FHLBanks. These funding sources depend on the Bank’s ability to access the capital markets at competitive market rates. Although the Bank maintains secured and unsecured lines of credit with money market counterparties, the Bank’s income and liquidity would be affected adversely if it were not able to access the capital markets at competitive rates for a long period of time. Historically, the FHLBanks have had excellent capital market access, although the FHLBanks experienced a decrease in investor demand for consolidated obligation bonds beginning in mid-July 2008, and this decrease in demand intensified, particularly with respect to long-term COs, during the fourth quarter of 2008. However, during that time, the Bank increased its issuance of short-term discount notes as an alternative source of funding.

During the credit market disruptions that occurred during 2008, the Bank increased its liquidity through the capital markets to meet member advance demand. Currently, the Bank anticipates that its liquidity needs will decrease in 2009 in light of its anticipated decrease in advance demand.

During the quarter ended September 30, 2008, each FHLBank entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (“GSECF”), as authorized by the Housing Act. The GSECF is designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings are agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members that have been collateralized in accordance with regulatory standards and MBS issued by Fannie Mae or Freddie Mac. The maximum borrowings under the Lending Agreement are subject to the federal debt ceiling limits and are based upon eligible collateral. Each FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of December 31, 2008, the Bank has provided the U.S. Treasury with a listing of advance collateral amounting to $21.4 billion, which provides for maximum borrowings of $18.7 billion. The amount of collateral available can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of December 31, 2008, the Bank has not drawn on this available source of liquidity.

Contingency plans are in place that prioritize the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance, as well as systemic Federal Reserve wire transfer system disruptions. Under the Housing Act, the Secretary of Treasury has the authority, at his or her discretion, to purchase consolidated obligations, subject to the general federal debt ceiling limits. Previously, the FHLBank Act had authorized the Secretary of Treasury, at his or her discretion, to purchase consolidated obligations up to an aggregate principal amount of $4 billion. No borrowings under this latter authority have been outstanding since 1977 and the Bank has no immediate plans to request the Treasury to exercise the authority under the Housing Act.

The Bank is jointly and severally liable with each and all of the other FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. Several FHLBanks have announced recently matters related to net losses, risk-based capital deficiencies and suspensions of dividends and stock repurchases, primarily in light of declines in the value of private-label MBS due to the ongoing turmoil in the capital and mortgage markets, in addition to general increases in funding costs and the difficulty in issuing long-term debt. The Bank is continuing to monitor these developments. Based on its knowledge, management of the Bank does not believe at this time that these developments should affect the Bank’s individual liability on the FHLBanks’ outstanding consolidated obligations.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Liquidity Risk” for further discussion.

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Off-Balance Sheet Commitments

The Bank’s primary off-balance sheet commitments are as follows:

• The Bank has joint and several liability for all of the consolidated obligations issued by the Office of Finance on behalf of the FHLBanks

• The Bank has outstanding commitments arising from standby letters of credit.

Should an FHLBank be unable to satisfy its payment obligation under a consolidated obligation for which it is the primary obligor, any of the other FHLBanks, including the Bank, could be called upon to repay all or any part of such payment obligation, as determined or approved by the Finance Agency. The Bank considers the joint and several liability as a related party guarantee. These related party guarantees meet the scope exceptions in Financial Interpretation Number 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks’ consolidated obligations at December 31, 2008 and 2007. As of December 31, 2008, the FHLBanks had $1.3 trillion in aggregate par value of consolidated obligations issued and outstanding, $191.1 billion of which was attributable to the Bank.

As of December 31, 2008, the Bank had outstanding standby letters of credit of approximately $10.2 billion with original terms of less than three months to 15 years, with the longest final expiration in 2023. Commitments to extend credit, including standby letters of credit, are agreements to lend. The Bank issues a standby letter of credit for the account of a member in exchange for a fee. A member may use these standby letters of credit to facilitate a financing arrangement. The Bank requires its borrowers, upon the effective date of the letter of credit through its expiration, to collateralize fully the face amount of any letter of credit issued by the Bank, as if such face amount were an advance to the borrower. If the Bank is required to make payment for a beneficiary’s draw, the Bank converts such paid amount to an advance to the member. The Bank’s underwriting and collateral requirements for standby letters of credit are the same as those requirements for advances. Based on management’s credit analyses and collateral requirements, the Bank presently does not deem it necessary to have an allowance for these unfunded letters of credit.

Contractual Obligations

The tables below present the payment due dates or expiration terms of the Bank’s contractual obligations and commitments (in thousands):

	Contractual Obligations As of December 31, 2008 Payments Due By Period
	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years
Contractual obligations:
Long-term debt	$	135,738,390	$	73,667,975	$	30,487,900	$	18,950,765	$	12,631,750
Operating leases		4,648		1,369		2,193		833		253
Mandatorily redeemable capital stock		44,428		3,764		7,409		11,648		21,607
Total contractual obligations	$	135,787,466	$	73,673,108	$	30,497,502	$	18,963,246	$	12,653,610
Other commitments:
Standby letters of credit	$	10,231,656	$	910,492	$	2,112,147	$	344,167	$	6,864,850
Total other commitments	$	10,231,656	$	910,492	$	2,112,147	$	344,167	$	6,864,850

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Critical Accounting Policies and Estimates

The preparation of the Bank’s financial statements in accordance with GAAP requires management to make a number of judgments and assumptions that affect the Bank’s reported results and disclosures. Several of the Bank’s accounting policies inherently are subject to valuation assumptions and other subjective assessments and are more critical than others to the Bank’s results. The Bank has identified the following policies that, given the assumptions and judgment used, are critical to an understanding of the Bank’s financial condition and results of operation:

• Fair Value Measurements

• Other-than-temporary Impairment Analysis

• Allowance for Credit Losses.

In addition to the above policies that inherently are subject to assumptions and judgment, the Bank’s accounting for derivatives and hedging activities accounting policy also is critical to understanding the Bank’s financial results and condition.

Fair Value Measurements

The Bank carries certain assets and liabilities, including investments classified as trading, and all derivatives on the balance sheet at fair value. The Bank adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”), effective January 1, 2008. SFAS 157 defines fair value, establishes a framework for measuring fair value, establishes fair value hierarchy based on the inputs used to measure fair value and requires additional disclosures for instruments carried at fair value on the balance sheet. SFAS 157 defines “fair value” as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date, representing an exit price.

Fair values play an important role in the valuation of certain of the assets, liabilities and hedging transactions of the Bank. Fair values are based on quoted market prices or market-based prices, if such prices are available, even in situations in which trading volume may be low when compared with prior periods as has been the case during the current market disruption. If quoted market prices or market-based prices are not available, the Bank determines fair values based on valuation models that use discounted cash flows, using market estimates of interest rates and volatility.

Valuation models and their underlying assumptions are based on the best estimates of management of the Bank with respect to:

• market indices (primarily LIBOR);

• discount rates;

• prepayments;

• market volatility; and

• other factors, including default and loss rates.

These assumptions, particularly estimates of market indices and discount rates, may have a significant effect on the reported fair values of assets and liabilities, including derivatives, and the income and expense related thereto. The use of different assumptions, as well as changes in market conditions, could result in materially different net income and retained earnings. The assumptions used in the models are corroborated by and independently verified against market observable data where possible.

The Bank categorizes its financial instruments carried at fair value into a three-level classification in accordance with SFAS 157. The valuation hierarchy is based upon the transparency (observable or unobservable) of inputs to

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the valuation of an asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s market assumptions. The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

As of December 31, 2008, the Bank did not carry any financial assets or liabilities, measured on a recurring basis, at fair value based on unobservable inputs. However, as of December 31, 2008, the fair value of the Bank’s private-label held-to-maturity investment portfolio is determined using unobservable inputs.

For further discussion regarding how the Bank measures financial assets and financial liabilities at fair value, see “Note 14—Estimated Fair Values” to the Bank’s 2008 financial statements.

Other-than-temporary Impairment Analysis

The Bank applies SFAS 115, as amended by FASB Staff Position (“FSP”) Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, to determine whether the Bank’s investment securities have incurred other-than-temporary impairment. The Bank recognizes an other-than-temporary impairment loss when it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the security and the fair value of the security is less than its amortized cost. If it is determined that an impairment loss is other than temporary, the carrying value is written down to fair value and a loss is recognized through earnings.

To determine which individual securities are at risk for other-than-temporary impairment, the Bank considers various characteristics of each security including, but not limited to, the following: the credit rating; the duration and amount of the unrealized loss; and any credit enhancements. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment. As a result of this security-level review, the Bank identifies individual securities believed to be at risk for other-than-temporary impairment, which are evaluated further by analyzing the performance of the security and other qualitative factors. These securities are evaluated by estimating projected cash flows based on the structure of the security and certain assumptions. Significant assumptions in these cash flow models include default rates, prepayments, and anticipated loan losses based on underlying loan characteristics, expected housing price changes, and interest rate assumptions. The information used in the discounted cash flow model is highly granular, including loan-level performance data for delinquencies, defaults, prepayments and foreclosures. The model incorporates Metropolitan Statistical Area level home price appreciation data for private-label MBS. The Bank also assesses qualitative considerations when determining whether an impairment is other than temporary, including external credit rating agency actions, the composition of underlying collateral, sufficiency of credit enhancements, the length of time and the extent to which the fair value has been less than amortized cost, the potential for continued adverse developments, and the Bank’s ability and intent to hold the security until maturity or a period of time to allow for the recovery in the fair value of the security.

In evaluating the Bank’s ability and intent to hold its investment securities in unrealized loss positions until the later of maturity or recovery of fair value, the Bank considers expectations about market conditions, projections of future results, and liquidity needs.

Allowance for Credit Losses

Pursuant to SFAS No. 5, Accounting for Contingencies (“SFAS 5”), and SFAS No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS 114”), the Bank is required to assess potential credit losses and establish an allowance for credit losses, if required. The Bank considers the application of these standards to its advance and mortgage loan portfolio a critical accounting policy, as determining the appropriate amount of the allowance for credit losses requires the Bank to make a number of assumptions. The Bank’s assumptions are based on information available as of the date of the financial statements. Actual results may differ from these estimates.

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Advances

Finance Agency regulations require the Bank to obtain eligible collateral from borrowing members to protect against potential credit losses. Eligible collateral is defined by statute and regulation. The Bank monitors the financial condition of borrowers and regularly verifies the existence and characteristics of a risk-based sample of mortgage collateral pledged to secure advances. Each borrower’s collateral requirements and the scope and frequency of its collateral verification reviews are dependent upon certain risk factors. Since its establishment in 1932, the Bank has never experienced a credit loss on an advance. Management believes that an allowance for credit losses on advances is unnecessary as of December 31, 2008 and 2007, based on the Bank’s historical loss experience and its policies and practice related to securing advances with eligible collateral pledged by the member. Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk” for further discussion regarding the Bank’s credit risk policies and practice.

Mortgage Loans

The allowance for credit losses represents management’s estimate of probable credit losses inherent in the Bank’s mortgage loan portfolio as of the balance sheet date. The allowance for credit losses is based on management’s periodic evaluation of the factors discussed below, as well as other pertinent factors that, in management’s judgment, deserve consideration under existing economic conditions in estimating probable credit losses. Realized credit losses on the Bank’s mortgage loan portfolio are charged off against the allowance while recoveries of amounts previously charged off are credited to the allowance. The Bank’s allowance for credit losses related to its mortgage loan portfolio was $856 thousand and $846 thousand as of December 31, 2008 and 2007, respectively, all attributable to multifamily mortgages in AMPP.

The Bank considers the following factors in establishing the allowance for credit losses: (1) the amount and timing of expected future cash flows and collateral values on mortgage loans independently reviewed and rated; (2) the estimated losses on pools of homogeneous loans based on historical loss experience; and (3) the current economic trends and conditions. Each of the above requires estimation based on management’s judgment. As current economic conditions change, the adequacy of the allowance also could change significantly.

The allowance for credit losses for mortgage loans held consists of three components: (1) specific reserves established for losses on multifamily residential mortgage loans based on a detailed credit quality review; (2) a general reserve established for the remaining multifamily residential mortgage loans not subject to specific reserve allocations; and (3) a general reserve for single-family residential mortgage loans based on the Bank’s loss exposure adjusted for credit enhancements from the PFI.

The following discussion provides details regarding the establishment of the allowance for credit losses for conventional multifamily residential mortgage loans and conventional single-family mortgage loans. An allowance for credit losses is not calculated for government-insured/guaranteed single-family residential mortgage loans because of the U.S. government guarantee of the loans and the contractual obligation of the loan servicer.

Multifamily Residential Mortgage Loans

An independent third-party loan review is performed annually on all the Bank’s multifamily residential mortgage loans in AMPP to identify credit risks and to assess the overall collectibility of those loans. Management may shorten this time frame if it notes significant changes in the portfolio’s performance in the quarterly review report provided on each loan. The Bank’s allowance for credit losses related to multifamily residential mortgage loans is comprised of a specific reserve and a general reserve.

The Bank establishes a specific reserve for all multifamily residential mortgage loans with a credit rating at or below a predetermined classification. A loan is considered impaired when, based on current information and

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events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan. The loans are collateral dependent; that is, the ability to repay the loan is dependent on amounts generated by the collateral. Therefore, should a loan be classified as impaired in accordance with SFAS 114, the loan will be adjusted to reflect the fair value of the underlying collateral less cost to sell.

To identify the loans that will be subject to review for SFAS 114 impairment, the Bank reviews all multifamily residential mortgage loans with a credit rating at or below a predetermined classification. The Bank uses six grade categories when assigning credit ratings to individual loans. These credit ratings involve a high degree of judgment in estimating the amount and timing of future cash flows and collateral values. While the Bank’s allowance for credit losses is sensitive to the credit ratings assigned to a loan, a hypothetical one-level downgrade or upgrade in the Bank’s credit ratings for all multifamily residential mortgage loans would not result in a change in the allowance for credit losses that would be material as a proportion of the unpaid principal balance of the Bank’s mortgage loan portfolio.

A general reserve is maintained on multifamily residential mortgage loans not subject to specific reserve allocations to recognize the economic uncertainty and the imprecision inherent in estimating and measuring losses when evaluating reserves for individual loans. To establish the general reserve, the Bank assigns a risk classification to this population of loans. A specified percentage is allocated to the general reserve for designated risk classification levels. The loans and risk classification designations are reviewed by the Bank on an annual basis.

As of December 31, 2008 and 2007, the allowance for credit losses on multifamily residential mortgage loans in AMPP was $856 thousand and $846 thousand, respectively.

Single-family Residential Mortgage Loans

Prior to October 1, 2006, the Bank calculated the allowance for credit losses on its conventional single-family residential mortgage loans to be equal to 5.0 percent of the unpaid principal balance of such loans classified as nonaccrual. This calculation did not consider the lender reserve accounts, supplemental mortgage insurance or the PFI’s credit enhancement obligation (collectively, “credit enhancements”) that would mitigate the loss exposure of the Bank.

Effective October 1, 2006, the Bank revised its calculation of the allowance for credit losses on conventional single-family residential mortgage loans to incorporate additional factors. The calculation now is based on all conventional single-family residential mortgage loans within the Bank’s mortgage portfolio and an estimate of expected credit losses in the portfolio as of the balance sheet date. Data used to estimate expected credit losses includes actual observable losses for mortgage portfolios in the same vintage with similar credit characteristics, the loan portfolio’s historical and current delinquency performance, credit enhancements from the PFI or mortgage insurer, industry data, and the prevailing economic conditions. A general reserve related to the portfolio of loans is recorded if the estimated expected loss exposure exceeds the available credit enhancements under the terms of each Master Commitment.

As of December 31, 2008 and 2007, there was no allowance for credit losses on single-family residential mortgage loans.

See “Note 1—Summary of Significant Accounting Policies—Mortgage Loans Held in Portfolio” to the Bank’s 2008 financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Credit Risk” for a further discussion of management’s estimate of credit losses.

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Accounting for Derivatives and Hedging Activities

General

The Bank accounts for derivatives in accordance with SFAS 133. In accordance with SFAS 133, the Bank records all derivatives on the balance sheet at fair value with changes in fair value recognized in current period earnings. The Bank designates derivatives as either fair-value hedging instruments or SFAS 133 non-qualifying hedging instruments for which hedge accounting is not applied. The Bank has not entered into any cash-flow hedges as of December 31, 2008. The Bank uses derivatives in its risk management program for the following purposes:

• Conversion of a fixed rate to a variable rate

• Conversion of a variable rate with a fixed component to another variable rate

• Macro hedging of balance sheet risks.

To qualify for SFAS 133 hedge accounting the Bank documents the following concurrently with the execution of each hedging relationship:

• The hedging strategy

• Identification of the hedging instrument and the hedged item

• Determination of the appropriate accounting designation under SFAS 133

• The method used for the determination of effectiveness for transactions qualifying for hedge accounting under SFAS 133

• The method for recording ineffectiveness for hedging relationships.

The Bank also evaluates each hedging relationship to determine whether the hedged cash item contains embedded derivatives that meet the criteria for bifurcation as documented in SFAS 133. If, after evaluation, it is determined that an embedded derivative must be bifurcated, the Bank will measure the fair value of the embedded derivative as required by SFAS 133.

Assessment of Hedge Effectiveness

SFAS 133 requires an effectiveness assessment for qualifying hedging relationships, and the Bank uses two methods to make such an assessment. If the hedging instrument is a swap and meets specific criteria, the hedging relationship may qualify for the short-cut method of assessing effectiveness. The short-cut method allows for an assumption of no ineffectiveness, which means that the change in the fair value of the hedged item is assumed to be equal and offsetting of the change in fair value of the hedging instrument. For periods beginning after May 31, 2005, management determined that it would no longer apply the short-cut method to new hedging relationships.

The long-haul method of effectiveness is used to assess effectiveness for hedging relationships that qualify for hedge accounting under SFAS 133 but do not meet the criteria for the use of the short-cut method. The long-haul method requires separate valuations of both the hedged item and the hedging instrument. If the hedging relationship is determined to be highly effective, the change in fair value of the hedged item related to the designated risk is recognized in current period earnings in the same period as the change in fair value of the hedging instrument. If the hedging relationship is determined not to be highly effective, hedge accounting either will not be allowed or will cease at that point. The Bank performs effectiveness testing on a monthly basis and uses statistical regression analysis techniques to determine whether a long-haul hedging relationship is highly effective.

Accounting for Ineffectiveness and Hedge De-designation

The Bank accounts for any ineffectiveness for all long-haul fair-value hedges using the dollar offset method. In the case of SFAS 133 non-qualifying hedges that do not qualify for hedge accounting under SFAS 133, the Bank

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reports only the change in fair value of the derivative. The Bank reports all ineffectiveness for qualifying hedges and SFAS 133 non-qualifying hedges in the income statement caption “Net (losses) gains on derivatives and hedging activities” which is included in the “Other Income (Loss)” section of the income statement.

The Bank may discontinue hedge accounting for a hedging transaction (de-designation) if it fails effectiveness testing or for other asset-liability-management reasons. The Bank also treats modifications to hedged items as a discontinuance of a hedging relationship. When a hedge relationship is discontinued, the Bank will cease marking the hedged item to fair value and will amortize the cumulative basis adjustment resulting from SFAS 133 hedge accounting. The Bank reports SFAS 133-related amortization as interest income or expense over the remaining life of the associated hedged item. The associated derivative will continue to be marked to fair value through earnings until it matures or is terminated.

Recently Issued and Adopted Accounting Standards and Interpretations

Recently Issued Accounting Standards and Interpretations

SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (“SFAS 161”), issued in March 2008, requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS 133, and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 (January 1, 2009 for the Bank) with earlier adoption allowed. The Bank does not believe that the adoption of SFAS 161 will have a material effect on its financial condition or results of operations. The Bank has determined that the adoption of SFAS 161 will result in increased financial statement disclosures.

Recently Adopted Accounting Standards and Interpretations

SFAS 157 was issued in September 2006. In defining fair value, SFAS 157 retains the exchange price notion in earlier definitions of fair value. However, the definition of fair value under SFAS 157 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 assets or liabilities to be measured at fair value. Accordingly, SFAS 157 does not expand the use of fair value in any new circumstances. SFAS 157 also establishes a three-level fair value hierarchy that prioritizes the information used to develop assumptions used to determine the exit price, thereby increasing consistency and comparability in fair value measurements and related disclosures. Under this standard, fair value measurements would be disclosed separately by level within the fair value hierarchy. The Bank adopted SFAS 157 effective January 1, 2008. The adoption of SFAS 157 had no effect on the Bank’s financial condition or results of operations. For additional information on the fair value of certain financial assets and liabilities, see “Note 14—Estimated Fair Values” to the Bank’s 2008 financial statements.

SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (“SFAS 159”), issued in February 2007, creates a fair value option allowing, but not requiring, an entity irrevocably to elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as they occur. SFAS 159 requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the statement of financial position. SFAS 159 also requires an entity to provide information that would allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. The Bank adopted SFAS 159 effective January 1, 2008. There was no initial effect of adoption since the Bank did not elect the fair value option for any existing asset or liability. In addition, the Bank did not elect the fair value option for any financial assets originated or purchased, or for liabilities issued, during the year ended December 31, 2008.

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FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP FIN 39-1”), issued in April 2007, permits an entity to offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instruments recognized at fair value executed with the same counterparty under a master netting arrangement. Under FSP FIN 39-1, the receivable or payable related to cash collateral may not be offset if the amount recognized does not represent or approximate fair value or arises from instruments in a master netting arrangement that are not eligible to be offset. The decision whether to offset such fair value amounts represents an elective accounting policy decision that, once elected, must be applied consistently. An entity should recognize the effects of applying FSP FIN 39-1 as a change in accounting principle through retrospective application for all financial statements presented unless it is impracticable to do so. Upon adoption of FSP FIN 39-1, an entity is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The Bank adopted FSP FIN 39-1 effective January 1, 2008 and retroactively applied its requirements to all prior periods. The Bank has not changed its accounting policy of offsetting fair value amounts recognized for derivative instruments under the same master netting arrangement. As a result of the adoption of FSP FIN 39-1, certain amounts on the Bank’s Statements of Condition as of December 31, 2007, were modified to conform to the 2008 presentation, as summarized in “Note 1—Summary of Significant Accounting Policies” to the Bank’s 2008 financial statements.

Statement 133 Implementation Issue No. 23, Issues Involving Application of the Shortcut Method under Paragraph 68 (“Issue E23”), issued in January 2008 amends SFAS 133 explicitly to permit the use of the shortcut method for those hedging relationships in which (a) the interest rate swap has a nonzero fair value at the inception of the hedging relationship, attributable solely to differing prices within the bid-ask spread; and/or (b) the hedged item has a trade date that differs from its settlement date because of generally established conventions in the marketplace in which the transaction to acquire or issue the hedged item is executed. Issue E23 is effective for hedging relationships designated on or after January 1, 2008. At adoption, preexisting hedging relationships utilizing the shortcut method that did not meet the requirements of Issue E23 as of the inception of the hedging relationship must be dedesignated prospectively. The effects of applying hedge accounting prior to the effective date may not be reversed. A hedging relationship that does not qualify for the shortcut method based on Issue E23 could be redesignated without the application of the shortcut method if that hedging relationship meets the applicable requirements of SFAS 133. The Bank adopted Issue E23 effective January 1, 2008. The Bank concluded that no dedesignations were required as a result of the adoption of Issue E23. In addition, since May 31, 2005, the Bank no longer applies the short-cut method to new hedging relationships. Therefore the adoption of Issue E23 had no effect on the Bank’s financial condition or results of operations.

SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”), issued in May 2008, identifies the sources of accounting principles and the framework, or hierarchy, for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 was effective November 15, 2008. The adoption of SFAS 162 had no effect on the Bank’s financial condition or results of operations.

FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (“FSP 133-1 and FIN 45-4”) was issued in September 2008. FSP 133-1 and FIN 45-4 amended SFAS 133 and FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others—an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34 (“FIN 45”), to improve disclosures about credit derivatives and guarantees and clarify the effective date of SFAS 161. FSP 133-1 and FIN 45-4 amended SFAS 133 to require entities to disclose sufficient information to allow users to assess the potential effect of credit derivatives, including their nature, maximum payment, fair value, and recourse provisions. FSP 133-1 and FIN 45-4 amended FIN 45 to require a disclosure about the current status of the payment/performance risk of a guarantee, which could be indicated by external credit ratings or categories by which the Bank measures risk.

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The Bank currently does not enter into credit derivatives, but does have guarantees: letters of credit and the joint and several liability on consolidated obligations of the FHLBanks. FSP 133-1 and FIN 45-4 are effective for periods ending after November 15, 2008. The Bank adopted FSP 133-1 and FIN 45-4 effective December 31, 2008. The adoption of FSP 133-1 and FIN 45-4 had no effect on the Bank’s financial condition or results of operations. The adoption of FSP 133-1 and FIN 45-4 resulted in increased financial statement disclosures.

FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”), issued in October 2008, clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Key existing principles of SFAS 157 illustrated in the example include:

• A fair value measurement represents the price at which a transaction would occur between market participants at the measurement date.

• In determining a financial asset’s fair value, use of a reporting entity’s own assumptions about future cash flows and appropriately risk-adjusted discount rates is acceptable when relevant observable inputs are unavailable.

• Broker or pricing service quotes may be an appropriate input when measuring fair value, but they are not necessarily determinative if an active market does not exist for the financial asset.

FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in SFAS No. 154, Accounting Changes and Error Corrections (“SFAS 154”). However, the disclosure provisions in SFAS 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. As FSP FAS 157-3 clarified but did not change the application of SFAS 157, the adoption of FSP FAS 157-3 had no effect on the Bank’s financial condition or results of operations.

FSP No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 (“FSP EITF 99-20-1”), issued in January 2009, amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in SFAS 115 and other related guidance. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. The Bank adopted FSP EITF 99-20-1 effective December 31, 2008. The adoption of FSP EITF 99-20-1 had no effect on the Bank’s financial condition or results of operations.

Risk Management

The Bank’s lending, investment, and funding activities and the use of derivative hedge instruments expose the Bank to a number of risks, including any one or more of the following:

• Market risk, which is the risk that the market value, or estimated fair value, of the Bank’s portfolio will decline as a result of changes in interest rates

• Liquidity risk, which is the risk that the Bank will be unable to meet its obligations as they come due or meet the credit needs of its members and associates in a timely and cost-efficient manner

• Credit risk, which is the risk that the market value of an obligation will decline as a result of deterioration in creditworthiness, or that the amount will not be realized

• Operational risk, which is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events, as well as reputation and legal risks associated with business practices or market conduct that the Bank may undertake

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• Business risk, which is the risk of an adverse effect on the Bank’s profitability resulting from external factors that may occur in both the short term and long term.

The Bank’s board of directors establishes the risk management philosophies for the Bank and works with management to align the Bank’s objectives to those philosophies. To manage the Bank’s risk exposure, the Bank’s board of directors has adopted the RMP. The RMP governs the Bank’s approach to managing the above risks. The Bank’s board of directors reviews the RMP annually and formally re-adopts the RMP at least once every three years. It also reviews and approves amendments to the RMP from time to time as necessary. In addition to the RMP, the Bank also is subject to Finance Agency regulations and policies regarding risk management.

To ensure compliance with the RMP, the Bank has established multiple internal management committees to provide oversight over these risks. The Bank produces a comprehensive risk assessment report on an annual basis that is reviewed by the board of directors.

Market Risk

General

The Bank is exposed to market risk in that changes in interest rates and spreads can have a direct effect on the value of the Bank’s assets and liabilities. As a result of the volume of its interest-earning assets and interest-bearing liabilities, the component of market risk having the greatest effect on the Bank’s financial condition and results of operations is interest-rate risk.

Interest-rate risk represents the risk that the aggregate market value or estimated fair value of the Bank’s asset, liability, and derivative portfolios will decline as a result of interest-rate volatility or that net earnings will be affected significantly by interest-rate changes. Interest-rate risk can occur in a variety of forms. These include repricing risk, yield-curve risk, basis risk, and option risk. The Bank faces repricing risk whenever an asset and a liability reprice at different times and with different rates, resulting in interest-margin sensitivity to changes in market interest rates. Yield-curve risk reflects the possibility that changes in the shape of the yield curve may affect the market value of the Bank’s assets and liabilities differently because a liability used to fund an asset may be short-term while the asset is long-term, or vice versa. Basis risk occurs when yields on assets and costs on liabilities are based on different bases, such as LIBOR versus the Bank’s cost of funds. Different bases can move at different rates or in different directions, which can cause erratic changes in revenues and expenses. Option risk is presented by the optionality that is embedded in some assets and liabilities. Mortgage assets represent the primary source of option risk.

The primary goal of the Bank’s interest-rate risk measurement and management efforts is to control the above risks through prudent asset-liability management strategies so that the Bank may provide members with dividends that consistently are competitive with existing market interest rates on alternative short-term and variable-rate investments. The Bank attempts to manage interest-rate risk exposure by using appropriate funding instruments and hedging strategies. Hedging may occur at the micro level, for one or more specifically identified transactions, or at the macro level. Management evaluates the Bank’s macro hedge position and funding strategies on a daily basis and makes adjustments as necessary.

The Bank measures its potential market risk exposure in a number of ways. These include asset, liability, and equity duration analyses; earnings forecast scenario analyses that reflect repricing gaps; and convexity characteristics under assumed changes in interest rates, the shape of the yield curve, and market basis relationships. The Bank establishes tolerance limits for these financial metrics and uses internal models to measure each of these risk exposures at least monthly.

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Use of Derivatives

The Bank enters into derivatives to reduce the interest-rate risk exposure inherent in otherwise unhedged assets and funding positions. The Bank does not engage in speculative trading of these instruments. The Bank’s management attempts to use derivatives to reduce interest-rate exposure in the most cost-efficient manner. The Bank’s derivative position includes interest-rate swaps, options, swaptions, interest-rate cap and floor agreements, and forward contracts. These derivatives are used to adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk-management objectives. Within its risk management strategy, the Bank uses derivative financial instruments in two ways:

1. As a fair-value hedge of an underlying financial instrument or a firm commitment. For example, the Bank uses derivatives to reduce the interest-rate net sensitivity of consolidated obligations, advances, investments, and mortgage loans by, in effect, converting them to a short-term interest rate, usually based on LIBOR. The Bank also uses derivatives to manage embedded options in assets and liabilities; and to hedge the market value of existing assets, liabilities, and anticipated transactions. The Bank reevaluates its hedging strategies from time to time and may change the hedging techniques used or adopt new strategies as deemed prudent.

2. As an asset-liability management tool, for which SFAS 133 hedge accounting is not applied (“SFAS 133 non-qualifying hedge”). The Bank may enter into derivatives that do not qualify for hedge accounting under SFAS 133 accounting rules. As a result, the Bank recognizes the change in fair value of these derivatives in the “Other Income (Loss)” section of the income statement as “Net (losses) gains on derivatives and hedging activities” with no offsetting fair-value adjustments of the hedged asset, liability, or firm commitment. Consequently, these transactions can introduce earnings volatility.

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The following table summarizes the fair-value amounts of derivative financial instruments, excluding accrued interest, by product type (in thousands). The category “Fair value hedges” represents hedge strategies for which hedge accounting is achieved. The category “SFAS 133 non-qualifying hedges” represents hedge strategies for which the derivatives are not in designated hedge relationships that formally meet the hedge accounting requirements under GAAP. In addition to derivatives, the table also includes mandatory delivery commitments for purchased loans under both the MPF Program and MPP, which are accounted for as derivatives in accordance with SFAS 133:

Derivative Financial Instruments Excluding Accrued Interest/By Product

	As of December 31,
	2008					2007
	Total Notional		Estimated Fair Value Gain /(Loss) (excludes accrued interest)			Total Notional		Estimated Fair Value Gain /(Loss) (excludes accrued interest)
Advances:
Fair value hedges	$	116,095,763	$	(9,392,889	)	$	108,404,411	$	(2,687,295	)
SFAS 133 non-qualifying hedges		2,768,400		(162,994	)		789,150		(7,861	)
Total		118,864,163		(9,555,883	)		109,193,561		(2,695,156	)
Investments:
SFAS 133 non-qualifying hedges		4,015,855		(512,160	)		4,327,502		(226,987	)
Total		4,015,855		(512,160	)		4,327,502		(226,987	)
MPF/MPP loans:
Stand alone delivery commitments		—		—			9,309		41
Total		—		—			9,309		41
Consolidated obligation bonds:
Fair value hedges		83,307,558		2,358,057			97,244,433		651,605
SFAS 133 non-qualifying hedges		9,430,000		(10,418	)		5,464,500		(2,552	)
Total		92,737,558		2,347,639			102,708,933		649,053
Consolidated obligation discount notes:
Fair value hedges		18,623,263		54,753			1,494,799		3,789
SFAS 133 non-qualifying hedges		243,030		1,903			—		—
Total		18,866,293		56,656			1,494,799		3,789
Balance Sheet:
SFAS 133 non-qualifying hedges		3,198,038		15,827			3,953,746		10,780
Total		3,198,038		15,827			3,953,746		10,780
Intermediary positions:
Intermediaries		2,532,251		108			1,179,667		103
Total		2,532,251		108			1,179,667		103
Total notional and fair value	$	240,214,158	$	(7,647,813	)	$	222,867,517	$	(2,258,377	)
Total derivatives excluding accrued interest			$	(7,647,813	)			$	(2,258,377	)
Accrued interest				56,762					187,934
Cash collateral held by counterparty—assets				6,338,420					808,359
Cash collateral held from counterparty—liabilities				(69,755	)				(9	)
Net derivative balance			$	(1,322,386	)			$	(1,262,093	)
Net derivative assets balance			$	91,406				$	43,039
Net derivative liabilities balance				(1,413,792	)				(1,305,132	)
Net derivative balance			$	(1,322,386	)			$	(1,262,093	)

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Interest-rate Risk Exposure Measurement

The Bank measures interest-rate risk exposure by various methods, including calculating the effective duration of assets, liabilities, and equity under various scenarios and calculating the theoretical market value of equity. Effective duration, normally expressed in years or months, measures the price sensitivity of the Bank’s interest bearing assets and liabilities to changes in interest rates. As effective duration lengthens, market-value changes become more sensitive to interest-rate changes. The Bank employs sophisticated modeling systems to measure effective duration.

Effective duration of equity aggregates the estimated sensitivity of market value for each of the Bank’s financial assets and liabilities to changes in interest rates. Effective duration of equity is computed by taking the market value-weighted effective duration of assets, less the market value-weighted effective duration of liabilities, and dividing the remainder by the market value of equity. Due to current market conditions, market value of equity is not indicative of the market value of the Bank as a going concern or the value of the Bank in a liquidation scenario. An effective duration gap is the measure of the difference between the estimated durations of portfolio assets and liabilities and summarizes the extent to which the estimated cash flows for assets and liabilities are matched, on average, over time and across interest-rate scenarios.

A positive effective duration of equity or a positive effective duration gap results when the effective duration of assets is greater than the effective duration of liabilities. A negative effective duration of equity or a negative effective duration gap results when the effective duration of assets is less than the effective duration of liabilities. A positive effective duration of equity or a positive effective duration gap generally indicates that the Bank has some exposure to interest-rate risk in a rising rate environment, and a negative effective duration of equity or a negative effective duration gap indicates some exposure to interest-rate risk in a declining interest-rate environment. Higher effective duration numbers, whether positive or negative, indicate greater volatility of market value of equity in response to changing interest rates.

The table below reflects the Bank’s effective duration exposure measurements as calculated in accordance with regulatory requirements. Under the Bank’s RMP, the Bank must maintain its effective duration of equity within a range of +60 months to – 60 months, assuming current interest rates, and within a range of +84 months to – 84 months, assuming an instantaneous parallel increase or decrease in market interest rates of 200 basis points.

Effective Duration Exposure

(In months)

	As of December 31,
	2008				2007
	Up 200 Basis Points	Current	Down 200 Basis Points*		Up 200 Basis Points	Current	Down 200 Basis Points
Assets	6.9	5.2	2.8		5.3	5.6	3.4
Liabilities	5.3	4.7	4.8		5.3	5.2	5.0
Equity	48.8	19.0	(51.5	)	4.1	14.6	(36.9	)
Effective duration gap	1.6	0.5	(2.0	)	0.0	0.4	(1.6	)

* The “down 200 basis points” scenarios shown above are considered to be “constrained shocks”; to prevent the possibility of negative interest rates when a designated low rate environment exists.

The Bank uses both sophisticated computer models and an experienced professional staff to measure the amount of interest rate risk in the balance sheet, thus allowing management to monitor the risk against policy and regulatory limits. Management regularly reviews the major assumptions and methodologies used in the Bank’s models, and may be required to make adjustments to the Bank’s models in response to rapid changes in economic conditions. Management believes that the use of market spreads calculated from estimates of current market

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prices (which include large embedded liquidity spreads), as opposed to valuation spreads that existed at the time the Bank acquired the MBS and mortgage loans (acquisition spreads), results in a disconnect between measured risk and the actual risks faced by the Bank. Because the Bank intends to and is able to hold its MBS and mortgage loans to maturity, the risks of value loss implied by current market price of MBS and mortgage loans are not likely to affect the Bank’s duration of equity. As a result, management does not believe that the increased sensitivity indicates a fundamental change in interest-rate risk. In light of these conditions, in the third quarter of 2008, management refined its duration model to reflect mortgage asset spreads closer to the historical average and price assets closer to book value. The changes between the Bank’s effective duration of equity and duration gap between December 31, 2008 and December 31, 2007 in the table above are based on this difference in calculation method. If these changes had not been made to the model, management estimates that the Bank’s effective duration of equity would have been calculated at 255.8 months and the effective duration gap would have been calculated at 5.7 months at December 31, 2008.

Management has determined that it would be useful to consider interest-rate movements of a lesser magnitude than the +/-200 basis point shifts required by the Bank’s RMP. The table below shows effective duration exposure to increases and decreases in interest rates in 50 basis point increments as of December 31, 2008.

Additional Effective Duration Exposure Scenarios

(In months)

	As of December 31, 2008
	Up 150 Basis Points	Up 100 Basis Points	Up 50 Basis Points	Current	Down 50 Basis Points*		Down 100 Basis Points*		Down 150 Basis Points*
Assets	6.8	6.6	6.1	5.2	2.1		1.3		2.7
Liabilities	5.4	5.5	5.1	4.7	4.3		4.7		4.7
Equity	41.2	34.3	31.1	19.0	(52.6	)	(76.6	)	(46.9	)
Effective duration gap	1.4	1.1	1.0	0.5	(2.2	)	(3.4	)	(2.0	)

* The “down” scenarios shown above are considered to be “constrained shocks”; to prevent the possibility of negative interest rates when a designated low rate environment exists.

The prepayment risk in both advances and investment assets can affect significantly the Bank’s effective duration of equity and effective duration gap. Current regulations require the Bank to mitigate advance prepayment risk by establishing prepayment fees that make the Bank financially indifferent to a borrower’s decision to prepay an advance that carries a rate above current market rates unless the advance contains explicit par value prepayment options. The Bank’s prepayment fees for advances without embedded options generally are based on the present value of the difference between the rate on the prepaid advance and the current rate for an advance with an identical maturity date. Prepayment fees for advances that contain embedded options generally are based upon the market value of the derivative instrument that the Bank used to hedge the advance.

As of December 31, 2008, the Bank held $23.1 billion in MBS and $3.3 billion in mortgage loans purchased from members. The prepayment options embedded in mortgage loan and mortgage security assets may result in extensions or contractions of both actual and expected cash flows when interest rates change. Current Finance Agency policies limit this source of interest-rate risk by limiting the types of MBS the Bank may own to those with defined estimated average life changes under specific interest-rate shock scenarios. These limits do not apply to mortgage loans purchased from members. The Bank typically hedges mortgage prepayment uncertainty by using callable debt as a funding source and by using interest-rate cap, floor, and swaption transactions. To reduce the Bank’s exposure to prepayment risk, the amount of callable debt liabilities used to fund the Bank’s mortgage investments grew from $8.7 billion as of December 31, 2007 to $9.3 billion as of December 31, 2008. The Bank also uses interest-rate exchange agreements to reduce duration and option risks for investment securities other than MBS. Duration and option risk exposures are measured on a regular basis for all investment assets under alternative rate scenarios.

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Another way the Bank analyzes its interest-rate risk and market exposure is by evaluating the theoretical market value of equity. The market value of equity represents the net result of the present value of future cash flows discounted to arrive at the theoretical market value of each balance sheet item, except for traded securities, for which the Bank uses an estimated market price. By using the discounted present value of future cash flows, the Bank is able to factor in the various maturities of assets and liabilities, similar to the effective duration analysis discussed above. The difference between the market value of total assets and the market value of total liabilities is the market value of equity. A more volatile market value of equity under different shock scenarios tends to result in a higher effective duration of equity, indicating increased sensitivity to interest rate changes. Although the Bank’s total capital increased by $870.7 million from December 31, 2007 to December 31, 2008, the market value of equity decreased by $2.8 billion during this same period. The difference is attributable to the decline in MBS prices relative to other fixed-income securities.

Market Value of Equity

(In millions)

	As of December 31,
	2008						2007
	Up 200 Basis Points		Current		Down 200 Basis Points*		Up 200 Basis Points		Current		Down 200 Basis Points
Assets	$	198,937	$	202,397	$	202,397	$	186,394	$	188,114	$	189,524
Liabilities		196,076		197,801		197,801		179,075		180,700		182,212
Equity		2,861		4,596		4,596		7,319		7,414		7,312

* The “down” scenario shown above is considered to be a “constrained shock”; to prevent the possibility of negative interest rates when a designated low rate environment exists.

Under the Bank’s RMP, the Bank’s market value of equity must not decline by more than 15 percent, assuming an immediate, parallel, and sustained interest-rate shock of 200 basis points in either direction. At December 31, 2008, the Bank’s market value of equity declined by more than this amount in the up-200 basis point shock scenario due to the depreciation of MBS market prices and its impact on the Bank’s market value of equity.

If duration of equity or market value of equity is approaching the boundaries of the Bank’s RMP ranges, management will initiate remedial action or review alternative strategies at the next meeting of the board of directors or appropriate committee thereof.

Liquidity Risk

Liquidity risk is the risk that the Bank will be unable to meet its obligations as they come due or meet the credit needs of its members and borrowers in a timely and cost-efficient manner. The Bank’s objective is to meet operational and member liquidity needs under all reasonable economic and operational situations. The Bank uses liquidity to absorb fluctuations in asset and liability balances and to provide an adequate reservoir of funding to support attractive and stable advance pricing. The Bank meets its liquidity needs from both asset and liability sources.

The Bank faces two basic types of liquidity risk; operational and contingent. Operational liquidity is defined as the ready cash and borrowing capacity available to meet the Bank’s day-to-day needs. To maintain adequate operational liquidity on each business day, the Bank has established a daily liquidity target.

Contingency liquidity is defined as the liquidity available should the need for liquidity increase as the result of increased member requests or a disruption of normal access to funding markets. The Bank can secure contingent liquidity from cash, securities available for repurchase, self-liquidating assets maturing in seven days or less, marketable assets with a maturity of one year or less and irrevocable lines of credit from financial institutions rated by an NRSRO no lower than the second highest credit rating category.

Finance Agency regulations and Bank policy require the Bank to maintain contingent liquidity in an amount sufficient to meet its liquidity needs for five business days if it is unable to access the capital markets. To

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maintain adequate contingency liquidity in accordance with this guideline, the Bank’s RMP establishes a contingency liquidity requirement. In addition, the Bank attempts to maintain sufficient liquidity to service debt obligations for at least 90 days, assuming restricted debt market access. At times during the second half of 2008, the Bank did not meet its 90-day debt service goal due to an increased reliance on discount notes and other short-term debt because of their attractive pricing and the lack of availability of long-term debt.

In light of stress and instability in domestic and international credit markets, the Finance Agency in September 2008 provided liquidity guidance to each FHLBank. In March 2009, the Finance Agency updated this guidance, generally to provide ranges of days within which each FHLBank should maintain positive cash balances based upon different assumptions and scenarios. The Bank has operated within these ranges since the Finance Agency issued this guidance.

If on any day the operational liquidity calculation or the contingency liquidity calculation results in a negative value, the Bank’s RMP requires management to review such occurrence at the next meeting of the Asset/Liability Committee and to report such occurrence at the next meeting of the board of directors or appropriate committee thereof. In the event of an actual stressed environment, the Bank will prioritize liquidity requests from its members, and management will consult with the board of directors or appropriate committee thereof at the earliest opportunity to discuss a remedial strategy.

Credit Risk

Credit risk is defined as the risk of loss due to defaults on principal and interest payments on advances, MBS and other investments, derivatives, mortgage loans and unsecured extensions of credit.

Advances

Secured advances to member financial institutions account for the largest category of Bank assets; thus, advances are the Bank’s principal source of credit risk exposure. The Bank uses a risk-focused approach to credit and collateral underwriting. The Bank attempts to reduce credit risk on advances by monitoring the financial condition of borrowers and counterparties and the quality and value of the assets members pledge as eligible collateral.

During the quarter ended June 30, 2008, the Bank began utilizing a credit risk rating system for its members, which focuses primarily on an institution’s overall financial health and takes into account quality of assets, earnings, and capital position. The Bank assigns each borrower that is an insured depository institution a credit risk rating from one to 10 according to the relative amount of credit risk such borrower poses to the Bank (one being the least amount of credit risk and 10 the greatest amount of credit risk). In general, borrowers in categories eight through 10 may have more restrictions on the types of collateral they may use to secure advances, may be required to maintain higher collateral maintenance levels and deliver loan collateral, may be restricted from obtaining convertible advances and may face more stringent collateral reporting requirements. At times, the Bank may place more restrictive requirements on a borrower than those generally applicable to borrowers with the same rating based upon management’s assessment of the borrower and its collateral.

The following table sets forth the number of borrowers and the par value of advances outstanding to borrowers with the specified ratings as of the specified dates (dollar amounts in thousands):

	As of December 31, 2008			As of June 30, 2008
Rating	Number of Borrowers	Outstanding Advances		Number of Borrowers	Outstanding Advances
1-4	207	$	7,786,864	203	$	8,699,040
5-7	436		70,081,172	427		62,919,884
8	134		22,064,197	139		16,369,958
9	101		46,662,050	90		51,379,489
10	50		7,612,959	30		1,152,768

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The Bank establishes a credit limit for each borrower. The credit limit is not a committed line of credit, but rather an indication of the borrower’s general borrowing capacity with the Bank. The Bank determines the credit limit in its sole and absolute discretion, by evaluating a wide variety of factors indicating the borrower’s overall creditworthiness. The credit limit is expressed as a percentage equal to the ratio of the borrower’s total liabilities to the Bank, including the face amount of outstanding letters of credit, the principal amount of outstanding advances and the total exposure of the Bank to the borrower under any derivative contract, to the borrower’s total assets. Generally, borrowers are held to a credit limit of no more than 30.0 percent. The Bank’s maximum allowable credit limit is 50.0 percent. However, the Bank’s board of directors, or a relevant committee thereof, may approve a higher limit at its discretion. Prior to 2009, credit limits in excess of 30.0 percent required approval of the Bank’s internal Credit and Collateral Committee. Beginning in 2009, the board of directors, or a relevant committee thereof, will be required to approve credit limits in excess of 30.0 percent.

Each borrower must maintain an amount of qualifying collateral that, when discounted to the lendable collateral value (“LCV”), is equal to at least 100 percent of the outstanding principal amount of all advances and other liabilities of the borrower to the Bank. Borrowers with a credit risk rating of nine or 10 currently must maintain higher collateral levels. The LCV is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support. For each type of qualifying collateral, the Bank discounts the unpaid principal balance, market value, or other value of the qualifying collateral, to calculate the LCV. The following table provides information about the types of collateral held for the Bank’s advances (dollar amounts in thousands):

	Total Par Value of Outstanding Advances		LCV of Collateral Pledged by Members		First Mortgage Collateral (%)	Securities Collateral (%)	Other Real Estate Related Collateral (%)
As of December 31, 2008	$	156,269,156	$	272,879,687	58.2	14.9	26.9
As of December 31, 2007		140,229,705		227,230,433	67.4	11.8	20.8

In its history, the Bank has never experienced a credit loss on an advance. In consideration of this, and the Bank’s policies and practices detailed above, the Bank has not established a loan loss allowance for advances as of December 31, 2008 and 2007.

Investments

While the Bank faces what it believes to be minimal credit risk on advances to members, it is subject to credit risk on certain unsecured investments, including federal funds sold and MBS.

The Bank follows guidelines approved by its board of directors regarding unsecured extensions of credit, in addition to Finance Agency regulations with respect to term limits and eligible counterparties.

Finance Agency regulations prohibit the Bank from investing in any of the following securities:

• Instruments such as common stock that represent an ownership interest in an entity, other than stock in small business investment companies or certain investments targeted to low-income people or communities

• Instruments issued by non-United States entities, other than those issued by United States branches and agency offices of foreign commercial banks

• Non-investment grade debt instruments, other than certain investments targeted to low-income people or communities and instruments that were downgraded to below an investment grade rating after purchase by the Bank

• Whole mortgages or other whole loans, other than (1) those acquired under the Bank’s mortgage purchase programs; (2) certain investments targeted to low-income people or communities; (3) certain marketable

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direct obligations of state, local, or tribal government units or agencies having at least the second highest credit rating from an NRSRO; (4) MBS or asset-backed securities backed by manufactured housing loans or home equity loans; and (5) certain foreign housing loans authorized under section 12(b) of the FHLBank Act

• Non-U.S. dollar denominated securities.

In addition, Finance Agency regulations prohibit the Bank from taking a position in any commodity or foreign currency, other than participating in consolidated obligations denominated in a foreign currency or linked to equity or commodity prices. Further, the Finance Agency prohibits the Bank from purchasing any of the following:

• Interest-only or principal-only stripped MBS, CMOs, and REMICs

• Residual-interest or interest-accrual classes of CMOs and REMICs

• Fixed-rate or variable-rate MBS, CMOs, and REMICs that on the trade date are at rates equal to their contractual cap and that have average lives that vary by more than six years under an assumed instantaneous interest-rate change of 300 basis points.

Consistent with its practice with respect to members, the Bank monitors the financial condition of investment counterparties to ensure that they are in compliance with the Bank’s RMP and Finance Agency regulations. Unsecured credit exposure to any counterparty is limited by the credit quality and capital of the counterparty and by the capital of the Bank. On a monthly basis, management produces financial monitoring reports detailing the financial condition of the Bank’s counterparties. These reports are reviewed by the Bank’s board of directors.

The Bank experienced a decrease in unsecured credit exposure in its investment portfolio related to counterparties other than the U.S. government or U.S. government agencies and instrumentalities from $20.7 billion at December 31, 2007 to $11.4 billion as of December 31, 2008. As of December 31, 2008, the distribution of maturities of unsecured credit exposure was approximately as follows:

• 70 percent of the exposure matured in one business day

• 30 percent matured after 270 calendar days and consisted of housing bonds and derivative exposure.

As of December 31, 2008, the Bank had unsecured credit exposure to three non-U.S. government counterparties that was greater than 10 percent of total unsecured credit exposure. The Bank had unsecured credit exposure to one counterparty in excess of five percent but less than 10 percent of total unsecured credit exposure.

Mortgage–backed Securities

The Bank’s RMP permits the Bank to invest in agency (Fannie Mae, Freddie Mac and Ginnie Mae) obligations, including collateralized mortgage obligations (“CMOs”) and real estate mortgage-investment conduits (“REMICS”) backed by such securities, and other MBS, CMOs and REMICS rated AAA by S&P or Aaa by Moody’s at the time of purchase. The MBS purchased by the Bank attain their triple-A ratings through credit enhancements, which primarily consist of the subordination of the claims of the other tranches of these securities. The Bank’s investment portfolio as of December 31, 2008 included $15.9 billion of private-label MBS, which represented a substantial portion, or 68.9 percent, of the Bank’s held-to-maturity investment portfolio.

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The table below provides information on the credit ratings of the Bank’s private-label MBS held at December 31, 2008, based on their credit ratings as of December 31, 2008 and March 20, 2009 (in thousands). The credit ratings reflect the lowest rating as reported by a NRSRO.

	As of December 31, 2008
Investment Ratings	Amortized Cost		Estimated Fair Value
AAA	$	13,823,733	$	10,845,358
AA		915,440		594,561
A		582,658		381,914
BBB		432,153		294,703
BB		24,539		14,063
B		72,246		72,246
CCC		67,622		73,513
Total	$	15,918,391	$	12,276,358
	As March 20, 2009
Investment Ratings	Amortized Cost		Estimated Fair Value
AAA		$11,593,460	$	9,347,479
AA		855,941		599,856
A		549,520		345,491
BBB		659,929		467,458
BB		279,990		204,665
B		716,600		416,788
CCC		1,262,951		894,621
Total		$15,918,391	$	12,276,358

A substantial portion of the Bank’s private-label MBS, or 72.8 percent, continued to be rated AAA as of March 20, 2009 and 13.0 percent were rated AA to BBB as of March 20, 2009. Approximately $6.5 billion, or 40.6 percent, of the Bank’s private-label MBS have been downgraded or placed on negative watch as of March 20, 2009 as outlined in the below table (in thousands).

	Rating Agency Actions as of March 20, 2009
	Downgraded and Stable						Downgraded and Negative Watch				Negative Watch/No Downgrade
	To Double A		To Single A		To Below Investment Grade		To Triple B		To Below Investment Grade		Rated Triple A		Rated Double A		Rated Single A		Rated Triple B
Private-label MBS	$	98,349	$	169,252	$	1,892,745	$	274,588	$	202,390	$	3,003,091	$	400,703	$	233,679	$	183,128
Total amortized cost	$	98,349	$	169,252	$	1,892,745	$	274,588	$	202,390	$	3,003,091	$	400,703	$	233,679	$	183,128

The Bank classifies private-label MBS as either prime or Alt-A based upon the overall credit quality of the underlying loans as determined by the originator at the time of origination. Although there is no universal accepted definition of Alt-A, generally, loans with credit characteristics that range between prime and subprime are classified as Alt-A. Participants in the mortgage market have used the Alt-A classification principally to describe loans for which the underwriting process has been streamlined in order to reduce the documentation requirements of the borrower or allow alternative documentation. At December 31, 2008, based on the classification by the originator at the time of origination, approximately 90 percent of the underlying mortgages

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collateralizing the Bank’s private-label MBS were considered prime and the remaining underlying mortgages collateralizing these securities were considered Alt-A. None of the underlying mortgages collateralizing the private-label MBS portfolio is considered subprime. The table below provides additional information on the credit rating of the Bank’s private-label MBS backed by prime and Alt-A loans (dollar amount in thousands).

	Credit Ratings of Private-label MBS Backed by Prime Loans As of December 31, 2008
	Unpaid Principal Balance		Amortized Cost		Gross Unrealized Losses		Weighted- average Collateral Delinquency (%)
Investment grade:
AAA-rated	$	12,363,309	$	12,285,245	$	2,638,655	2.63
AA-rated		937,578		915,440		320,878	6.05
Other		1,065,449		1,014,811		338,194	7.88
Below investment grade		167,446		96,785		10,476	14.46
Total	$	14,533,782	$	14,312,281	$	3,308,203	3.37
	Credit Ratings of Private-label MBS Backed by Alt-A Loans As of December 31, 2008
	Unpaid Principal Balance		Amortized Cost		Gross Unrealized Losses		Weighted- average Collateral Delinquency (%)
Investment grade:
AAA-rated	$	1,535,615	$	1,538,488	$	340,076	7.90
Below investment grade		99,043		67,622		—	17.18
Total	$	1,634,658	$	1,606,110	$	340,076	8.47

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The tables below provide additional information on the Bank’s private-label MBS by year of issuance (dollar amounts in thousands).

	As of December 31, 2008
	AAA				AA				A				BBB				Below Investment Grade
	Unpaid Principal Balance		Gross Unrealized Losses		Unpaid Principal Balance		Gross Unrealized Losses		Unpaid Principal Balance		Gross Unrealized Losses		Unpaid Principal Balance		Gross Unrealized Losses		Unpaid Principal Balance		Gross Unrealized Losses		Subtotal Gross Unrealized Losses		Original Credit Enhancement (%)	Weighted Average Credit Support Percentage (%)
Prime - Year of Issuance
2003 and prior	$	3,393,210	$	325,499	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	325,499	2.3	4.6
2004		2,901,176		625,553		356,464		123,072		87,721		33,214		—		—		—		—		781,839	3.6	6.6
2005		3,318,773		962,640		—		—		58,533		17,262		—		—		24,539		10,476		990,378	6.2	8.1
2006		257,234		70,627		402,571		126,628		483,535		150,267		346,302		112,715		142,907		—		460,237	9.3	10.3
2007		2,123,179		527,133		178,544		71,179		—		—		89,359		24,735		—		—		623,047	11.8	12.1
2008		369,735		127,203		—		—		—		—		—		—		—		—		127,203	15.7	16.7
Total prime		12,363,307		2,638,655		937,579		320,879		629,789		200,743		435,661		137,450		167,446		10,476		3,308,203	6.2	8.1
Alt-A- Year of Issuance
2003 and prior		944,996		108,560		—		—		—		—		—		—		—		—		108,560	6.5	10.2
2004		154,590		16,192		—		—		—		—		—		—		—		—		16,192	7.1	12.5
2005		436,029		215,324		—		—		—		—		—		—		—		—		215,324	26.0	27.3
2006		—		—		—		—		—		—		—		—		—		—		—	—	—
2007		—		—		—		—		—		—		—		—		99,043		—		—	12.3	12.0
2008		—		—		—		—		—		—		—		—		—		—		—	—	—
Total Alt-A		1,535,615		340,076		—		—		—		—		—		—		99,043		—		340,076	12.1	15.1
Total	$	13,898,922	$	2,978,731	$	937,579	$	320,879	$	629,789	$	200,743	$	435,661	$	137,450	$	266,489	$	10,476	$	3,648,279	6.8	8.8

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Fair Value as a Percentage of Unpaid Principal Balance

By Year of Issuance

Private-label MBS by Year of Issuance	December 31, 2008		September 30, 2008		June 30, 2008		March 31, 2008		December 31, 2007
Prime
2008	66	%	86	%	96	%	97	%	—
2007	72	%	78	%	94	%	96	%	98	%
2006	64	%	80	%	95	%	96	%	98	%
2005	70	%	83	%	95	%	97	%	98	%
2004	76	%	86	%	96	%	97	%	97	%
2003 and earlier	90	%	89	%	93	%	96	%	96	%
Weighted-average of all prime	76	%	84	%	95	%	96	%	97	%
Alt-A
2008	—		—		—		—		—
2007	74	%	68	%	88	%	89	%	97	%
2006	—		—		—		—		—
2005	51	%	69	%	72	%	84	%	91	%
2004	90	%	86	%	86	%	90	%	95	%
2003 and earlier	89	%	80	%	82	%	85	%	95	%
Weighted-average of all Alt-A	78	%	77	%	80	%	86	%	94	%
Weighted-average of all private-label MBS	76	%	83	%	93	%	95	%	97	%

The table below provides information on the interest-rate payment terms of the Bank’s MBS backed by prime and Alt-A loans (in thousands).

	As of December 31,
	2008						2007
	Fixed-Rate		Variable-Rate		Total		Fixed-Rate		Variable-Rate		Total
Private-label MBS:
Prime	$	3,536,058	$	10,997,724	$	14,533,782	$	4,153,715	$	12,190,060	$	16,343,775
Alt-A		1,116,874		517,784		1,634,658		1,296,000		567,652		1,863,652
Total unpaid principal balance	$	4,652,932	$	11,515,508	$	16,168,440	$	5,449,715	$	12,757,712	$	18,207,427

The Bank evaluates its individual held-to-maturity securities for other-than-temporary impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate these investments may be other-than-temporarily impaired. As a result of this security-level review, the Bank identifies individual securities believed to be at risk for other-than-temporary impairment, which are evaluated further by analyzing the performance of the security and other qualitative factors. These securities are evaluated by estimating projected cash flows based on the structure of the security and certain assumptions, such as prepayments, default rates and loss severity, to determine whether the Bank expects to receive all of the contractual cash flows as scheduled. For the securities for which an other-than-temporary impairment loss was recorded, the Bank concluded it was probable that it would not receive all of the investment security’s cash flows according to the security’s contractual terms.

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As discussed previously, the Bank recognized an other-than-temporary impairment loss of $186.1 million for the year ended December 31, 2008 related to five private-label MBS in its held-to-maturity securities portfolio. The table below summarizes the other-than-temporary impairment loss recorded during the period by classification and by the duration of the unrealized loss prior to impairment (in thousands):

	Gross Unrealized Loss Position
	Less than 12 Months		12 Months or more		Total
Private-label MBS backed by:
Prime loans	$	153,068	$	—	$	153,068
Alt-A		32,995		—		32,995
Total securities impairments	$	186,063	$	—	$	186,063

As of December 31, 2008, no additional securities in the Bank’s held-to-maturity portfolio have been designated as other-than-temporarily impaired. However, the Bank’s held-to-maturity portfolio has experienced significant unrealized losses and decreases in fair value due to interest rate volatility, illiquidity in the marketplace, and credit deterioration in the U.S. mortgage markets. This decline in fair value is considered temporary as the Bank has the ability and intent to hold these investments to maturity and expects to collect all contractual cash flows as scheduled.

Given the current market conditions and the significant judgments involved, there is a continuing risk that further declines in fair value may occur and that the Bank may record material other-than-temporary impairment losses in future periods, which could affect the Bank’s earnings and retained earnings.

Derivatives

Derivative transactions may subject the Bank to credit risk due to potential nonperformance by counterparties to the agreements. The Bank seeks to limit counterparty risk by collateral requirements and netting procedures that establish collateral requirement thresholds. The Bank also manages counterparty credit risk through credit analysis, collateral management, and other credit enhancements. Additionally, the Bank follows applicable regulatory requirements, which set forth the eligibility criteria for counterparties (i.e., minimum capital requirements, NRSRO ratings, dollar and term limits, etc.). The Bank requires collateral agreements with counterparties that establish maximum allowable net unsecured credit exposure before collateral requirements are triggered. Limits are based on the credit rating of the counterparty. Uncollateralized exposures result when credit exposures to specific counterparties fall below collateralization trigger levels.

As of December 31, 2008, the Bank had $240.2 billion in total notional amount of derivatives outstanding compared to $222.9 billion at December 31, 2007. The notional amount serves as a factor in determining periodic interest payments or cash flows received and paid. It does not represent actual amounts exchanged or the Bank’s exposure to credit and market risk. The amount potentially subject to credit loss is based upon the counterparty’s net payment obligations. The credit risk of derivatives is measured on a portfolio basis by netting the market values of all outstanding transactions for each counterparty.

As of December 31, 2008, 99.5 percent of the total notional amount of outstanding derivative transactions was represented by 27 counterparties with a credit rating of A or better. Of these counterparties, there were five, Barclays Bank Plc, JP Morgan Chase Bank N.A., Deutsche Bank AG, Goldman Sachs Group, Inc and Merrill Lynch & Co. Inc., that represented more than 10 percent of the Bank’s total notional amount, and three counterparties, Bank of America N.A., Rabobank Nederland and Royal Bank of Canada, that represented more than 10 percent of the Bank’s net exposure. As of December 31, 2007, 32 counterparties represented 99.7 percent of the total notional amount of outstanding derivative transactions and all counterparties had a credit rating of A or better. Of these counterparties, there were four, Goldman Sachs Group, Inc., JP Morgan Chase Bank, Deutsche Bank AG and Lehman Brothers Holdings Inc., that represented more than 10 percent of the total notional amount and three counterparties, Bank of America N.A., HSBC Bank USA, and Royal Bank of Canada, represented more than 10 percent of the Bank’s net exposure.

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The following tables represent the credit ratings of and the Bank’s credit exposure to its derivative counterparties (in thousands):

Derivative Counterparty Credit Exposure

As of December 31, 2008

Credit Rating	Notional Amount		Total Net Exposure at Fair Value		Collateral Held		Net Exposure After Collateral
AAA	$	4,487,365	$	—	$	—	$	—
AA		86,833,819		108,627		69,747		38,880
A		147,626,848		2,382		—		2,382
Member institutions *		1,266,126		6,692		—		—
Total derivatives	$	240,214,158	$	117,701	$	69,747	$	41,262

* Collateral held with respect to derivative financial instruments with member institutions represents either collateral physically held by or on behalf of the Bank or collateral assigned to the Bank , as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.

Derivative Counterparty Credit Exposure

As of December 31, 2007

Credit Rating	Notional Amount		Total Net Exposure at Fair Value		Collateral Held		Net Exposure After Collateral
AAA	$	2,043,635	$	38	$	—	$	38
AA		161,453,653		39,859		—		39,859
A		58,771,087		355		—		355
Member institutions *		589,833		2,755		—		—
Delivery commitments		9,309		41		—		—
Total derivatives	$	222,867,517	$	43,048	$	—	$	40,252

* Collateral held with respect to derivative financial instruments with member institutions represents either collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by a written security agreement, and held by the member institution for the benefit of the Bank.

The maximum credit risk is the estimated cost of replacing interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans, and purchased caps and floors that have a net positive market value, if the counterparty defaults and the related collateral, if any, is of no value to the Bank.

The net exposure after collateral is treated as unsecured credit consistent with the Bank’s RMP and Finance Agency regulations if the counterparty has an NRSRO rating. If the counterparty does not have an NRSRO rating, the Bank requires collateral for the full amount of the exposure.

Mortgage Loan Programs

The Bank stopped accepting additional MPF master commitments as of February 4, 2008, and as of March 31, 2008, ceased purchasing assets under the MPF Program. Early in the third quarter of 2008, the Bank suspended new acquisitions of mortgage loans under the MPP.

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MPF Program

The Bank seeks to manage the credit risk associated with the MPF Program by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the PFI.

Mortgage loans purchased under the MPF Program must comply with the underwriting and eligibility standards established and maintained by FHLBank Chicago. In some circumstances, the Bank, with the concurrence of FHLBank Chicago, may grant a PFI a waiver exempting it from complying with these standards. The Bank has granted a limited number of such waivers related to documentation requirements or accepted alternate underwriting criteria in circumstances in which such waivers would not affect materially the value of the asset.

The Bank manages MPF Program credit risk through underwriting and eligibility guidelines and sharing of potential losses with the PFI. The Bank and PFI share the risk of losses on MPF loans by structuring potential losses on conventional MPF loans into layers with respect to each master commitment. The general allocation of losses under the MPF program is divided into the following loss layers:

Borrower’s Equity. The first layer of protection against loss is the borrower’s equity in the real property securing the MPF loan.

Primary Mortgage Insurance. The second layer of protection comes from primary mortgage insurance (“PMI”) that is required for any MPF loan with a loan-to-value (“LTV”) greater than 80 percent.

First Loss Account. Third, losses for each master commitment that are not paid by PMI, up to an agreed-upon amount, are incurred by the Bank up to a pre-specified amount that is tracked in what is called a “First Loss Account,” or “FLA.” The FLA represents the amount of expected losses that the Bank incurs before the PFI’s credit enhancement becomes available to cover losses. For MPF products with performance based CE Fees (e.g., MPF Plus), the Bank may withhold CE Fees to recover losses at the FLA level, essentially transferring a portion of the first layer risk of credit loss to the PFI.

Member Credit Enhancement. Fourth, losses for loans purchased under each master commitment in excess of the FLA, up to an agreed-upon amount, called the credit enhancement, or “CE Amount,” are incurred by the PFI, which, for MPF Plus, includes supplemental mortgage insurance (“SMI”). The member’s CE Amount is sized using the MPF Program methodology to limit the amount of the Bank’s losses in excess of, or including, the FLA (depending on the MPF product) to those that would be expected to be experienced by an investor in an MBS rated AA under the S&P LEVELS ratings methodology (although the assets are not rated by S&P or any other agency). The CE Amount is determined at inception of each loan pool master commitment and is reassessed and increased, if necessary, after the “fill up period” for each master commitment that has been completed but is not increased thereafter. In one MPF product, the PFI is required to obtain and pay for SMI, for which the Bank is the insured party. The Bank pays the PFI a monthly credit enhancement fee for managing credit risk on the MPF Program loans. In most cases, the credit enhancement fees are performance based, which further motivates the PFI to minimize loan losses on MPF Program loans.

MPF Bank. Fifth, the Bank absorbs any remaining unallocated losses.

The unpaid principal balance of MPF Program mortgage loans was $2.9 billion and $3.2 billion as of December 31, 2008 and 2007, respectively. The Bank determined that an allowance for credit losses on MPF Program mortgage loans was not required at December 31, 2008 and 2007. A description of the MPF Program is contained in Item 1, “Business-Mortgage Loans Held for Portfolio-MPF.”

MPP

Like the MPF Program, the Bank seeks to manage the credit risk associated with the MPP by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the PFI.

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Mortgage loans purchased under MPP must comply with the underwriting and eligibility standards set forth in the MPP guidelines established by the Bank. In some circumstances, the Bank may grant a PFI a waiver exempting it from complying with specified provisions of the MPP guidelines.

The current underwriting and eligibility guidelines with respect to MPP loans can be summarized broadly as follows:

• Conforming loan size, which may not exceed the loan limits permitted to be set by Fannie Mae each year

• Fixed-rate, fully-amortizing loans with terms from 10 years to 30 years

• Secured by first liens on residential owner-occupied primary residences and second homes; primary residences may be up to four units

• Condominiums and planned unit developments are acceptable property types as are mortgages on leasehold estates

• 95 percent maximum LTV; government MPP loans which may not exceed the LTV limits set by FHA and VA; any MPP loan with an LTV greater than 80 percent requires certain amounts of PMI from insurers acceptably rated as detailed in the MPP guidelines

• Current production or seasoned up to 12 months from origination

• Eligible loan purposes are purchase transactions, cash-out refinances, and no-cash-out refinances

• Credit scores no more than 180 days old as of the delivery date are required

• Verification of income

• Property appraisals

• Customary property or hazard insurance, and flood insurance, if applicable, from insurers acceptably rated as detailed in the MPP guidelines

• Title insurance must be provided to assure the first lien and clear title status of each mortgage; title insurance is to be provided by an acceptably rated title insurance company as provided in the MPP guidelines

• The mortgage documents, mortgage transaction, and mortgaged property must comply with all applicable laws and loans must be documented using standard Fannie Mae/Freddie Mac Uniform Instruments

• Loans that S&P has declined to rate are not eligible for delivery under MPP

• Loans that are classified as high-cost, high-rate, or high-risk, or loans in similar categories defined under predatory lending or abusive lending laws, are not eligible for delivery under MPP

• Loans that exceed either the annual percentage rate or points and fees threshold of Home Ownership and Equity Protection Act are not eligible.

The Bank manages MPP credit risk through sharing of potential losses with the PFI. The general allocation of losses under the MPP is divided into the following loss layers:

Borrower’s Equity and Primary Mortgage Insurance. The first layer of protection against loss is the borrower’s equity in the real property securing the MPP loan and PMI where applicable.

Lender Risk Account. Second, the Bank establishes a Lender Risk Account (“LRA”) for each master commitment to cover losses that are not paid by PMI or borrower’s equity. The Bank can establish the amount of the LRA balance either up front as a portion of the purchase proceeds (a “Fixed LRA”) or as a portion of the monthly

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interest paid by the borrower (a “Spread LRA”). The cost of the LRA is factored into determining a purchase price for loans under MPP. If, for example, the Bank has to set aside seven basis points annually to cover the funding of the LRA, the purchase price would be set under the assumption that seven basis points of coupon flow was not available to the Bank.

The Bank historically has offered only the Spread LRA option, so the Bank funds the LRA through a portion of the monthly interest paid by the borrower. The LRA typically ranges between 30 basis points and 45 basis points of the outstanding principal balance of the mortgage loans. The exact amount is determined in conjunction with the provider of the SMI and the final pricing received on the SMI can be affected by the size of the LRA. The PFI’s recourse is limited to this predetermined LRA amount, so that the PFI has no further obligation to make additional contributions to the LRA, regardless of any losses or deterioration of the mortgage pool exceeding such amount in the LRA. Once the LRA has reached the required amount, but not before five years in the case of the Fixed LRA, the Bank will pay to the PFI on an annual basis in accordance with a step-down schedule that is established at the time of a master commitment contract any unused amounts of the LRA that are no longer required to cover expected losses. After 11 years from the closing of the mortgage pool, the Bank extinguishes the LRA and pays any remaining amounts to the PFI. The extinguishment of the LRA after 11 years was arrived at in conjunction with the providers of SMI.

Supplemental Mortgage Insurance. Third, losses for each master commitment in excess of the LRA, up to a specified LTV ratio, are covered by SMI obtained by the PFI. In MPP, SMI generally covers mortgages with an LTV of 45 percent or greater. The Bank expects that the specified LTV may change in the future. In addition, SMI policies for master commitments in excess of $35 million contain an aggregate loss limit whereby the total amount payable by the SMI insurer under the policy is less than the total unpaid principal balances on the insured loans.

The Bank has never incurred a credit loss pursuant to which a claim has been paid by SMI. The Bank has established formal polices and procedures to monitor its exposure to mortgage insurance companies, including an aggregate cap on the amount of permissible exposure to SMI at each provider.

The Bank. Fourth, the Bank absorbs any remaining unallocated losses.

Total credit enhancement is sized to provide the equivalent of an AA rating under the S&P LEVELS rating methodology (although the assets are not rated by S&P or any other agency).

The unpaid principal balance of MPP mortgage loans was $369.6 million and $327.1 million as of December 31, 2008 and 2007, respectively. The Bank determined that an allowance for credit losses on MPP mortgage loans was not required at December 31, 2008 and 2007. A description of MPP is contained in Item 1, “Business-Mortgage Loans Held for Portfolio-MPP.”

Currently, eight mortgage insurance companies provide primary and/or supplemental mortgage insurance for loans in which the Bank has a retained interest. As of March 19, 2009, several of the Bank’s mortgage insurance providers have had their ratings for claims paying ability or insurer financial strength downgraded below double A by one or more NRSROs. Ratings downgrades imply an increased risk that these mortgage insurers may be unable to fulfill their obligations to pay claims that may be made under the insurance policies. Given the amount of loans covered by this insurance, the other credit enhancements and the historical performance of those loans, the Bank believes its credit exposure to these companies, both individually and in the aggregate, was not significant as of December 31, 2008.

AMPP

The Bank’s AMPP assets do not carry external credit enhancements like the MPF and MPP assets and are not rated by a rating agency. The Bank’s primary protection against loss is the borrower’s equity in the real property

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that secures the AMPP loan. The unpaid principal balance of AMPP mortgage loans was $22.8 million and $23.3 million as of December 31, 2008 and 2007, respectively. Starting in 2006, the Bank no longer purchased assets under this program but retains its existing portfolio, which eventually will be reduced to zero in accordance with the ordinary course of the maturities of the assets.

An independent third party performs a loan review of the AMPP portfolio on an annual basis, and the Bank establishes an allowance for credit losses based on the results of the review in accordance with written policies and procedures. The Bank’s allowance for credit losses on AMPP mortgage loans was approximately $856 thousand and $846 thousand, at December 31, 2008 and 2007, respectively.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or from external events. Operational risk for the Bank also includes reputation and legal risks associated with business practices or market conduct the Bank may undertake. Operational risk inherently is greatest where transaction processes include numerous processing steps, require greater subjectivity or are non-routine. As the Bank’s activities and business environment are becoming increasingly complex due to changing regulatory requirements and Bank growth, the Bank is experiencing increased operational risk.

The Bank identifies risk through daily operational monitoring, independent reviews, and the strategic planning and risk assessment programs, both of which consider the operational risk ramifications of the Bank’s business strategies and environment. The Bank has established comprehensive financial and operating polices and procedures to mitigate the likelihood of loss resulting from the identified operational risks. For example, the Bank has a disaster recovery plan designed to restore critical business processes and systems in the event of disaster. The Bank effects related changes in processes, information systems, lines of communication, and other internal controls as deemed appropriate in response to identified or anticipated increases in operational risk.

In 2008, the board established the Enterprise Risk and Operations Committee to advise and assist the board with respect to enterprise risk management, operations, public affairs, information technology and other related matters. The Bank’s internal Enterprise Risk Committee is responsible for management and oversight of the Bank’s risk management programs and practices discussed above. Additionally, the Bank’s Internal Audit department, which reports directly to the Audit Committee of the Bank’s board of directors, regularly monitors compliance with the polices and procedures related to managing operational risks.

Business Risk

Business risk is the risk of an adverse effect on the Bank’s profitability resulting from external factors that may occur in both the short- and the long-term. Business risk includes political, strategic, reputational, and regulatory events that are beyond the Bank’s control. From time to time, proposals are made or legislative and regulatory changes are considered that could affect the Bank’s status and its cost of doing business. The Bank attempts to mitigate these risks through long-term strategic planning and through continually monitoring economic indicators and the external environment.

Cyclicality and Seasonality

The demand for advances from the Bank, and the Bank’s business generally, are not subject to the effects of cyclical or seasonal variations.

Effects of Inflation

The majority of the Bank’s assets and liabilities are, and will continue to be, monetary in nature. Although interest rates do not necessarily move in the same direction, or to the same extent, as the prices of goods and

82

services, higher rates of inflation generally result in corresponding increases in interest rates. Inflation coupled with increasing interest rates, generally has the following effect on the Bank:

• The cost of the Bank’s funds and operating overhead increases

• The yield on variable rate assets held by the Bank increases

• The fair value of fixed-rate investments and mortgage loans held in portfolio decreases

• Mortgage loan prepayment rates decrease and result in lower levels of mortgage loan re-finance activity, which may result in the reduction of Bank advances to members as increased rates tend to slow home sales.

Conversely, lower rates of inflation or deflation have the opposite effect of the above on the Bank and its holdings.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

A discussion of the Bank’s market risk is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Market Risk.”

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Item 8. Financial Statements and Supplementary Data.

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm	85
Statements of Condition as of December 31, 2008 and 2007	86
Statements of Income for the Years Ended December 31, 2008, 2007 and 2006	87
Statements of Capital Accounts for the Years Ended December 31, 2008, 2007 and 2006	88
Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006	89
Notes to Financial Statements	91
Supplementary Data:
Supplementary Financial Data (Unaudited)	135

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of the Federal Home Loan Bank of Atlanta:

In our opinion, the accompanying statements of condition and the related statements of income, capital, and cash flows present fairly, in all material respects, the financial position of the Federal Home Loan Bank of Atlanta (the “Bank”) at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Atlanta, GA

March 30, 2009

85

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CONDITION

(In thousands, except par value)

	As of December 31,
	2008			2007
ASSETS
Cash and due from banks	$	27,841		$	18,927
Deposit with other FHLBanks		2,888			3,403
Federal funds sold		10,769,000			14,835,000
Trading securities (includes $1,104,434 and $592,065 pledged as collateral as of December 31, 2008 and 2007, respectively, that may be repledged and includes other FHLBanks’ bonds of $300,135 and $284,542 as of December 31, 2008 and 2007, respectively)		4,485,929			4,627,545
Held-to-maturity securities, net (fair value of $19,593,615 and $21,577,379 as of December 31, 2008 and 2007, respectively)		23,118,123			22,060,517
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $856 and $846 as of December 31, 2008 and 2007, respectively		3,251,074			3,526,582
Advances, net		165,855,546			142,867,373
Accrued interest receivable		775,083			824,815
Premises and equipment, net		29,383			30,652
Derivative assets		91,406			43,039
Other assets		158,067			99,911
TOTAL ASSETS	$	208,564,340		$	188,937,764
LIABILITIES
Deposits:
Interest-bearing	$	3,572,709		$	7,115,183
Noninterest-bearing		—			19,844
Total deposits		3,572,709			7,135,027
Consolidated obligations, net:
Discount notes		55,194,777			28,347,939
Bonds		138,181,334			142,237,042
Total consolidated obligations, net		193,376,111			170,584,981
Mandatorily redeemable capital stock		44,428			55,538
Accrued interest payable		1,039,002			1,460,113
Affordable Housing Program		139,300			156,184
Payable to REFCORP		—			30,681
Derivative liabilities		1,413,792			1,305,132
Other liabilities		86,062			187,872
Total liabilities		199,671,404			180,915,528
Commitments and contingencies (Note 15)
CAPITAL
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 14,671 and 12,900 as of December 31, 2008 and 2007, respectively		1,467,092			1,289,973
Subclass B2 issued and outstanding shares: 69,959 and 62,660 as of December 31, 2008 and 2007, respectively		6,995,903			6,266,043
Total capital stock Class B putable		8,462,995			7,556,016
Retained earnings		434,883			468,779
Accumulated other comprehensive loss		(4,942	)		(2,559	)
Total capital		8,892,936			8,022,236
TOTAL LIABILITIES AND CAPITAL	$	208,564,340		$	188,937,764

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(In thousands)

	For the Years Ended December 31
	2008			2007			2006
INTEREST INCOME
Advances	$	4,722,158		$	6,270,328		$	5,253,942
Prepayment fees on advances, net		7,303			2,078			1,088
Interest-bearing deposits		28,887			8,557			8,151
Federal funds sold		239,198			697,244			535,144
Trading securities		284,022			265,742			282,585
Held-to-maturity securities		1,168,821			996,150			953,702
Mortgage loans held for portfolio		182,721			175,679			152,167
Loans to other FHLBanks		77			60			109
Total interest income		6,633,187			8,415,838			7,186,888
INTEREST EXPENSE
Consolidated obligations:
Discount notes		988,265			670,682			352,634
Bonds		4,685,564			6,748,405			5,911,141
Deposits		109,726			266,562			218,831
Loans from other FHLBanks		136			48			68
Securities sold under agreements to repurchase		1,607			14,550			23,200
Mandatorily redeemable capital stock		1,504			11,307			9,234
Other borrowings		357			736			561
Total interest expense		5,787,159			7,712,290			6,515,669
NET INTEREST INCOME		846,028			703,548			671,219
Provision for credit losses on mortgage loans held for portfolio		10			72			217
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		846,018			703,476			671,002
OTHER INCOME (LOSS)
Service fees		2,336			2,488			2,354
Net gains (losses) on trading securities		200,373			106,718			(99,241	)
Realized loss on held-to-maturity securities		(186,063	)		—			—
Net (losses) gains on derivatives and hedging activities		(229,289	)		(96,424	)		91,176
Other		(1,352	)		742			1,888
Total other (loss) income		(213,995	)		13,524			(3,823	)
OTHER EXPENSE
Compensation and benefits		64,800			64,564			56,170
Other operating expenses		38,976			33,340			35,977
Finance Agency		6,193			4,938			4,441
Office of Finance		4,647			4,135			2,825
Provision for losses on receivable		170,486			—			—
Other		1,330			3,204			2,968
Total other expense		286,432			110,181			102,381
INCOME BEFORE ASSESSMENTS		345,591			606,819			564,798
Affordable Housing Program		28,365			50,690			47,048
REFCORP		63,445			111,226			103,552
Total assessments		91,810			161,916			150,600
NET INCOME	$	253,781		$	444,903		$	414,198

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006

(In thousands)

	Capital Stock Class B Putable					Retained Earnings			Accumulated Other Comprehensive Loss			Total Capital
	Shares		Par Value
BALANCE, DECEMBER 31, 2005	57,532		$	5,753,203		$	328,369		$	—		$	6,081,572
Issuance of capital stock	40,599			4,059,854			—			—			4,059,854
Repurchase/redemption of capital stock	(38,947	)		(3,894,652	)		—			—			(3,894,652	)
Net shares reclassified to mandatorily redeemable capital stock	(1,466	)		(146,607	)		—			—			(146,607	)
Net income	—			—			414,198			—			414,198
Adoption of SFAS 158	—			—			—			(4,537	)		(4,537	)
Cash dividends on capital stock	—			—			(336,191	)		—			(336,191	)
BALANCE, DECEMBER 31, 2006	57,718			5,771,798			406,376			(4,537	)		6,173,637
Issuance of capital stock	61,203			6,120,298			—			—			6,120,298
Repurchase/redemption of capital stock	(42,446	)		(4,244,628	)		—			—			(4,244,628	)
Net shares reclassified to mandatorily redeemable capital stock	(915	)		(91,452	)		—			—			(91,452	)
Comprehensive income:
Net income	—			—			444,903			—			444,903
Other comprehensive loss:
Benefit plans:
Net actuarial gain	—			—			—			1,839			1,839
Amortization of net loss	—			—			—			825			825
Amortization of net prior service credit	—			—			—			(728	)		(728	)
Amortization of net transition obligation	—			—			—			42			42
Total comprehensive income	—			—			—			—			446,881
Cash dividends on capital stock	—			—			(382,500	)		—			(382,500	)
BALANCE, DECEMBER 31, 2007	75,560			7,556,016			468,779			(2,559	)		8,022,236
Issuance of capital stock	64,110			6,410,977			—			—			6,410,977
Repurchase/redemption of capital stock	(54,546	)		(5,454,598	)		—			—			(5,454,598	)
Net shares reclassified to mandatorily redeemable capital stock	(494	)		(49,400	)		—			—			(49,400	)
Comprehensive income:
Net income	—			—			253,781			—			253,781
Other comprehensive loss:
Benefit plans:
Net actuarial loss	—			—			—			(2,381	)		(2,381	)
Amortization of net loss	—			—			—			684			684
Amortization of net prior service credit	—			—			—			(728	)		(728	)
Amortization of net transition obligation	—			—			—			42			42
Total comprehensive income	—			—			—			—			251,398
Cash dividends on capital stock	—			—			(287,677	)		—			(287,677	)
BALANCE, DECEMBER 31, 2008	84,630		$	8,462,995		$	434,883		$	(4,942	)	$	8,892,936

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

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FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(In thousands)

	For the Years Ended December 31,
	2008			2007			2006
OPERATING ACTIVITIES
Net income	$	253,781		$	444,903		$	414,198
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Net premiums and discounts on consolidated obligations		362,194			114,995			28,114
Net premiums and discounts on investments		(16,587	)		(6,697	)		(2,373	)
Net premiums and discounts on mortgage loans		561			(1,167	)		(326	)
Concessions on consolidated obligations		48,646			36,763			31,251
Net deferred loss on derivatives		337			308			340
Premises and equipment		2,992			2,512			2,272
Capitalized software		4,607			4,617			4,410
Other		5,123			(10,695	)		(11,468	)
Provision for credit losses on mortgage loans held for the portfolio		10			72			217
Provision for credit losses on receivable		170,486			—			—
Net realized gains from redemption of held-to-maturity securities		(401	)		—			—
Realized loss on held-to-maturity securities		186,063			—			—
Gain due to early extinguishment of debt		—			(196	)		(394	)
Loss (gain) on disposal of capitalized software		322			—			(2	)
Gain due to change in net fair value adjustment on derivative and hedging activities		253,797			(35,074	)		(149,834	)
Fair value adjustment on trading securities		(236,355	)		(106,718	)		99,241
Net change in:
Accrued interest receivable		42,558			(135,511	)		(71,045	)
Other assets		(24,941	)		(16,031	)		(3,792	)
Affordable Housing Program liability		(17,156	)		27,899			29,748
Accrued interest payable		(421,111	)		73,133			319,637
Payable to REFCORP *		(44,708	)		7,075			2,840
Other liabilities		8,648			25,849			3,232
Total adjustments		325,085			(18,866	)		282,068
Net cash provided by operating activities		578,866			426,037			696,266
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits		(5,532,513	)		(717,202	)		61,355
Federal funds sold		4,066,000			(4,303,000	)		2,496,500
Deposits with other FHLBanks		515			1,611			(16	)
Trading Securities:
Proceeds from sales		1,900,000			—			508,174
Proceeds from maturities		550,000			—			142,800
Purchases		(2,978,941	)		—			—
Held-to-maturity securities:
Net change in short-term		800,000			(92,000	)		(608,000	)
Proceeds		3,472,541			2,708,521			3,768,897
Purchases		(5,505,075	)		(4,638,148	)		(3,472,943	)
Advances:
Proceeds from principal collected		218,997,667			183,071,581			174,423,978
Made		(235,045,802	)		(221,386,830	)		(174,662,009	)
Mortgage loans held for portfolio:
Proceeds from principal collected		440,627			388,188			356,422
Purchases		(165,290	)		(909,617	)		(499,778	)
Capital expenditures:
Purchase of premises and equipment		(2,914	)		(2,051	)		(1,574	)
Purchase of software		(5,200	)		(3,334	)		(3,553	)
Net cash (used in) provided by investing activities		(19,008,385	)		(45,882,281	)		2,510,253

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

89

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS—(Continued)

(In thousands)

	For the Years Ended December 31,
	2008			2007			2006
FINANCING ACTIVITIES
Net change in:
Deposits		(3,492,571	)		2,514,559			(614,406	)
Securities sold under agreement to repurchase		—			(500,000	)		—
Net proceeds from derivatives containing a financing element		831,800			—			—
Proceeds from issuance of consolidated obligations:
Discount notes		358,041,635			711,124,455			493,398,191
Bonds		118,774,516			126,662,526			55,097,330
Bonds transferred from other FHLBanks		613,027			—			67,518
Payments for debt issuance costs		(43,593	)		(33,183	)		(25,255	)
Payments for maturing and retiring consolidated obligations:
Discount notes		(331,323,640	)		(687,796,834	)		(498,048,732	)
Bonds		(125,457,005	)		(107,793,293	)		(52,841,321	)
Proceeds from issuance of capital stock		6,410,977			6,120,298			4,059,854
Payments for repurchase/redemption of capital stock		(5,454,598	)		(4,244,628	)		(3,894,652	)
Payments for repurchase/redemption of mandatorily redeemable capital stock		(60,510	)		(251,619	)		(73,998	)
Cash dividends paid		(401,605	)		(355,781	)		(315,722	)
Net cash provided by (used in) financing activities		18,438,433			45,446,500			(3,191,193	)
Net increase (decrease) in cash and cash equivalents		8,914			(9,744	)		15,326
Cash and cash equivalents at beginning of the year		18,927			28,671			13,345
Cash and cash equivalents at end of the year	$	27,841		$	18,927		$	28,671
Supplemental disclosures of cash flow information:
Cash paid for:
Interest paid	$	5,183,731		$	6,898,856		$	5,790,675
AHP assessments paid, net	$	45,249		$	24,512		$	22,953
REFCORP assessments paid	$	108,154		$	104,151		$	100,712
Noncash investing and financing activities:
Dividends declared but not paid	$	—		$	113,928		$	87,208
Net shares reclassified to mandatorily redeemable capital stock	$	49,400		$	91,452		$	146,607
Held-to-maturity securities acquired with accrued liabilities	$	—		$	361		$	559
Settlement with derivative counterparty using trading securities	$	922,383		$	—		$	—

* Payable to REFCORP includes the net change in the REFCORP receivable/payable.

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

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS

Background Information

The Federal Home Loan Bank of Atlanta (the “Bank”), a federally chartered corporation, is one of 12 district Federal Home Loan Banks (“FHLBanks”). The FHLBanks serve the public by enhancing the availability of credit for residential mortgages and targeted community development. The Bank provides a readily available, competitively priced source of funds to its member institutions. The Bank is a cooperative whose member institutions own almost all of the capital stock of the Bank. Former members own the remaining capital stock to support business transactions still carried on the Bank’s Statements of Condition. All holders of the Bank’s capital stock are entitled to receive dividends on their capital stock, to the extent declared by the Bank’s board of directors.

All federally insured depository institutions, insurance companies and certified community development financial institutions chartered in the Bank’s defined geographic district and engaged in residential housing finance are eligible to apply for membership. State and local housing authorities that meet certain statutory criteria also may borrow from the Bank. While eligible to borrow, housing associates are not members of the Bank and, as such, are not required to hold capital stock. All members must purchase and hold capital stock of the Bank. A member’s stock requirement is based on the amount of its total assets, as well as the amount of certain of its business activities with the Bank.

The Federal Housing Finance Board (the “Finance Board”), an independent agency in the executive branch of the U.S. government, supervised and regulated the FHLBanks and the Federal Home Loan Banks Office of Finance (the “Office of Finance”) through July 29, 2008. With the passage of the Housing and Economic Recovery Act of 2008 (the “Housing Act”), the Federal Housing Finance Agency (the “Finance Agency”) was established and became the new independent Federal regulator of the FHLBanks, effective July 30, 2008. The Finance Board was merged into the Finance Agency as of October 27, 2008. The Office of Finance, a joint office of the FHLBanks established by the Finance Board, facilitates the issuing and servicing of the FHLBank’s debt instruments, known as consolidated obligations, and prepares the combined quarterly and annual financial reports of all 12 FHLBanks. The Finance Agency is responsible for ensuring that (1) the FHLBanks operate in a safe and sound manner, including maintenance of adequate capital and internal controls; (2) the operations and activities of the FHLBanks foster liquid, efficient, competitive and resilient national housing finance markets; (3) the FHLBanks comply with applicable laws and regulations; and (4) the FHLBanks carry out their housing finance mission through authorized activities that are consistent with the public interest. The Finance Agency also establishes policies and regulations covering the operations of the FHLBanks. Each FHLBank operates as a separate entity with its own management, employees, and board of directors. The Bank does not have any special purpose entities or any other types of off-balance sheet conduits.

As provided by the Federal Home Loan Bank Act of 1932 (the “FHLBank Act”), as amended, or applicable regulations, the Bank’s consolidated obligations are backed only by the financial resources of all 12 FHLBanks and are the primary source of funds for the Bank. Deposits, other borrowings, and capital stock issued to members provide other funds. The Bank primarily uses these funds to provide advances to members. The Bank also provides members and non-members with correspondent banking services, such as safekeeping, wire transfer and cash management services.

Note 1—Summary of Significant Accounting Policies

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires the Bank’s management to make subjective assumptions and estimates, which are based upon the information then available to management and inherently are uncertain and subject to change. These assumptions and estimates may affect the reported amounts of assets

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and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. Actual results could differ significantly from these estimates.

Interest-bearing Deposits in Banks and Federal Funds Sold. These investments provide short-term liquidity and are carried at cost. The Bank invests in certificates of deposit that meet the definition of a security under Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”), and records them as held-to-maturity securities.

Investment Securities. The Bank classifies certain investments acquired for purposes of liquidity and asset-liability management as trading investments and carries them at fair value. The Bank records changes in the fair value of these investments in other income (loss) as “Net gains (losses) on trading securities,” along with gains and losses on sales of investment securities using the specific identification method. The Bank does not participate in speculative trading practices in these investments and generally holds them until maturity, except to the extent management deems necessary to manage the Bank’s liquidity position.

The Bank carries at cost, and classifies as held-to-maturity, investments for which it has both the ability and intent to hold to maturity, adjusted for periodic principal repayments, amortization of premiums and accretion of discounts. Amortization of premiums and accretion of discounts are computed using the level-yield method.

The Bank computes the amortization of premiums and accretion of discounts on investment securities using the contractual level-yield method (the “contractual method”), adjusted for actual prepayments. The contractual method recognizes the income effects of premiums and discounts in a manner that effectively is proportionate to the actual behavior of the underlying assets and reflects the contractual terms of the assets without regard to changes in estimated prepayment based on assumptions about future borrower behavior.

The Bank evaluates its individual held-to-maturity investment securities holdings for other-than-temporary impairment on at least a quarterly basis. The Bank will conclude that a loss is other-than-temporary if it is probable that the Bank will not receive all of the investment security’s cash flows according to the security’s contractual terms. As part of this analysis, the Bank must assess its intent and ability to hold a security until recovery of any unrealized losses. These evaluations inherently are subjective and consider a number of qualitative factors. In addition to monitoring the credit ratings of these securities for downgrades, as well as placement on negative outlook or credit watch, the Bank’s management evaluates other factors that may be indicative of other-than-temporary impairment. These include, but are not limited to, an evaluation of the type of security, the length of time and extent to which the fair value of a security has been less than its cost, any credit enhancement or insurance, and certain other collateral-related characteristics such as FICO credit scores, loan-to-value ratios, delinquency and foreclosure rates, geographic concentrations and the security’s performance. If the Bank determines that an other-than-temporary impairment exists, it accounts for the investment security as if it had been purchased on the measurement date of the other-than-temporary impairment. The Bank writes down the investment security to fair value (its new cost basis), writes off any deferred amounts related to the investment security, and recognizes a realized loss in other income (loss) as “Realized loss on held-to-maturity securities.” The Bank calculates and amortizes a new accretable yield prospectively over the remaining life of the investment security based on the amount and timing of future expected cash flows. The Bank recognized an other-than-temporary impairment loss of $186.1 million during the year ended December 31, 2008 related to private-label mortgage-backed securities (“MBS”) in its held-to-maturity portfolio. The Bank did not experience any other-than-temporary impairment in the value of its investments during 2007 and 2006.

Mortgage Loans Held for Portfolio. Until 2008, the Bank participated in the Mortgage Partnership Finance^® (MPF^®) Program under which the Bank purchased government-guaranteed/insured and conventional residential mortgage loans directly from its participating financial institutions (“PFIs”). The Bank manages the liquidity, interest-rate risk, and prepayment risk of the loans and was responsible for marketing the program to its PFIs. The PFIs may retain or sell, with the Bank’s approval, the servicing of the mortgages. The Bank and the PFI share in the credit risk of the purchased loans. In 2008, the Bank ceased purchasing assets under the MPF

92

Program. The Bank plans to retain its existing portfolio of MPF loans, which eventually will be reduced to zero in accordance with the ordinary course of maturity of those assets.

The PFI’s credit enhancement obligation (“CE Amount”) arises under its PFI Agreement while the amount and nature of the obligation are determined with respect to each Master Commitment. Under the Acquired Member Asset regulation (12 C.F.R. §955) (“AMA Regulation”) the PFI must “bear the economic consequences” of certain credit losses with respect to a Master Commitment based upon the MPF product and other criteria. Under the MPF Program, the PFI’s credit enhancement protection (“CEP Amount”) may take the form of the CE Amount, which represents the direct liability to pay credit losses incurred with respect to that Master Commitment or may require the PFI to obtain and pay for a Supplemental Mortgage Insurance (“SMI”) policy insuring the Bank for a portion of the credit losses arising from the Master Commitment, and/or the PFI may contract for a contingent performance-based credit enhancement fee, whereby such fees are reduced by losses up to a certain amount arising under the Master Commitment. Under the AMA Regulation, any portion of the CE Amount that is a PFI’s direct liability must be collateralized by the PFI in a manner similar to the way in which Bank advances are collateralized. The PFI Agreement provides that the PFI’s obligations under the PFI Agreement are secured along with other obligations of the PFI under its regular advances agreement with the Bank and further, that the Bank may request additional collateral to secure the PFI’s obligations. PFIs are paid a credit enhancement fee (“CE fee”) as an incentive to minimize credit losses, to share in the risk of loss on MPF loans and to pay for SMI, rather than paying a guaranty fee as required by other secondary market purchasers. The Bank pays CE fees to the PFI monthly, which are determined based on the remaining unpaid principal balance of the MPF loans. The required CE Amount may vary depending on the MPF product alternatives selected. CE fees, payable to a PFI as compensation for assuming credit risk, are recorded as an offset to mortgage loan interest income when paid by the Bank. As applicable for certain MPF products, the Bank also pays performance-based CE fees that are based on actual performance of the pool of MPF loans under each individual Master Commitment. To the extent that losses in the current month exceed performance-based CE fees accrued, the remaining losses may be recovered from future performance CE fees payable to the PFI. The total balance of CE fees payable is recorded in other liabilities and totaled $1.4 million and $1.6 million as of December 31, 2008 and 2007, respectively.

Until 2008, the Bank also participated in the Mortgage Purchase Program (“MPP”) under which the Bank purchased government-guaranteed/insured and conventional residential mortgage loans directly from its PFIs. The Bank manages the liquidity risk, interest-rate risk, and prepayment risk of the loans and was responsible for marketing MPP to its PFIs. The PFI may retain or sell, with the Bank’s approval, the servicing of the mortgages. The Bank and the PFI share in the credit risk on the purchased loans. Early in the third quarter of 2008, the Bank suspended acquisitions of mortgage loans under MPP. The Bank plans to hold its existing portfolio of MPP loans until maturity.

The credit enhancement layers for MPP conventional loans consist of borrower’s equity, primary mortgage insurance (“PMI”) (if applicable), a lender risk account (“LRA”), and SMI; and such total credit enhancement is sized to provide at a minimum the equivalent of a AA rating under the S&P LEVELS rating methodology (although the assets are not rated by S&P or any other agency). The Bank establishes the LRA as a portion of the net interest remitted monthly by the PFI. The LRA is a lender-specific account and is used to offset any losses that may occur. The Bank’s recourse to the PFI is limited to this predetermined LRA amount so that the PFI has no further obligation to make additional contributions to the LRA, regardless of any losses or deterioration of the mortgage pool exceeding such amount in the LRA. Amounts in the LRA in excess of the required balances are distributed to the PFI in accordance with a step-down schedule that is established at the time of a master commitment contract. No LRA balance is required after 11 years. The total balance of all LRAs is recorded in other liabilities and totaled $1.1 million and $797 thousand as of December 31, 2008 and 2007, respectively. The Bank did not incur any credit losses on MPP loans during 2008 and 2007.

In addition to the expected losses covered by the LRA, the PFI selling conventional loans is required to purchase SMI as an enhancement to cover losses over and above losses covered by the LRA. The Bank is listed as the

93

insured on the SMI policy and this coverage serves to limit further the Bank’s exposure to losses. The Bank may require the PFI to purchase additional mortgage insurance coverage called SMI Plus to achieve the rating discussed above.

The Bank also holds participation interests in loans on affordable multifamily rental properties through its Affordable Multifamily Participation Program (“AMPP”). Through AMPP, members and participants in housing consortia could sell to the Bank participations in loans on affordable multifamily rental properties. In 2006, the Bank ceased purchasing assets under this program but plans to retain its existing portfolio, which eventually will be reduced to zero in accordance with the ordinary course of the maturities of the assets.

Accounting for Mortgage Loans Held for Portfolio. The Bank classifies the mortgage loans that are purchased directly from a PFI as held for investment and, accordingly, reports them at their principal amounts outstanding, net of unamortized premiums, and unaccreted discounts, together with mark-to-market basis adjustments on loans initially classified as mortgage loan commitments. The Bank has the intent and ability to hold these mortgage loans to maturity.

The Bank defers and amortizes premiums and accretes discounts paid to and received by the PFI, and mark-to-market basis adjustments on loans initially classified as mortgage loan commitments, as interest income using the contractual method.

The Bank places a conventional mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the borrower is 90 days or more past due. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. A government-guaranteed/insured loan is not placed on nonaccrual status when the collection of the contractual principal or interest is 90 days or more past due because of the (1) U.S. government guarantee of the loan and (2) contractual obligation of the loan servicer.

The Bank bases the allowance for credit losses on mortgage loans on management’s estimate of credit losses inherent in the Bank’s mortgage loan portfolio as of the Statements of Condition date. The overall allowance is determined by an analysis that includes consideration of various data, such as past performance, current performance, current delinquencies, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. Inherent in the Bank’s evaluation of past performance are the effects of various credit enhancements, as discussed above. As a result of this analysis, the Bank has determined that each PFI’s obligation for losses and the mortgage insurance coverage currently exceeds the inherent incurred loss in the MPF Program and MPP loan portfolios. Accordingly, no allowance for credit losses on mortgage loans is considered necessary for the MPF Program and MPP loan portfolios as of December 31, 2008 and 2007. The Bank has established an allowance for credit losses on mortgage loans outstanding under the AMPP in the amount of $856 thousand and $846 thousand as of December 31, 2008 and 2007, respectively.

Advances. The Bank reports advances (loans to members or housing associates), net of discounts on advances related to the Affordable Housing Program (“AHP”) and Economic Development and Growth Enhancement Program (“EDGE”). The Bank accretes the discounts on advances using the level-yield method. The Bank records interest on advances to income as earned. Following requirements of the FHLBank Act, the Bank obtains collateral on advances to protect it from losses. The FHLBank Act limits eligible collateral to certain investment securities, residential mortgage loans, cash or deposits with the Bank, and other eligible real estate-related assets. Community Financial Institutions (“CFIs”) (defined in the Housing Act as those institutions that have, as of the date of the transaction at issue, less than $1.0 billion in average total assets over the three years preceding that date; subject to annual adjustment by the Finance Agency director based on the consumer price index) are subject to expanded statutory collateral rules that include secured small business and agricultural loans and securities representing a whole interest in such secured loans. The Housing Act also adds secured loans for “community development activities” as a permitted purpose, and as eligible collateral, for advances to CFIs. Based on a current assessment of collectibility, including consideration of the collateral held as security for the advances and

94

prior repayment history of the Bank’s advances, management believes, as of December 31, 2008 and 2007, that an allowance for credit losses on advances is unnecessary.

Prepayment Fees. The Bank charges a member a prepayment fee when the member prepays certain advances before the original maturity. The Bank records prepayment fees net of SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities—Deferral of Effective Date of FASB Statement No. 133, and as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, SFAS No. 155, Accounting for Certain Hybrid Financial Instruments -an amendment of FASB Statements No. 133 and 140 and various Derivatives Implementation Group (“DIG”) issues (collectively, “SFAS 133”) basis adjustments included in the book basis of the advance as “Prepayment fees on advances, net” in the interest income section of the Statements of Income. In cases in which the Bank funds a new advance within a short period of time from the prepayment of an existing advance, the Bank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance in accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-7, Creditor’s Accounting for a Modification or Exchange of Debt Instruments, and SFAS No. 91 Accounting for Nonrefundable Fees and Costs Associated with Originating and Acquiring Loans and Initial Direct Costs of Leases (“SFAS 91”). If the new advance qualifies as a modification of the existing advance, the hedging basis adjustments and the net prepayment fee on the prepaid advance are recorded in the carrying value of the modified advance, and amortized over the life of the modified advance using a level-yield method. This amortization is recorded in advance interest income.

If the Bank determines that the transaction does not qualify as a modification of an existing advance, it is treated as an advance termination with subsequent funding of a new advance and the Bank records the net fees as “Prepayment fees on advances, net” in the interest income section of the Statements of Income.

Commitment Fees. The Bank defers commitment fees for advances and amortizes them to interest income using a level-yield method. The Bank records commitment fees for standby letters of credit as a deferred credit when it receives the fees and amortizes them using the straight-line method over the term of the standby letter of credit. The Bank’s management believes that the likelihood of standby letters of credit being drawn upon is remote based upon past experience.

Premises and Equipment. The Bank records premises and equipment at cost less accumulated depreciation. The Bank’s accumulated depreciation was $43.6 million and $40.6 million as of December 31, 2008 and 2007, respectively. The Bank computes depreciation using the straight-line method over the estimated useful lives of assets. The estimated useful lives in years are generally as follows: automobiles and computer hardware—three; office equipment—eight; office furniture and building improvements—10; and building—40. The Bank amortizes leasehold improvements using the straight-line method over the shorter of the estimated useful life of the improvement or the remaining term of the lease. The Bank capitalizes improvements but it expenses ordinary maintenance and repairs when incurred. Depreciation expense was $3.0 million, $2.5 million, and $2.3 million for the years ended December 31, 2008, 2007, and 2006, respectively. The Bank includes gains and losses on disposal of premises and equipment in other income. There were no gains or losses on disposal of premises and equipment during the years ended December 31, 2008, 2007 and 2006.

Software. Cost of computer software developed or obtained for internal use is accounted for in accordance with Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (“SOP 98-1”), which requires the cost of purchased software and certain costs incurred in developing computer software for internal use to be capitalized and amortized over future periods. The Bank amortizes capitalized computer software cost using the straight-line method over an estimated useful life of five years. As of December 31, 2008 and 2007, the gross carrying amount of computer software costs included in other assets was $40.8 million and $33.6 million, and accumulated amortization was $22.6 million and $18.0 million, respectively. Amortization of computer software costs charged to expense was $4.6 million,

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$4.6 million, and $4.4 million for the years ended December 31, 2008, 2007, and 2006, respectively. The Bank includes gains and losses on disposal of capitalized software cost in other income. The net realized (loss) gain on disposal of capitalized software cost was $(322) thousand, $0 and $2 thousand for the years ended December 31, 2008, 2007 and 2006, respectively.

Derivatives. The Bank accounts for its derivatives in accordance with SFAS 133. Derivative assets and derivative liabilities reported on the Statements of Condition include the net cash collateral and accrued interest from counterparties in accordance with FASB Staff Position (“FSP”) No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP FIN 39-1”). For more information on FSP FIN 39-1, see Note 2 to these financial statements. All derivatives are recognized on the Statements of Condition at their fair values and those that are not used for intermediary purposes are designated as either (1) a hedge of the fair value of (a) a recognized asset or liability or (b) an unrecognized firm commitment (a fair-value hedge); or (2) a SFAS 133 non-qualifying hedge of an asset or liability for asset-liability management purposes. Changes in the fair value of a derivative that is effective as, and that is designated and qualifies as, a fair-value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in other income (loss) as “Net (losses) gains on derivatives and hedging activities.” A SFAS 133 non-qualifying hedge is defined by the Bank as a derivative, hedging specific or non-specific underlying assets, liabilities or firm commitments that is an acceptable hedging strategy under the Bank’s risk management program and Finance Agency regulatory requirements, but does not qualify or was not designated for hedge accounting under the rules of SFAS 133. A SFAS 133 non-qualifying hedge by definition introduces the potential for earnings variability because only the change in fair value of the derivative is recorded and is not offset by corresponding changes in the fair value of the SFAS 133 non-qualifying hedged asset, liability, or firm commitment, unless such asset, liability, or firm commitment is required to be accounted for at fair value through earnings. Both the net interest on the derivative and the fair value adjustments are recorded in other income (loss) as “Net (losses) gains on derivatives and hedging activities.” Cash flows associated with such stand-alone derivatives (derivatives not qualifying as a hedge) are reflected as cash flows from operating activities in the Statements of Cash Flows.

The derivatives used in intermediary activities do not qualify for SFAS 133 hedge accounting treatment and are separately marked-to-market through earnings. The net result of the accounting for these derivatives does not affect significantly the operating results of the Bank. These amounts are recorded in other income (loss) and presented as “Net (losses) gains on derivatives and hedging activities.”

The differences between accruals of interest receivables and payables on derivatives designated as fair-value hedges are recognized as adjustments to the interest income or interest expense of the designated underlying investment securities, advances, consolidated obligations, or other financial instruments. The differences between accruals of interest receivables and payables on intermediated derivatives for members and other SFAS 133 non-qualifying hedges are recognized in other income (loss) as “Net (losses) gains on derivatives and hedging activities.”

The Bank may issue debt, make advances, or purchase financial instruments in which a derivative instrument is “embedded.” Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (i.e., the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument pursuant to a SFAS 133 non-qualifying hedge. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current earnings (e.g., an investment security classified as “trading” under SFAS 115), or if the Bank could not identify and measure reliably the embedded derivative for purposes of separating that derivative from its host contract, the entire contract would be carried on the Statements of Condition at fair value and no portion of the contract could be designated as a hedging instrument.

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The Bank discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer expected to be highly effective in offsetting changes in the fair value of a hedged risk, including hedged items such as firm commitments; (2) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (3) a hedged firm commitment no longer meets the definition of a firm commitment; or (4) management determines that designating the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued due to the Bank’s determination that a derivative no longer qualifies as an effective fair-value hedge, or when management decides to cease the specific hedging activity, the Bank will continue to carry the derivative on the Statements of Condition at its fair value, cease to adjust the hedged asset or liability for changes in fair value, and amortize the cumulative basis adjustment on the hedged item into earnings using the level-yield method over the remaining life of the hedged item. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Bank will carry the derivative at its fair value on the Statements of Condition, recognizing changes in the fair value of the derivative in current-period earnings. See Note 13 for more information on derivatives and hedging.

Concessions on Consolidated Obligations. The Bank defers and amortizes the amounts paid to dealers in connection with the sale of consolidated obligations using the level-yield method over the term of the consolidated obligations. When consolidated obligations are called prior to contractual maturity, the related unamortized concessions are written off to interest expense. The Office of Finance prorates the amount of the concession to the Bank based upon the percentage of the debt issued that is assumed by the Bank. Unamortized concessions were $44.4 million and $49.5 million as of December 31, 2008 and 2007, respectively, and are included in “Other assets.” Amortization of such concessions is included in consolidated obligation interest expense and totaled $48.6 million, $38.2 million, and $32.2 million in 2008, 2007, and 2006, respectively.

Discounts and Premiums on Consolidated Obligations. The Bank accretes discounts and amortizes premiums on consolidated obligations to interest expense using the level-yield method over the terms to maturity of the consolidated obligations.

Mandatorily Redeemable Capital Stock. In compliance with SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”), the Bank reclassifies the stock subject to redemption from equity to a liability after a member submits a written redemption request, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership, since the member shares will then meet the definition of a mandatorily redeemable financial instrument. Member shares meeting this definition are reclassified to a liability at fair value. Dividends declared on member shares classified as a liability in accordance with SFAS 150 are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments will be reflected as cash outflows in the financing activities section of the Statements of Cash Flows once redeemed.

If a member cancels its written notice of redemption or notice of withdrawal, the Bank will reclassify mandatorily redeemable capital stock from a liability to equity in compliance with SFAS 150. After the reclassification, dividends on the capital stock no longer will be classified as interest expense.

Finance Agency/Finance Board and Office of Finance Expenses. The FHLBanks funded the costs of operating the Finance Board, and fund a portion of the costs of operating the Finance Agency since it was created on July 30, 2008. The Finance Board allocated its operating and capital expenditures to the FHLBanks based on each FHLBank’s percentage of total combined regulatory capital stock plus retained earnings through July 29, 2008. The Finance Agency allocates the FHLBanks’ portion of its expenses and working capital fund among the FHLBanks based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank. Each FHLBank must pay an amount equal to one-half of its annual assessment twice each year. The Office of Finance allocates its operating and capital expenditures based equally on each FHLBank’s percentage of capital stock, percentage of consolidated obligations issued and percentage of consolidated obligations outstanding.

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Affordable Housing Program. The FHLBank Act requires each FHLBank to establish and fund an AHP. The Bank charges the required funding for AHP against earnings and establishes a corresponding liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-income, low-income, and moderate-income households. The Bank issues AHP advances at interest rates below the customary interest rate for non-subsidized advances. When the Bank makes an AHP advance, the present value of the variation in the cash flow caused by the difference in the interest rate between the AHP advance rate and the Bank’s related cost of funds for comparable maturity funding is charged against the AHP liability and recorded as a discount on the AHP advance. As an alternative, the Bank has the authority to make the AHP subsidy available to members as a grant. The discount on AHP advances is accreted to interest income on advances using the level-yield method over the life of the advance. See Note 10 for more information.

Resolution Funding Corporation (“REFCORP”). Although FHLBanks are exempt from ordinary Federal, state, and local taxation except for local real estate tax, the FHLBanks are required to make quarterly payments to REFCORP to cover a portion of the interest on bonds issued by REFCORP. REFCORP is a corporation established by Congress in 1989 to provide funding for the resolution and disposition of insolvent savings institutions. Officers, employees, and agents of the Office of Finance are authorized to act for and on behalf of REFCORP to carry out the functions of REFCORP. See Note 10 for more information.

Estimated Fair Values. Estimated fair value is based on quoted market prices, where available. Many of the Bank’s financial instruments lack an available trading market characterized by transactions between a willing buyer and a willing seller engaging in an exchange transaction. Therefore, the Bank uses pricing services and/or internal models employing significant estimates and present-value calculations when disclosing estimated fair values. See Note 14 for more information.

Cash Flows. In the Statements of Cash Flows, the Bank considers cash and due from banks as cash and cash equivalents. Federal funds sold are not treated as cash equivalents for purposes of the Statements of Cash Flows but instead are treated as short-term investments and are reflected in the investing activities section of the Statements of Cash Flows.

Reclassifications. Certain amounts in the 2007 and 2006 financial statements have been reclassified to conform to the 2008 presentation.

In particular, in accordance with FSP FIN 39-1, the Bank recognized the effects of applying FSP FIN 39-1 as a change in accounting principle through retrospective application for all financial statement periods presented. For more information related to FSP FIN 39-1, see Note 2 to these financial statements.

In accordance with SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 (“SFAS 159”), which amends SFAS No. 95, Statement of Cash Flows (“SFAS 95”), and SFAS 115, cash flows from trading securities (which include securities for which an entity has elected the fair value option) should be classified in the statement of cash flows based on the nature of and purpose for which the securities were acquired. Prior to this amendment, SFAS 95 and SFAS 115 specified that all cash flows from trading securities must be classified as cash flows from operating activities. On a retroactive basis, beginning in the first quarter of 2008, the Bank classifies purchases, sales and maturities of trading securities held for investment purposes as cash flows from investing activities. Cash flows related to trading securities held for trading purposes continue to be reported as cash flows from operating activities. Previously, all cash flows associated with trading securities were reflected in the statement of cash flows as operating activities. For more information on SFAS 159, see Note 2 to these financial statements.

During the third quarter of 2008, on a retrospective basis, the Bank reclassified its investments in certificates of deposit, previously reported as interest-bearing deposits, as held-to-maturity securities in its Statements of Condition and Statements of Income as they meet the definition of a security under SFAS 115. These financial instruments have been classified as held-to-maturity securities based on their short-term nature and the Bank’s

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history and intent of holding them until maturity. This reclassification had no effect on total assets or net interest income and net income.

The effects of the above reclassifications on the Bank’s prior year financial statements were as follows (in thousands):

	Statement of Condition As of December 31, 2007
	As Originally Reported		FSP FIN 39-1 Reclassification			SFAS 159 Reclassification		Certificates of Deposit Reclassification			As Currently Reported
Assets:
Interest-bearing deposits (a)	$	1,608,573	$	(805,170	)	$	—	$	(800,000	)	$	3,403
Held-to-maturity securities		21,260,517		—			—		800,000			22,060,517
Accrued interest receivable		828,004		(3,189	)		—		—			824,815
Derivative assets		43,048		(9	)		—		—			43,039
Total assets		189,746,132		(808,368	)		—		—			188,937,764
Liabilities:
Accrued interest payable		1,460,122		(9	)		—		—			1,460,113
Derivative liabilities		2,113,491		(808,359	)		—		—			1,305,132
Total liabilities		181,723,896		(808,368	)		—		—			180,915,528
Total liabilities and capital		189,746,132		(808,368	)		—		—			188,937,764

(a) “As Currently Reported” amount represents deposits with other FHLBanks.

	Statement of Income For the Year Ended December 31, 2007
	As Originally Reported			FSP FIN 39-1 Reclassification		SFAS 159 Reclassification			Certificates of Deposit Reclassification			As Currently Reported
Interest income:
Interest-bearing deposits	$	50,672		$	—	$	—		$	(42,115	)	$	8,557
Held-to-maturity securities		954,035			—		—			42,115			996,150
	Statement of Income For the Year Ended December 31, 2006
	As Originally Reported			FSP FIN 39-1 Reclassification		SFAS 159 Reclassification			Certificates of Deposit Reclassification			As Currently Reported
Interest income:
Interest-bearing deposits	$	34,691		$	—	$	—		$	(26,540	)	$	8,151
Held-to-maturity securities		927,162			—		—			26,540			953,702
	Statement of Cash Flows For the Year Ended December 31, 2007
	As Originally Reported			FSP FIN 39-1 Reclassification		SFAS 159 Reclassification			Certificates of Deposit Reclassification			As Currently Reported
Operating Activities:
Net change in trading securities	$	(106,718	)	$	—	$	106,718		$	—		$	—
Fair value adjustment on trading securities		—			—		(106,718	)		—			(106,718	)
Investing Activities:
Net change in interest-bearing deposits		(809,202	)		—		—			92,000			(717,202	)
Held-to-maturity securities:
Net change in short-term		—			—		—			(92,000	)		(92,000	)

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	Statement of Cash Flows For the Year Ended December 31, 2006
	As Originally Reported			FSP FIN 39-1 Reclassification		SFAS 159 Reclassification			Certificates of Deposit Reclassification			As Currently Reported
Operating Activities:
Net change in trading securities	$	750,215		$	—	$	(750,215	)	$	—		$	—
Fair value adjustment on trading securities		—			—		99,241			—			99,241
Investing Activities:
Net change in interest-bearing deposits		(546,645	)		—		—			608,000			61,355
Trading securities:
Proceeds from sales		—			—		508,174			—			508,174
Proceeds from maturities		—			—		142,800			—			142,800
Held-to-maturity securities:
Net change in short-term		—			—		—			(608,000	)		(608,000	)

Note 2—Recently Issued and Adopted Accounting Standards and Interpretations

Recently Issued Accounting Standards and Interpretations

SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (“SFAS 161”), issued in March 2008, requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS 133, and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 (January 1, 2009 for the Bank) with earlier adoption allowed. The Bank does not believe that the adoption of SFAS 161 will have a material effect on its financial condition or results of operations. The Bank has determined that the adoption of SFAS 161 will result in increased financial statement disclosures.

Recently Adopted Accounting Standards and Interpretations

SFAS No. 157, Fair Value Measurements (“SFAS 157”), was issued in September 2006. In defining fair value, SFAS 157 retains the exchange price notion in earlier definitions of fair value. However, the definition of fair value under SFAS 157 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 assets or liabilities to be measured at fair value. Accordingly, SFAS 157 does not expand the use of fair value in any new circumstances. SFAS 157 also establishes a three-level fair value hierarchy that prioritizes the information used to develop assumptions used to determine the exit price, thereby increasing consistency and comparability in fair value measurements and related disclosures. Under this standard, fair value measurements would be disclosed separately by level within the fair value hierarchy. The Bank adopted SFAS 157 effective January 1, 2008. The adoption of SFAS 157 had no effect on the Bank’s financial condition or results of operations. For additional information on the fair value of certain financial assets and liabilities, see Note 14 to these financial statements.

SFAS 159, issued in February 2007, creates a fair value option allowing, but not requiring, an entity irrevocably to elect fair value as the initial and subsequent measurement attribute for certain financial assets and financial liabilities, with changes in fair value recognized in earnings as they occur. SFAS 159 requires an entity to report those financial assets and financial liabilities measured at fair value in a manner that separates those reported fair values from the carrying amounts of assets and liabilities measured using another measurement attribute on the face of the statement of financial position. SFAS 159 also requires an entity to provide information that would

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allow users to understand the effect on earnings of changes in the fair value on those instruments selected for the fair value election. The Bank adopted SFAS 159 effective January 1, 2008. There was no initial effect of adoption since the Bank did not elect the fair value option for any existing asset or liability. In addition, the Bank did not elect the fair value option for any financial assets originated or purchased, or for liabilities issued, during the year ended December 31, 2008.

FSP FIN 39-1, issued in April 2007, permits an entity to offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instruments recognized at fair value executed with the same counterparty under a master netting arrangement. Under FSP FIN 39-1, the receivable or payable related to cash collateral may not be offset if the amount recognized does not represent or approximate fair value or arises from instruments in a master netting arrangement that are not eligible to be offset. The decision whether to offset such fair value amounts represents an elective accounting policy decision that, once elected, must be applied consistently. An entity should recognize the effects of applying FSP FIN 39-1 as a change in accounting principle through retrospective application for all financial statements presented unless it is impracticable to do so. Upon adoption of FSP FIN 39-1, an entity is permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The Bank adopted FSP FIN 39-1 effective January 1, 2008 and retroactively applied its requirements to all prior periods. The Bank has not changed its accounting policy of offsetting fair value amounts recognized for derivative instruments under the same master netting arrangement. As a result of the adoption of FSP FIN 39-1, certain amounts on the Bank’s Statements of Condition as of December 31, 2007, were modified to conform to the 2008 presentation, as summarized in Note 1 to the financial statements.

Statement 133 Implementation Issue No. 23, Issues Involving Application of the Shortcut Method under Paragraph 68 (“Issue E23”), issued in January 2008 amends SFAS 133 explicitly to permit the use of the shortcut method for those hedging relationships in which (a) the interest rate swap has a nonzero fair value at the inception of the hedging relationship, attributable solely to differing prices within the bid-ask spread; and/or (b) the hedged item has a trade date that differs from its settlement date because of generally established conventions in the marketplace in which the transaction to acquire or issue the hedged item is executed. Issue E23 is effective for hedging relationships designated on or after January 1, 2008. At adoption, preexisting hedging relationships utilizing the shortcut method that did not meet the requirements of Issue E23 as of the inception of the hedging relationship must be dedesignated prospectively. The effects of applying hedge accounting prior to the effective date may not be reversed. A hedging relationship that does not qualify for the shortcut method based on Issue E23 could be redesignated without the application of the shortcut method if that hedging relationship meets the applicable requirements of SFAS 133. The Bank adopted Issue E23 effective January 1, 2008. The Bank concluded that no dedesignations were required as a result of the adoption of Issue E23. In addition, since May 31, 2005, the Bank no longer applies the short-cut method to new hedging relationships. Therefore the adoption of Issue E23 had no effect on the Bank’s financial condition or results of operations.

SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”), issued in May 2008, identifies the sources of accounting principles and the framework, or hierarchy, for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 was effective November 15, 2008. The adoption of SFAS 162 had no effect on the Bank’s financial condition or results of operations.

FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (“FSP 133-1 and FIN 45-4”) was issued in September 2008. FSP 133-1 and FIN 45-4 amended SFAS 133 and FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others—an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34 (“FIN 45”), to improve disclosures about credit derivatives and guarantees and clarify the effective date of SFAS 161. FSP 133-1 and FIN 45-4 amended SFAS

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133 to require entities to disclose sufficient information to allow users to assess the potential effect of credit derivatives, including their nature, maximum payment, fair value, and recourse provisions. FSP 133-1 and FIN 45-4 amended FIN 45 to require a disclosure about the current status of the payment/performance risk of a guarantee, which could be indicated by external credit ratings or categories by which the Bank measures risk. The Bank currently does not enter into credit derivatives, but does have guarantees: letters of credit and the joint and several liability on consolidated obligations of the FHLBanks. FSP 133-1 and FIN 45-4 is effective for periods ending after November 15, 2008. The Bank adopted FSP 133-1 and FIN 45-4 effective December 31, 2008. The adoption of FSP 133-1 and FIN 45-4 had no effect on the Bank’s financial condition or results of operations. The adoption of FSP 133-1 and FIN 45-4 resulted in increased financial statement disclosures.

FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”), issued in October 2008, clarifies the application of SFAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Key existing principles of SFAS 157 illustrated in the example include:

• A fair value measurement represents the price at which a transaction would occur between market participants at the measurement date.

• In determining a financial asset’s fair value, use of a reporting entity’s own assumptions about future cash flows and appropriately risk-adjusted discount rates is acceptable when relevant observable inputs are unavailable.

• Broker or pricing service quotes may be an appropriate input when measuring fair value, but they are not necessarily determinative if an active market does not exist for the financial asset.

FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate following the guidance in SFAS No. 154, Accounting Changes and Error Corrections (“SFAS 154”). However, the disclosure provisions in SFAS 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. As FSP FAS 157-3 clarified but did not change the application of SFAS 157, the adoption of FSP FAS 157-3 had no effect on the Bank’s financial condition or results of operations.

FSP No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 (“FSP EITF 99-20-1”), issued in January 2009, amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in SFAS 115 and other related guidance. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. The Bank adopted FSP EITF 99-20-1 effective December 31, 2008. The adoption of FSP EITF 99-20-1 had no effect on the Bank’s financial condition or results of operations.

Note 3—Cash and Due from Banks

The Bank maintains collected cash balances with commercial banks in return for certain services. These agreements contain no legal restrictions regarding the withdrawal of funds. The average compensating balances were approximately $365 thousand and $136 thousand for the years ended December 31, 2008 and 2007, respectively.

In addition, the Bank maintained average compensating balances with various Federal Reserve Banks of approximately $6.0 million for the years ended December 31, 2008 and 2007. The Bank must maintain these average balances over any two-week settlement period to avoid charges for certain services provided to the Bank by the Federal Reserve Banks.

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Note 4—Trading Securities

Major Security Types. Trading securities were as follows (in thousands):

	As of December 31,
	2008		2007
Government-sponsored enterprises debt obligations	$	4,171,725	$	4,283,519
Other FHLBanks’ bonds		300,135		284,542
State or local housing agency obligations		14,069		59,484
Total	$	4,485,929	$	4,627,545

Net gains (losses) on trading securities during the years ended December 31, 2008, 2007 and 2006 included net unrealized holding gains (losses) of $210.6 million, $106.7 million and $(82.4) million for securities that were held on December 31, 2008, 2007 and 2006, respectively.

Other FHLBanks Consolidated Obligation Bonds. The following table details the Bank’s investment in other FHLBanks’ consolidated obligation bonds by primary obligor (in thousands):

	As of December 31,
	2008		2007
Other FHLBanks’ bonds:
FHLBank Dallas	$	82,300	$	83,525
FHLBank Chicago		89,128		70,345
		171,428		153,870
FHLBank TAP Program*		128,707		130,672
Total	$	300,135	$	284,542

* Under this program, the FHLBanks can offer debt obligations representing aggregations of smaller bond issues into larger bond issues that may have greater market liquidity. Because of the aggregation of smaller issues, there is more than one primary obligor.

Note 5—Held-to-maturity Securities

Major Security Types. Held-to-maturity securities were as follows (in thousands):

	As of December 31,
	2008								2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificates of deposit	$	—	$	—	$	—	$	—	$	800,000	$	70	$	30	$	800,040
State or local housing agency obligations		101,105		3,605		—		104,710		117,988		4,933		65		122,856
Mortgage-backed securities:
U.S. agency obligations-guaranteed		38,545		260		367		38,438		47,460		779		—		48,239
Government-sponsored enterprises		7,060,082		117,494		3,467		7,174,109		2,968,441		8,591		37,260		2,939,772
Private label		15,918,391		6,246		3,648,279		12,276,358		18,126,628		2,068		462,224		17,666,472
Total	$	23,118,123	$	127,605	$	3,652,113	$	19,593,615	$	22,060,517	$	16,441	$	499,579	$	21,577,379

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A summary of the mortgage-backed securities issued by members or affiliates of members follows (in thousands):

	As of December 31,
	2008								2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Countrywide Financial Corporation, Calabasas, CA	$	4,675,435	$	6,062	$	1,195,018	$	3,486,479	$	5,446,210	$	582	$	160,483	$	5,286,309
Bank of America Corporation, Charlotte, NC		2,060,873		—		488,315		1,572,558		2,387,004		114		56,485		2,330,633
Total	$	6,736,308	$	6,062	$	1,683,333	$	5,059,037	$	7,833,214	$	696	$	216,968	$	7,616,942

The following tables summarize the held-to-maturity securities with unrealized losses (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

	As of December 31, 2008
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities:
U.S. agency obligations-guaranteed	$	25,580	$	367	$	—	$	—	$	25,580	$	367
Government-sponsored enterprises		557,822		3,467		—		—		557,822		3,467
Private label		4,635,936		1,647,200		7,371,486		2,001,079		12,007,422		3,648,279
Total	$	5,219,338	$	1,651,034	$	7,371,486	$	2,001,079	$	12,590,824	$	3,652,113
	As of December 31, 2007
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Certificates of deposit	$	499,970	$	30	$	—	$	—	$	499,970	$	30
State or local housing agency obligations		—		—		5,125		65		5,125		65
Mortgage-backed securities:
Government-sponsored enterprises		250,137		707		1,609,791		36,553		1,859,928		37,260
Private label		6,762,719		126,604		10,392,842		335,620		17,155,561		462,224
Total	$	7,512,826	$	127,341	$	12,007,758	$	372,238	$	19,520,584	$	499,579

Mortgage-backed Securities. The Bank’s investments in MBS consist of agency guaranteed securities and senior tranches of private-label MBS. The Bank has increased exposure to the risk of loss on its investments in MBS when the loans backing the MBS exhibit high rates of delinquency and foreclosures, as well as losses on the sale of foreclosed properties. The Bank regularly requires high levels of credit enhancements from the structure of the collateralized mortgage obligation to reduce its risk of loss on such securities. Credit enhancements are defined as the percentage of subordinate tranches, overcollateralization, or excess spread, or the support of monoline insurance, if any, in a security structure that will absorb the losses before the security the Bank purchased will take a loss. The Bank does not purchase credit enhancements for its MBS from monoline insurance companies.

The Bank’s investments in private-label MBS were rated “AAA” (or its equivalent) by a nationally recognized statistical rating organization (“NRSRO”), such as Moody’s Investors Service (“Moody’s”) and Standard &

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Poor’s Rating Services (“S&P”), at purchase date. The “AAA”-rated securities achieved their ratings through credit enhancement, over-collateralization and senior-subordinated shifting interest features; the latter results in subordination of payments by junior classes to ensure cash flows to the senior classes. Some of the ratings on the Bank’s private-label MBS have changed since their purchase date.

Other-Than-Temporary Impairment. The Bank had a total of 279 securities in an unrealized loss position, with total gross unrealized losses of $3.7 billion as of December 31, 2008. The Bank had a total of 300 securities in an unrealized loss position, with total gross unrealized losses of $500.0 million as of December 31, 2007. The Bank evaluates its individual held-to-maturity investment securities holdings for other-than-temporary impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired.

To determine which individual securities are at risk for other-than-temporary impairment, the Bank considers various characteristics of each security including, but not limited to, the following: the credit rating; the duration and amount of the unrealized loss; and any credit enhancements. The relative importance of this information varies based on the facts and circumstances surrounding each security, as well as the economic environment at the time of assessment. As a result of this security-level review, the Bank identifies individual securities believed to be at risk for other-than-temporary impairment, which are evaluated further by analyzing the performance of the security. These securities are evaluated by estimating projected cash flows based on the structure of the security and certain assumptions, such as prepayments, default rates and loss severity, to determine whether the Bank expects to receive all of the contractual cash flows as scheduled.

Based on the Bank’s impairment analysis, the Bank recognized an other-than-temporary impairment loss of $186.1 million related to five private-label MBS in its held-to-maturity securities portfolio during 2008. This other-than-temporary impairment loss is reported in the Statements of Income as “Realized loss on held-to-maturity securities.” No other-than-temporary impairment loss was recognized for the years ended December 31, 2007 and 2006.

The remainder of the Bank’s held-to-maturity portfolio that has not been designated as other-than-temporarily impaired has experienced unrealized losses and decreases in fair value due to interest rate volatility, illiquidity in the marketplace, and general disruption in the U.S. mortgage markets. This decline in fair value is considered temporary as the Bank expects to collect all contractual cash flows and has the ability and intent to hold these investments to maturity. The ability and intent of the Bank is demonstrated by the fact that the Bank is well capitalized, has sufficient liquidity and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would impact such intent and ability.

Redemption Terms. The amortized cost and estimated fair value of held-to-maturity securities by contractual maturity are shown below (in thousands). Expected maturities of some securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	As of December 31,
	2008				2007
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Year of maturity:
Due in one year or less	$	1,705	$	1,721	$	801,290	$	801,359
Due after one year through five years		71,465		74,197		71,950		73,844
Due after five years through 10 years		—		—		9,945		10,163
Due after 10 years		27,935		28,792		34,803		37,530
		101,105		104,710		917,988		922,896
Mortgage-backed securities		23,017,018		19,488,905		21,142,529		20,654,483
Total	$	23,118,123	$	19,593,615	$	22,060,517	$	21,577,379

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The amortized cost of the Bank’s mortgage-backed securities classified as held-to-maturity includes net discounts of $145.7 million and $71.0 million as of December 31, 2008 and 2007, respectively.

Interest-rate Payment Terms. The following table details interest-rate payment terms for investment securities classified as held-to-maturity (in thousands):

	As of December 31,
	2008		2007
Amortized cost of held-to-maturity securities other than mortgage-backed securities:
Fixed-rate	$	101,105	$	917,988
		101,105		917,988
Amortized cost of held-to-maturity mortgage-backed securities:
Pass-through securities:
Fixed-rate		2,999,333		1,865,128
Variable-rate		1,333,832		353,806
Collateralized mortgage obligations:
Fixed-rate		5,638,816		6,213,064
Variable-rate		13,045,037		12,710,531
		23,017,018		21,142,529
Total	$	23,118,123	$	22,060,517

Note 6—Mortgage Loans Held for Portfolio

Both the MPF Program and the MPP involve investment by the Bank in single-family mortgage loans that are purchased directly from PFIs. The total dollar amount of loans represents held-for-portfolio loans under both programs whereby the PFIs service and credit enhance home mortgage loans that they sell to the Bank. Also included in mortgage loans are AMPP loans which are investments by the Bank in participation interests in loans on affordable multifamily rental properties. In 2006, the Bank ceased purchasing assets under AMPP, and in 2008 the Bank ceased purchasing assets under the MPF Program and suspended acquisitions of mortgage loans under MPP.

The following table presents information on mortgage loans held for portfolio (in thousands):

	As of December 31,
	2008			2007
Mortgage loans held for portfolio:
Fixed-rate medium-term* single-family mortgages	$	813,351		$	946,439
Fixed-rate long-term single-family mortgages		2,421,652			2,564,175
Multifamily mortgages		22,762			23,256
Total unpaid principal balance		3,257,765			3,533,870
Premiums		15,882			14,265
Discounts		(21,896	)		(20,487	)
SFAS 133 delivery commitments basis adjustments		179			(220	)
Total	$	3,251,930		$	3,527,428

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

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The following table details the unpaid principal balance of mortgage loans held for portfolio outstanding (in thousands):

	As of December 31,
	2008		2007
Government-guaranteed/insured loans	$	289,092	$	294,186
Conventional loans		2,968,673		3,239,684
Total unpaid principal balance	$	3,257,765	$	3,533,870

The activity in the allowances for credit losses was as follows (in thousands):

	For the Years Ended December 31,
	2008		2007		2006
Balance, beginning of year	$	846	$	774	$	557
Provision for credit losses		10		72		217
Balance, end of year	$	856	$	846	$	774

As of December 31, 2008 and 2007, the Bank had $14.4 million and $2.9 million of nonaccrual loans, respectively. Generally, only government-guaranteed/insured loans continue to accrue interest after delinquency of 90 days or more.

Residential mortgage loans included in large groups of smaller-balance homogenous loans are evaluated collectively for impairment. The allowance for credit losses attributed to these loans is established through a process that estimates the probable losses inherent in the Bank’s mortgage loan portfolio as of the balance sheet date. Mortgage loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when, based on current information and events, management determines that it is probable that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement. Due to the layers of credit enhancement, the Bank had no recorded investments in impaired mortgage loans, as of December 31, 2008 and 2007.

The Bank records credit enhancement fees as a reduction to mortgage loan interest income. Credit enhancement fees totaled $3.7 million, $3.7 million, and $3.4 million for the years ended December 31, 2008, 2007, and 2006, respectively.

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Note 7—Advances

Redemption Terms. The Bank had advances outstanding, including AHP advances (see Note 10), at interest rates ranging from 0.00 percent to 8.79 percent, as summarized below (in thousands). Advances with interest rates of 0.00 percent are AHP subsidized advances.

	As of December 31,
	2008			2007
Year of contractual maturity:
Overdrawn demand deposit accounts	$	550		$	18,219
Due in one year or less		39,739,223			34,062,503
Due after one year through two years		34,187,680			19,356,806
Due after two years through three years		23,761,810			22,684,160
Due after three years through four years		17,692,714			18,326,931
Due after four years through five years		10,566,914			16,430,434
Due after five years		30,320,265			29,350,652
Total par value		156,269,156			140,229,705
Discount on AHP advances		(14,028	)		(13,461	)
Discount on EDGE advances		(13,253	)		(14,091	)
SFAS 133 hedging adjustments		9,617,925			2,667,120
Deferred commitment fees		(4,254	)		(1,900	)
Total	$	165,855,546		$	142,867,373

The Bank offers advances to members that may be prepaid on prescribed dates (call dates) without incurring prepayment or termination fees (callable advances). Other advances may be prepaid only by paying a fee to the Bank (prepayment fee) that makes the Bank financially indifferent to the prepayment of the advance. As of December 31, 2008 and 2007, the Bank had callable advances of $6.0 million and $90.0 million, respectively.

The following table summarizes advances by year of contractual maturity or next call date for callable advances (in thousands):

	As of December 31,
	2008		2007
Year of contractual maturity or next call date:
Overdrawn demand deposit accounts	$	550	$	18,219
Due or callable in one year or less		39,744,223		34,152,503
Due or callable after one year through two years		34,187,680		19,331,806
Due or callable after two years through three years		23,759,810		22,684,160
Due or callable after three years through four years		17,692,714		18,286,931
Due or callable after four years through five years		10,564,914		16,405,434
Due or callable after five years		30,319,265		29,350,652
Total par value	$	156,269,156	$	140,229,705

Convertible advances offered by the Bank allow the Bank to convert the fixed-rate advance to a variable-rate advance at the current market rate on certain specified dates. Until September 2007, the Bank also offered another type of convertible advance that allowed the Bank to terminate the fixed-rate advance on certain specified dates, which the Bank normally would exercise when interest rates increased. As of December 31, 2008 and 2007, the Bank had convertible advances outstanding totaling $30.2 billion and $30.1 billion, respectively.

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The following table summarizes advances by year of contractual maturity or, for convertible advances, next conversion date (in thousands):

	As of December 31,
	2008		2007
Year of contractual maturity or next convert date:
Overdrawn demand deposit accounts	$	550	$	18,219
Due or convertible in one year or less		60,519,668		53,102,693
Due or convertible after one year through two years		35,271,305		24,183,636
Due or convertible after two years through three years		24,000,685		22,063,885
Due or convertible after three years through four years		14,001,269		17,705,481
Due or convertible after four years through five years		9,539,464		11,979,329
Due or convertible after five years		12,936,215		11,176,462
Total par value	$	156,269,156	$	140,229,705

Security Terms. The Bank lends to member institutions and nonmembers that are eligible “housing associates” in accordance with the FHLBank Act. The Bank obtains collateral on advances to protect against losses and Finance Agency regulations permit the Bank to accept only certain types of collateral. The lendable collateral value (“LCV”) is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support.

As of December 31, 2008 and 2007, the Bank had rights to collateral, on a member specific basis, with an estimated value greater than outstanding advances. The following table provides information about the types of collateral held for the Bank’s advances (dollar amount in thousands):

	Total Par Value of Outstanding Advances		LCV of Collateral Pledged by Members		First Mortgage Collateral (%)	Securities Collateral (%)	Other Real Estate Related Collateral (%)
As of December 31, 2008	$	156,269,156	$	272,879,687	58.2	14.9	26.9
As of December 31, 2007		140,229,705		227,230,433	67.4	11.8	20.8

The Bank requires its borrowers to execute an Advances and Security Agreement that establishes the Bank’s security interest in all collateral pledged by the borrower to the Bank. The Bank perfects its security interest in collateral before making an advance to the borrower.

The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), other than claims and rights that (1) would be entitled to priority under otherwise applicable law and (2) are held by actual bona fide purchasers for value or by actual secured parties that are secured by actual perfected security interests.

Credit Risk. Based on the collateral pledged as security for advances, management’s credit analysis of members’ financial condition, and prior repayment history, no allowance for credit losses on advances is deemed necessary by management, as of December 31, 2008 and 2007, respectively. No advance was past due as of December 31, 2008 or 2007.

The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions and credit unions and further is concentrated in certain larger borrowing relationships. As of December 31, 2008 and 2007, the concentration of the Bank’s advances was $102.7 billion and $97.6 billion, respectively, to 10 member institutions, and this represented 65.7 percent and 69.6 percent of total advances outstanding.

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Interest-rate Payment Terms. The following table details interest-rate payment terms for advances (in thousands):

	As of December 31,
	2008		2007
Par value of advances:
Fixed-rate	$	127,322,930	$	115,846,392
Variable-rate		28,946,226		24,383,313
Total	$	156,269,156	$	140,229,705

Note 8—Deposits

The Bank offers demand and overnight deposits for members and qualifying nonmembers. A member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of such funds to the owners of the mortgage loans. The Bank classifies these items as demand and overnight deposits.

Deposits classified as demand and overnight pay interest based on a daily interest rate.

The following table details deposits with the Bank that are interest-bearing and noninterest-bearing deposits (in thousands):

	As of December 31,
	2008		2007
Interest-bearing deposits:
Demand and overnight	$	3,572,709	$	7,115,183
Noninterest-bearing deposits:
Pass-through reserve deposits		—		19,844
Total	$	3,572,709	$	7,135,027

Until May 2008 the Bank acted as a pass-through correspondent for member institutions required to deposit reserves with the Federal Reserve Banks. The Bank includes member reserve balances in “Noninterest-bearing deposits” on the Statements of Condition.

Note 9—Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are the joint and several obligations and are backed only by the financial resources of the 12 FHLBanks.

The Bank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), and also is jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligation whether or not the consolidated obligation represents a primary liability of such FHLBank. Although it has never occurred, to the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank that is primarily liable for such consolidated obligation, Finance Agency regulations provide that the paying FHLBank is entitled to reimbursement from the noncomplying FHLBank for any payments made on its behalf and other associated costs (including interest to be determined by the Finance Agency). If, however, the Finance Agency determines that the noncomplying FHLBank is unable to satisfy its repayment obligations, the Finance Agency may allocate the outstanding liabilities of the noncomplying FHLBank among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding. The Finance

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Agency reserves the right to allocate the outstanding liabilities for the consolidated obligations among the FHLBanks in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner.

The par value of the 12 FHLBanks’ outstanding consolidated obligations, including consolidated obligations issued by the Bank, was approximately $1.3 trillion and $1.2 trillion as of December 31, 2008 and 2007, respectively. Regulations require each FHLBank to maintain, in the aggregate, unpledged qualifying assets equal to that FHLBank’s consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations of or fully guaranteed by the United States; mortgages guaranteed or insured by the United States or its agencies; participations, mortgages, or other securities of or issued by certain government-sponsored enterprises; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. The Bank held unpledged qualifying assets of $207.3 billion and $189.0 billion as of December 31, 2008 and 2007, respectively, compared to a par amount of $191.1 billion and $170.4 billion in consolidated obligations as of December 31, 2008 and 2007, respectively.

General Terms. Consolidated obligations are issued with either fixed-rate coupon payment terms or variable-rate coupon payment terms that use a variety of indices for interest-rate resets including the London Interbank Offered Rate (“LIBOR”), Constant Maturity Treasury (“CMT”), and others. To meet the expected specific needs of certain investors in consolidated obligations, both fixed-rate consolidated obligation bonds and variable-rate consolidated obligation bonds also may contain certain features, which may result in complex coupon payment terms and call options. When such consolidated obligations are issued, the Bank generally enters into derivatives containing offsetting features that, in effect, convert the terms of the consolidated obligation bond to those of a simple variable-rate consolidated obligation bond.

These consolidated obligations, beyond having fixed-rate or simple variable-rate coupon payment terms, also may have the following broad terms regarding either principal repayment or coupon payment terms:

Optional Principal Redemption Consolidated Obligation Bonds (callable bonds) that the Bank may redeem in whole or in part at its discretion on predetermined call dates according to the terms of the consolidated obligation bond offerings.

With respect to interest payments, consolidated obligation bonds also may have the following terms:

Step Consolidated Obligation Bonds have coupons at fixed rates for specified intervals over the lives of the consolidated obligation bonds. At the end of each specified interval, the coupon rate increases (decreases) or steps up (steps down). These consolidated obligation bond issues generally contain call provisions enabling the bonds to be called at the Bank’s discretion;

Variable-rate Capped Floater Consolidated Obligation Bonds pay interest at variable rates subject to an interest-rate ceiling;

Inverse Floating-rate Consolidated Obligation Bonds have coupons that increase as an index declines and decrease as an index rises;

Conversion Consolidated Obligation Bonds have coupons that convert from fixed to variable or variable to fixed on predetermined dates according to the terms of the consolidated obligation bond offerings; and

Zero-coupon Consolidated Obligation Bonds are long-term discounted instruments that earn a fixed yield to maturity or the optional principal redemption date. All principal and interest are paid at maturity or on the optional principal redemption date, if exercised prior to maturity.

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Interest-rate Payment Terms. The following table details consolidated obligation bonds by interest-rate payment type (in thousands):

	As of December 31,
	2008		2007
Par value of consolidated obligation bonds:
Fixed-rate	$	101,202,430	$	112,134,915
Simple variable-rate		28,004,900		18,311,900
Step		6,023,000		8,951,550
Variable-rate capped floater		100,000		908,000
Inverse floating-rate		—		24,500
Fixed-rate that converts to variable-rate		15,000		259,950
Variable-rate that converts to fixed-rate		225,000		670,000
Zero-coupon		168,060		659,060
Total	$	135,738,390	$	141,919,875

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding, by year of contractual maturity (dollar amounts in thousands):

	As of December 31,
	2008					2007
	Amount			Weighted- average Interest Rate		Amount			Weighted- average Interest Rate
Year of contractual maturity:
Due in one year or less	$	73,667,975		2.63	%	$	62,826,705		4.56	%
Due after one year through two years		22,242,000		3.40	%		29,721,925		4.64	%
Due after two years through three years		8,245,900		3.90	%		14,448,245		4.63	%
Due after three years through four years		5,402,015		4.57	%		4,665,400		4.93	%
Due after four years through five years		13,548,750		4.13	%		7,851,500		5.06	%
Due after five years		12,631,750		5.13	%		22,406,100		5.08	%
Total par value		135,738,390		3.30	%		141,919,875		4.70	%
Premiums		100,767					19,479
Discounts		(109,228	)				(375,211	)
SFAS 133 hedging adjustments		2,452,134					673,965
Deferred net losses on terminated hedges		(729	)				(1,066	)
Total	$	138,181,334				$	142,237,042

The Bank’s consolidated obligation bonds outstanding included (in thousands):

	As of December 31,
	2008		2007
Par value of consolidated bonds:
Noncallable	$	92,597,640	$	71,188,475
Callable		43,140,750		70,731,400
Total	$	135,738,390	$	141,919,875

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The following table summarizes consolidated obligation bonds outstanding, by year of contractual maturity or, for callable consolidated obligation bonds, next call date (in thousands):

	As of December 31,
	2008		2007
Year of contractual maturity or next call date:
Due or callable in one year or less	$	93,302,975	$	99,681,505
Due or callable after one year through two years		20,979,500		19,364,975
Due or callable after two years through three years		4,497,900		9,811,245
Due or callable after three years through four years		1,728,015		1,974,900
Due or callable after four years through five years		6,378,750		1,590,000
Due or callable after five years		8,851,250		9,497,250
Total par value	$	135,738,390	$	141,919,875

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

The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows (dollar amounts in thousands):

	Book Value		Par Value		Weighted- average Interest Rate
As of December 31, 2008	$	55,194,777	$	55,393,546	1.73	%
As of December 31, 2007	$	28,347,939	$	28,514,466	4.23	%

Note 10—Assessments

Affordable Housing Program. Section 10(j) of the FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies in the form of direct grants and below-market interest rate advances to members who use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Annually, the FHLBanks must set aside for the AHP the greater of $100 million or 10 percent of each FHLBank’s regulatory income. Regulatory income is defined as GAAP income before interest expense related to mandatorily redeemable capital stock under SFAS 150 and the assessment for AHP, but after the assessment for REFCORP. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation. The AHP and REFCORP assessments are calculated simultaneously due to their interdependence on each other. The Bank accrues this expense monthly based on its income. The Bank reduces the AHP liability as members use subsidies.

If the Bank experienced a regulatory loss during a quarter, but still had regulatory income for the year, the Bank’s obligation to the AHP would be calculated based on the Bank’s year-to-date regulatory income. If the Bank had regulatory income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a regulatory loss for a full year, the Bank would have no obligation to the AHP for the year, since each FHLBank’s required annual AHP contribution is limited to its annual net earnings. If the aggregate 10 percent calculation described above were less than $100 million for all 12 FHLBanks, each FHLBank would be required to assure that the aggregate contribution of the FHLBanks equals $100 million. The pro ration would be made on the basis of an FHLBank’s income in relation to the income of all FHLBanks for the previous year.

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There was no shortfall in 2008, 2007, or 2006. If an FHLBank finds that its required contributions are contributing to the financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions. No FHLBank made such an application in 2008, 2007, or 2006. The Bank had outstanding principal in AHP-related advances of $66.1 million and $65.7 million as of December 31, 2008 and 2007, respectively.

An analysis of the Bank’s AHP liability is as follows (in thousands):

	As of December 31,
	2008			2007
Balances, beginning of year	$	156,184		$	130,006
AHP assessments		28,365			50,690
Subsidy usage, net		(45,249	)		(24,512	)
Balances, end of year	$	139,300		$	156,184

REFCORP. Each FHLBank is required to pay to REFCORP 20 percent of income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP. The AHP and REFCORP assessments are calculated simultaneously due to their interdependence on each other. The Bank accrues its REFCORP assessment on a monthly basis. The REFCORP has been designated as the calculation agent for AHP and REFCORP assessments. Each FHLBank provides its net income before AHP and REFCORP assessments to the REFCORP, which then performs the calculations for each quarter end.

The FHLBanks will continue to be obligated to pay these amounts until the aggregate amounts actually paid by all 12 FHLBanks are equivalent to a $300 million annual annuity (or a scheduled payment of $75 million per quarter) whose final maturity date is April 15, 2030, at which point the required payment of each FHLBank to REFCORP will be satisfied. The cumulative amount to be paid to REFCORP by the Bank is not determinable at this time because it depends on the future earnings of all FHLBanks and interest rates. If the Bank experienced a net loss during a quarter but still had net income for the year, the Bank’s obligation to the REFCORP would be calculated based on the Bank’s year-to-date GAAP net income. The Bank would be entitled to either a refund or a credit for amounts paid for the full year that were in excess of its calculated annual obligation. If the Bank had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the Bank would have no obligation to the REFCORP for the year.

The Finance Agency is required to extend the term of the FHLBanks’ obligation to the REFCORP for each calendar quarter in which the FHLBanks’ quarterly payment falls short of $75 million.

The FHLBanks’ aggregate payments have generally exceeded $300 million per year, effectively accelerating payment of the REFCORP obligation and shortening its remaining term to April 15, 2013, effective December 31, 2008. The FHLBanks’ aggregate payments through 2008 have satisfied $42.5 million of the $75 million scheduled payment for the second quarter 2013 and all scheduled payments thereafter. This date assumes that the FHLBanks will pay exactly $300 million annually after December 31, 2008 until the annuity is satisfied.

The benchmark payments or portions of them could be reinstated if the actual REFCORP payments of the FHLBanks fall short of $75 million in a quarter. During the fourth quarter of 2008, the FHLBanks’ benchmark payments or portions of them were reinstated due to actual REFCORP payments falling short of the $300 million annual requirement. The maturity date of the REFCORP obligation may be extended beyond April 15, 2030 if such extension is necessary to ensure that the value of the aggregate amounts paid by the FHLBanks exactly equals a $300 million annual annuity. Any payment beyond April 15, 2030, will be paid to the U.S. Department of the Treasury.

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An analysis of the Bank’s REFCORP liability is as follows (in thousands):

	As of December 31,
	2008			2007
Balances, beginning of year	$	30,681		$	23,606
REFCORP assessments		63,445			111,226
Payments during the year		(108,154	)		(104,151	)
Balances, end of year	$	(14,028	)	$	30,681

The REFCORP balance as of December 31, 2008 represents an overpayment of the 2008 REFCORP assessments by the Bank and is recorded in “Other assets” on the Statements of Condition as a deferred asset. The Bank will use its overpayment as a credit against future REFCORP assessments (to the extent the Bank has positive net income in the future) over an indefinite period of time. Over time, as the Bank uses its credit against its future REFCORP assessments, the Bank’s deferred asset will be reduced until the deferred asset has been exhausted. If any amount of the Bank’s deferred asset still remains at the time that the REFCORP obligation for the FHLBank System as a whole is fully satisfied, REFCORP, in consultation with the U.S. Treasury, will implement a procedure so that the Bank would be able to collect on its remaining deferred asset.

Note 11—Capital and Mandatorily Redeemable Capital Stock

Capital. The Bank is subject to three regulatory capital requirements under its capital plan and Finance Agency rules and regulations. First, the Bank must maintain permanent capital at all times in an amount at least equal to the sum of its credit risk capital requirement, its market risk capital requirement, and its operations risk capital requirement, calculated in accordance with the rules and regulations of the Finance Agency. Only “permanent capital,” defined by the FHLBank Act and regulations as retained earnings (determined in accordance with GAAP) and the amounts paid-in for Class B stock, satisfies the risk-based capital requirement. The Finance Agency may require the Bank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined. Second, the FHLBank Act requires the Bank to maintain at all times total capital in an amount equal to at least four percent of total assets. Third, the FHLBank Act requires the Bank to maintain at all times weighted leverage capital in an amount equal to at least five percent of total assets. “Total capital” is defined in the regulations as the sum of permanent capital, the amount paid-in for Class A stock (if any), the amount of the Bank’s general allowance for losses (if any), and the amount of any other instruments identified in the capital plan and approved by the Finance Agency. As of December 31, 2008, the Bank has not issued any Class A stock and has no general allowance for losses or any other instruments identified in the capital plan and approved by the Finance Agency; therefore, the Bank’s total capital is equal to its permanent capital. “Weighted leverage capital” is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times. It should be noted that, although mandatorily redeemable capital stock under SFAS 150 is not included in capital for financial reporting purposes, such outstanding stock is considered capital for determining compliance with these regulatory capital requirements.

The Bank was in compliance with the Finance Agency’s regulatory capital rules and requirements as shown in the following table (dollar amounts in thousands):

	As of December 31,
	2008						2007
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk based capital	$	5,715,678		$	8,942,306		$	981,647		$	8,080,333
Total capital-to-assets ratio		4.00	%		4.29	%		4.00	%		4.28	%
Total regulatory capital*	$	8,342,574		$	8,942,306		$	7,557,511		$	8,080,333
Leverage ratio		5.00	%		6.43	%		5.00	%		6.42	%
Leverage capital	$	10,428,217		$	13,413,459		$	9,446,888		$	12,120,499

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* Mandatorily redeemable capital stock is considered capital for regulatory purposes, and “total regulatory capital” includes the Bank’s $44.4 million and $55.5 million in mandatorily redeemable capital stock at December 31, 2008 and 2007, respectively.

The Bank offers two subclasses of Class B stock, each of which is issued, redeemed, and repurchased at a par value of $100 per share. Shares of subclass B1 capital stock are issued to meet the membership stock requirement under the capital plan and shares of subclass B2 capital stock are issued to meet the activity-based stock requirement under the capital plan. Activity-based stock held by a member is that amount of subclass B2 capital stock that the member is required to own for as long as certain transactions between the Bank and the member remain outstanding. The manner in which the activity-based stock requirement is determined under the capital plan is set forth below.

The minimum stock requirement for each member is the sum of the membership stock requirement and the activity-based stock requirement. The capital plan permits the Bank’s board of directors to set the membership and activity-based stock requirements within a range as set forth in the capital plan. During 2008, the membership stock requirement was an amount of subclass B1 capital stock equal to 0.18 percent (18 basis points) of the member’s total assets as of December 31, 2007, subject to a cap of $25 million. The membership stock requirement is recalculated at least annually by March 31, using the member’s total assets as of the preceding calendar year-end. As of December 31, 2008, the activity-based stock requirement was an amount of subclass B2 capital stock equal to the sum of the following:

• 4.50 percent of the member’s outstanding par balance of advances; and

• 8.00 percent of targeted debt/equity investments (such as AMPP assets) sold by the member to the Bank on or after December 17, 2004.

The activity-based stock requirement also may include a percentage of any outstanding balance of acquired member assets (such as MPF and MPP assets), although this percentage was set at zero at December 31, 2008.

The FHLBank Act and Finance Agency regulations require that the minimum stock requirement for members must be sufficient to enable the Bank to meet its minimum regulatory capital requirement. Therefore, from time to time the Bank’s board of directors may adjust the membership stock requirement and the activity-based stock requirement within specified ranges set forth in the capital plan. Any adjustment outside the ranges would require an amendment to the capital plan and Finance Agency approval. Each member is required to comply promptly with any adjustment to the minimum stock requirement. The FHLBank Act provides that the Bank may repurchase, at its sole discretion, any member’s capital stock investment that exceeds the required minimum amount (excess capital stock).

A member may obtain redemption of its excess Class B capital stock at par value payable in cash five years after providing written notice to the Bank. The Bank, at its option, may repurchase a member’s excess capital stock before expiration of the five-year notice period. The Bank’s authority to redeem or repurchase capital stock is subject to a number of limitations.

The Bank’s board of directors may, but is not required to, declare and pay non-cumulative dividends out of previously retained earnings and current earnings in either cash or capital stock in compliance with Finance Agency rules. All shares of capital stock share in any dividend without preference. Dividends are computed on the average daily balance of capital stock outstanding during the relevant time period. The Bank may not pay a dividend if the Bank is not in compliance with any of its regulatory capital requirements or if the payment, if made, would cause the Bank to fail to meet any of its regulatory capital requirements.

As of December 31, 2008 and 2007, the 10 largest holders of capital stock held $4.9 billion and $4.6 billion, respectively, of the total regulatory capital stock of the Bank.

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Mandatorily Redeemable Capital Stock. In compliance with SFAS 150, the Bank reclassifies capital stock subject to redemption from equity to liability once a member exercises a written redemption right, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination, or involuntary termination from membership. Shares of capital stock meeting these definitions are reclassified to a liability at fair value. Dividends related to capital stock classified as a liability are accrued at the expected dividend rate and reported as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments is reflected as a financing cash outflow in the Statements of Cash Flows.

The Bank is a cooperative whose member financial institutions and former members own all of the capital stock. Member shares cannot be purchased or sold except between the Bank and its members at its $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, the Bank will reclassify mandatorily redeemable capital stock from a liability to equity in compliance with SFAS 150. After the reclassification, dividends on the capital stock would no longer be classified as interest expense. For the years ended December 31, 2008, 2007 and 2006, dividends on mandatorily redeemable capital stock in the amount of $1.5 million, $11.3 million and $9.2 million, respectively, were recorded as interest expense.

The following table provides the number of members that attained nonmember status and the number of nonmembers for which the Bank has completed the repurchase/redemption of mandatorily redeemable capital stock:

	For the Years Ended December 31,
	2008		2007		2006
Beginning of year	11		9		7
Attainment of nonmember status	15		20		8
Repurchase/redemption during the year	(13	)	(18	)	(6	)
End of year	13		11		9

The Bank’s activity for mandatorily redeemable capital stock was as follows (in thousands):

	For the Years Ended December 31,
	2008			2007			2006
Balance, beginning of year	$	55,538		$	215,705		$	143,096
Capital stock subject to mandatory redemption reclassified from equity during the year due to attainment of nonmember status		49,968			91,452			146,876
Capital stock no longer subject to redemption due to a nonmember becoming a member		(568	)		—			(269	)
Repurchase/redemption of mandatorily redeemable capital stock during the year		(60,510	)		(251,619	)		(73,998	)
Balance, end of year	$	44,428		$	55,538		$	215,705

As of December 31, 2008, the Bank’s outstanding mandatorily redeemable capital stock consisted of B2 activity-based stock. The Bank is not required to redeem activity-based stock until the later of the expiration of the redemption period, which is five years after notification is received, or until the activity no longer remains outstanding. During 2008, if, as a result of a member’s activity no longer remaining outstanding, a member’s activity-based stock became excess capital stock, the Bank generally would repurchase promptly the member’s excess stock, subject to certain limitations and thresholds in the Bank’s capital plan. Additionally, if a member merges into a non-member, that member’s membership-based stock becomes excess capital stock, which the Bank may repurchase with 10 business days notice, subject to certain limitations and thresholds in the Bank’s capital plan.

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The following table shows the amount of mandatorily redeemable capital stock by year of redemption (in thousands). The year of redemption in the table is the later of the end of the five-year redemption period, or with respect to activity-based stock, the later of the expiration of the five-year redemption period or the activity’s maturity date.

	As of December 31,
	2008		2007
Contractual year of redemption:
Due in one year or less	$	3,764	$	28,758
Due after one year through two years		3,578		786
Due after two years through three years		3,831		625
Due after three years through four years		8,948		3,600
Due after four years through five years		2,700		4,727
Due after five years		21,607		17,042
Total	$	44,428	$	55,538

A member may cancel or revoke its written notice of redemption or its notice of withdrawal from membership at any time prior to the end of the five-year redemption period, subject to payment of a cancellation fee equal to the greater of $500 or two basis points (0.02 percent) of the par value of the shares of stock subject to the redemption notice.

Note 12—Employee Retirement Plans

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Pentegra Plan”), a multiemployer tax-qualified defined-benefit pension plan. The plan covers substantially all officers and employees of the Bank. Funding and administrative costs of the Pentegra Plan charged to other operating expenses were $9.6 million, $15.0 million, and $10.9 million in 2008, 2007, and 2006, respectively. The Pentegra Plan is a multiemployer plan in which assets contributed by one participating employer may be used to provide benefits to employees of other participating employers; assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. As a result, disclosure of the accumulated benefit obligations, plan assets, and the components of annual pension expense attributable to the Bank are not presented herein.

The Bank also participates in a qualified, defined contribution plan. The Bank’s contribution to this plan is equal to a percentage of voluntary contributions, subject to certain limitations. The Bank contributed $1.7 million, $1.6 million, and $1.4 million to this plan during the years ended December 31, 2008, 2007, and 2006, respectively.

The Bank offers a supplemental nonqualified defined contribution retirement plan to eligible executives. The Bank’s contribution to this plan is equal to a percentage of voluntary contributions. The Bank contributed $106 thousand, $67 thousand, and $100 thousand to this plan during the years ended December 31, 2008, 2007, and 2006, respectively.

In addition, the Bank maintains a nonqualified deferred compensation plan, available to Bank directors and officers at the senior vice president level and above, which is, in substance, an unfunded supplemental savings plan. The plan’s liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals. The Bank’s minimum obligation from this plan was $3.1 million as of December 31, 2008 and 2007. Operating expense includes deferred compensation and accrued earnings of $370 thousand, $228 thousand, and $298 thousand during the years ended December 31, 2008, 2007, and 2006, respectively.

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The Bank offers a supplemental nonqualified defined benefit pension plan to eligible executives and a postretirement health benefit plan to eligible retirees. There are no funded plan assets that have been designated to provide supplemental retirement plan or postretirement health benefits. The obligations and funding status of the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan at December 31, 2008 and 2007 were as follows (in thousands):

	Supplemental Defined Benefit Pension Plan						Postretirement Health Benefit Plan
	2008			2007			2008			2007
Change in benefit obligation:
Benefit obligation at beginning of year	$	9,998		$	9,861		$	5,480		$	6,139
Service cost		456			605			280			329
Interest cost		563			515			386			343
Actuarial loss (gain)		2,333			(640	)		48			(1,199	)
Benefits paid		(274	)		(343	)		(169	)		(132	)
Projected benefit obligation at end of year		13,076			9,998			6,025			5,480
Change in plan assets:
Fair value of plan assets at beginning of year		—			—			—			—
Employer contributions		274			343			169			132
Benefits paid		(274	)		(343	)		(169	)		(132	)
Fair value of plan assets at end of year		—			—			—			—
Funded status at end of year	$	(13,076	)	$	(9,998	)	$	(6,025	)	$	(5,480	)

Amounts recognized in “Other liabilities” on the Statements of Condition for the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan were $19.1 million and $15.5 million as of December 31, 2008 and 2007, respectively.

Amounts recognized in accumulated other comprehensive loss for the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan at December 31, 2008 and 2007 were as follows (in thousands):

	Supplemental Defined Benefit Pension Plan						Postretirement Health Benefit Plan
	2008			2007			2008			2007
Net transition obligation	$	—		$	—		$	251		$	293
Net loss		5,946			3,994			3,475			3,729
Prior service credit		(90	)		(215	)		(4,640	)		(5,242	)
Total amount recognized	$	5,856		$	3,779		$	(914	)	$	(1,220	)

The accumulated benefit obligation for the supplemental defined benefit pension plan was $7.5 million and $6.9 million for the years ended December 31, 2008 and 2007, respectively.

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Components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan for the years ended December 31, 2008, 2007 and 2006 were as follows (in thousands):

	Supplemental Defined Benefit Pension Plan									Postretirement Health Benefit Plan
	2008			2007			2006			2008			2007			2006
Net periodic benefit cost
Service cost	$	456		$	605		$	693		$	280		$	329		$	740
Interest cost		563			515			439			386			343			633
Amortization of net transition obligation		—			—			—			42			42			42
Amortization of prior service credit		(125	)		(125	)		(125	)		(603	)		(603	)		—
Amortization of net loss		381			422			425			303			403			499
Net periodic benefit cost		1,275			1,417		$	1,432			408			514		$	1,914
Other changes in benefit obligations recognized in other comprehensive loss
Net loss (gain)		2,333			(640	)					48			(1,199	)
Amortization of net loss		(381	)		(422	)					(303	)		(403	)
Amortization of net transition obligation		—			—						(42	)		(42	)
Amortization of prior service credit		125			125						603			603
Total recognized in other comprehensive loss		2,077			(937	)					306			(1,041	)
Total recognized in periodic benefit cost and other comprehensive loss	$	3,352		$	480					$	714		$	(527	)

The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit cost during the next fiscal year are as follows (in thousands):

	Supplemental Defined Benefit Pension Plan			Postretirement Health Benefit Plan			Total
Net transition obligation	$	—		$	42		$	42
Net loss		666			249			915
Prior service credit		(43	)		(603	)		(646	)
	$	623		$	(312	)	$	311

The measurement date used to determine the Bank’s 2008 benefit obligation was December 31, 2008.

Key assumptions used for the actuarial calculations to determine benefit obligations for the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan for the years ended December 31, 2008, 2007 and 2006 were as follows:

	Supplemental Defined Benefit Pension Plan						Postretirement Health Benefit Plan
	2008		2007		2006		2008		2007		2006
Discount rate	5.85	%	5.76	%	5.75	%	6.96	%	6.60	%	5.75	%
Rate of compensation increase	5.50	%	5.50	%	5.50	%	N/A		N/A		N/A

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Key assumptions used for the actuarial calculations to determine net periodic benefit cost for the Bank’s supplemental defined benefit pension plan and postretirement health benefit plan for the years ended December 31, 2008, 2007 and 2006 were as follows:

	Supplemental Defined Benefit Pension Plan						Postretirement Health Benefit Plan
	2008		2007		2006		2008		2007		2006
Discount rate	5.76	%	5.75	%	5.50	%	6.60	%	5.75	%	5.50	%
Rate of compensation increase	5.50	%	5.50	%	5.50	%	N/A		N/A		N/A

The discount rate used for the years ended December 31, 2008, 2007, and 2006 was determined based on the duration of the Bank’s benefit payments and the application of this duration to the Citigroup Pension Discount Curve.

Assumed health-care cost trend rates for the Bank’s postretirement health benefit plan were as follows:

	As of December 31,
	2008		2007
Health-care cost trend rates:
Assumed for next year	8.50	%	8.00	%
Ultimate rate	5.30	%	5.00	%
Year that ultimate rate is reached	2012		2013

As of December 31, 2008, a one percentage point change in the assumed health-care cost trend rates would have the following effects (in thousands):

	One Percentage Point
	Increase		Decrease
Effect on total service and interest cost components	$	98	$	98
Effect on accumulated postretirement benefit obligation		697		565

The supplemental defined benefit pension plan and postretirement health benefit plan are not funded; therefore the Bank will not make a contribution to them in 2009 except for the payment of benefits.

The benefits the Bank expects to pay in each of the next five years and subsequent five years for both the supplemental defined benefit pension plan and postretirement health benefit plan are listed in the table below (in thousands):

Years	Supplemental Defined Benefit Pension Plan		Postretirement Health Benefit Plan
2009	$	1,119	$	231
2010		688		254
2011		1,081		286
2012		1,234		319
2013		1,543		347
2014-2018		8,723		2,176

Note 13—Derivatives and Hedging Activities

Nature of Business Activity

The Bank may enter into interest-rate swaps, swaptions, interest-rate cap and floor agreements, calls, puts, and forward contracts (collectively, derivatives) to manage its exposure to changes in interest rates. The Bank may

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use these instruments to, in effect, adjust the maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives. The Bank uses derivatives in three ways: (1) as a fair value hedge of an underlying financial instrument or a firm commitment; (2) as an intermediary transaction; or (3) as a SFAS 133 non-qualifying hedge for purposes of asset liability management. In addition to using derivatives to manage mismatches of interest rates between assets and liabilities, the Bank also uses derivatives to manage embedded options in assets and liabilities, to hedge the market value of existing assets and liabilities, to hedge the duration risk of prepayable instruments, to offset exactly other derivatives executed with members (when the Bank serves as an intermediary) and to reduce funding costs.

Consistent with Finance Agency regulation, the Bank enters into derivatives only to reduce the interest rate risk exposures inherent in otherwise unhedged assets and funding positions, to achieve the Bank’s risk management objectives, and to act as an intermediary between its members and counterparties. Bank management uses derivatives when they are considered to be the most cost-effective alternative to achieve the Bank’s financial and risk management objectives. Accordingly, the Bank may enter into derivatives that do not necessarily qualify for hedge accounting (SFAS 133 non-qualifying hedges).

Net (losses) gains on derivatives and hedging activities were as follows (in thousands):

	For Years Ended December 31,
	2008			2007			2006
(Losses) gains related to fair-value hedge ineffectiveness	$	(46,542	)	$	29,338		$	36,044
(Losses) gains on SFAS 133 non-qualifying hedges and other		(182,747	)		(125,762	)		55,132
Net (losses) gains on derivatives and hedging activities	$	(229,289	)	$	(96,424	)	$	91,176

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The following table provides outstanding notional balances and estimated fair values of the derivatives outstanding used for fair value hedges and stand alone derivatives that are SFAS 133 non-qualifying hedges, excluding collateral and accrued interest by category (in thousands):

	As of December 31,
	2008					2007
	Notional		Estimated Fair Value			Notional		Estimated Fair Value
Interest-rate swaps:
Fair value hedges	$	218,026,584	$	(6,980,079	)	$	207,143,643	$	(2,031,901	)
SFAS 133 non-qualifying hedges		17,706,074		(719,810	)		12,338,065		(263,429	)
Interest-rate swaptions:
SFAS 133 non-qualifying hedges		—		—			115,000		10,823
Interest-rate caps/floors:
SFAS 133 non-qualifying hedges		4,480,000		51,476			3,260,000		25,980
Interest-rate futures/forwards:
SFAS 133 non-qualifying hedges		1,500		600			1,500		109
Mortgage delivery commitments:
SFAS 133 non-qualifying hedges		—		—			9,309		41
Total	$	240,214,158	$	(7,647,813	)	$	222,867,517	$	(2,258,377	)
Total derivatives excluding accrued interest			$	(7,647,813	)			$	(2,258,377	)
Accrued interest				56,762					187,934
Cash collateral held by counterparty—assets				6,338,420					808,359
Cash collateral held from counterparty—liabilities				(69,755	)				(9	)
Net derivative balances			$	(1,322,386	)			$	(1,262,093	)
Net derivative assets balance			$	91,406				$	43,039
Net derivative liabilities balance				(1,413,792	)				(1,305,132	)
Net derivative balances			$	(1,322,386	)			$	(1,262,093	)

The fair values of bifurcated embedded derivatives presented on a combined basis with the host contract and not included in the above table are as follows (in thousands):

	As of December 31,
	2008		2007
Host contract:
Advances	$	160,227	$	8,459
Callable bonds		—		408
Total	$	160,227	$	8,867

Hedging Activities

The Bank formally documents at inception all relationships between derivative hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions and its method of assessing effectiveness and measuring ineffectiveness. This process includes linking all derivatives that are designated as fair-value hedges to (1) assets and liabilities on the Statements of Condition or (2) firm commitments. The Bank also formally assesses (both at the hedge’s inception and at least quarterly on an ongoing basis) whether the derivatives that are used in hedging relationships have been effective in offsetting changes in the fair value of hedged items attributable to the risk being hedged and whether those derivatives may

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be expected to remain effective in future periods. The Bank uses regression analyses to assess the effectiveness of its hedges.

Consolidated Obligations. While consolidated obligations are the joint and several obligations of the FHLBanks, each FHLBank has consolidated obligations for which it is the primary obligor. The Bank enters into derivatives to hedge the interest-rate risk associated with its specific debt issuances.

For instance, in a typical transaction, fixed-rate consolidated obligations are issued for the Bank and the Bank simultaneously enters into a matching derivative in which the counterparty pays fixed cash flows to the Bank designed to mirror in timing and amount the cash outflows the Bank pays on the consolidated obligation. The Bank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable-rate advances (typically one- or three-month LIBOR). These transactions are treated as fair-value hedges under SFAS 133. This intermediation between the capital and swap markets permits the Bank to raise funds at lower costs than otherwise would be available through the issuance of simple fixed- or variable-rate consolidated obligations in the capital markets.

Advances. The Bank offers a wide array of advance structures to meet members’ funding needs. These advances may have maturities of up to 30 years with variable or fixed rates and may include early termination features or options. The Bank may use derivatives to adjust, in effect, the repricing and/or option characteristics of advances in order to match more closely the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed-rate advance or a variable-rate advance with embedded options, the Bank simultaneously will execute a derivative with terms that offset the terms and embedded options, if any, in the advance. For example, the Bank may hedge a fixed-rate advance with an interest-rate swap where the Bank pays a fixed-rate coupon and receives a variable-rate coupon, effectively converting the fixed-rate advance to a variable-rate advance. Alternatively, the advance may have a variable-rate coupon based on an interest-rate index other than LIBOR, in which case the Bank would receive a coupon based on the non-LIBOR index and pay a LIBOR-based coupon. These types of hedges are treated as fair-value hedges under SFAS 133.

Mortgage Assets. The Bank has invested in fixed-rate mortgage assets. The prepayment options embedded in mortgage assets may result in extensions or contractions in the expected maturities of these investments, depending on changes in estimated prepayment speeds. Finance Agency regulation limits this source of interest-rate risk by restricting the types of mortgage assets the Bank may own to those with limited average life changes under certain interest-rate shock scenarios and by establishing limitations on duration of equity and change in market value of equity. The Bank may manage prepayment and duration risk by funding some mortgage assets with consolidated obligations that have call features. In addition, the Bank may use derivatives to manage the prepayment and duration variability of mortgage assets. Net income could be reduced if the Bank replaces the mortgages with lower-yielding assets and if the Bank’s higher funding costs are not reduced concomitantly.

The Bank manages the interest-rate and prepayment risk associated with mortgages through a combination of debt issuance and derivatives. The Bank issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. The Bank may use derivatives to match the expected prepayment characteristics of the mortgages.

Options also may be used to hedge prepayment risk on the mortgages, many of which are not identified to specific mortgages and, therefore, do not receive fair-value or cash flow hedge accounting treatment. The options are marked-to-market through current earnings. The Bank also may purchase interest-rate caps and floors, swaptions, callable swaps, calls, and puts to minimize the prepayment risk embedded in the mortgage loans. Although these derivatives are valid SFAS 133 non-qualifying hedges against the prepayment risk of the loans, they are not linked specifically to individual loans and, therefore, do not receive either fair-value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

The Bank analyzes the duration, convexity, and earnings risk of the mortgage portfolio on a regular basis under various rate scenarios.

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Firm Commitment Strategies. Mortgage purchase commitments are recorded on the balance sheet at fair value, with changes in fair value recognized in current-period earnings. When the mortgage purchase commitment derivative settles, the current market value of the commitment is included with the basis of the mortgage loans and amortized accordingly.

The Bank also may enter into a fair value hedge of a firm commitment for a forward starting advance through the use of an interest-rate swap. In this case, the swap will function as the hedging instrument for both the firm commitment and the subsequent advance. The basis movement associated with the firm commitment will be rolled into the basis of the advance at the time the commitment is terminated and the advance is issued. The basis adjustment then will be amortized into interest income over the life of the advance using the level-yield method.

Investments. The Bank invests in U.S. agency obligations, mortgage-backed securities, and the taxable portion of state or local housing finance agency obligations. The interest-rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment and interest rate risk by funding investment securities with consolidated obligations that have call features, or by hedging the prepayment risk with caps or floors, or by adjusting the duration of the securities by using derivatives to modify the cash flows of the securities. Investment securities may be classified as held-to-maturity or trading.

The Bank also may manage the risk arising from changing market prices and volatility of investment securities classified as trading by entering into derivatives (SFAS 133 non-qualifying hedges) that offset the changes in fair value of the securities. The market value changes of both the trading securities and the associated derivatives are included in other income (loss) in the Statements of Income and presented as part of the “Net gains (losses) on trading securities” and “Net (losses) gains on derivatives and hedging activities.”

The Bank is not a derivatives dealer and thus does not trade derivatives for short-term profit.

Managing Credit Risk on Derivatives

The Bank is subject to credit risk due to nonperformance by counterparties to the derivative agreements. The amount of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The Bank manages counterparty credit risk through credit analysis, collateral requirements and adherence to the requirements set forth in Bank policy and regulations. Based on credit analyses and collateral requirements, Bank management presently does not anticipate any credit losses on its existing derivative agreements with counterparties as of December 31, 2008.

The contractual or notional amount of derivatives reflects the involvement of the Bank in the various classes of financial instruments. The notional amount of derivatives does not measure the credit risk exposure of the Bank, and the maximum credit exposure of the Bank is substantially less than the notional amount. The Bank requires collateral agreements that establish collateral delivery thresholds for all derivatives. The maximum credit risk is the estimated cost of replacing interest-rate swaps, forward agreements, mandatory delivery contracts for mortgage loans, and purchased caps and floors that have a net positive market value, if the counterparty defaults and the related collateral, if any, is of no value to the Bank. As of December 31, 2008, the Bank has not sold or repledged any such collateral.

As of December 31, 2008 and 2007, the Bank’s maximum credit risk, as defined above, was approximately $117.7 million and $43.0 million, respectively. These totals include $12.0 million and $11.0 million, respectively, of net accrued interest receivable. In determining maximum credit risk, the Bank considers accrued interest receivables and payables, and the legal right to offset derivative assets and liabilities by counterparty. Cash held by the Bank as collateral for derivatives was $69.7 million and $0 as of December 31, 2008 and 2007, respectively. Additionally, collateral with respect to derivatives with member institutions includes collateral assigned to the Bank, as evidenced by a written security agreement and held by the member institution for the benefit of the Bank.

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Lehman Brothers Special Financing Inc. (“LBSF”) was a counterparty to the Bank on multiple derivative transactions documented under an International Swap Dealers Association, Inc. master agreement (the “Master Agreement”). Lehman Brothers Holdings Inc. (“Lehman”), the parent company of LBSF, is a credit support provider for these obligations of LBSF under such transactions. On September 15, 2008, Lehman filed for protection under Chapter 11 of the federal Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York, which is an event of default under the Master Agreement. On September 18, 2008, the Bank sent LBSF a notice identifying the occurrence of an event of default and designating September 19, 2008 as the early termination date in respect of all outstanding derivative transactions. On October 3, 2008, the Bank sent a settlement statement to LBSF notifying it of all amounts payable if, as permitted under the Master Agreement, the value of the collateral due to be returned to the Bank were netted against all other amounts due between the parties as a result of unwinding the derivative transactions, and demanding payment for that amount. On October 3, 2008, the Bank filed suit in New York State Court against LBSF with respect to certain terminated derivative transactions. Later that same day, LBSF filed for bankruptcy protection, and the Bank’s action has now been stayed pursuant to applicable bankruptcy law.

In accordance with the Master Agreement, the net amount due to the Bank as a result of such excess collateral held by LBSF is approximately $189.4 million. Management evaluated this receivable in accordance with the guidance provided by SFAS No. 5, Accounting for Contingencies (“SFAS 5”), and related pronouncements. The Bank recorded a $170.5 million reserve based on management’s estimate of the probable amount that will be realized. The net receivable of $18.9 million is recorded in “Other assets” on the Statements of Condition. Determining the reserve amount requires management to use considerable judgment and is based on the facts currently available. As additional relevant facts become available in future periods, the amount of the reserve may be adjusted accordingly.

The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. Note 15 discusses assets pledged by the Bank to these counterparties.

Intermediation. To assist its members in meeting their hedging needs, the Bank acts as an intermediary between its members and other counterparties by entering into offsetting derivative transactions. This intermediation allows smaller members indirect access to the derivatives market.

Derivatives in which the Bank is an intermediary may arise when the Bank: (1) enters into derivatives with members and offsetting derivatives with other counterparties to meet the needs of its members; or (2) enters into derivatives to offset the economic effect of other derivatives that are no longer designated to either advances, investments, or consolidated obligations.

The notional principal amount of derivatives in which the Bank was an intermediary was $2.5 billion and $1.2 billion as of December 31, 2008 and 2007, respectively.

Note 14—Estimated Fair Values

As discussed in Note 2 to the financial statements, the Bank adopted SFAS 157 and SFAS 159 on January 1, 2008. SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. SFAS 157 applies whenever other accounting pronouncements require or permit assets or liabilities to be measured at fair value. Accordingly, SFAS 157 does not expand the use of fair value in any new circumstances. SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. As of December 31, 2008, the Bank had not elected to measure any financial assets or liabilities using the fair value option under SFAS 159; therefore the adoption of SFAS 159 had no effect on the Bank’s financial condition or results of operations.

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The Bank records trading securities and derivative assets and liabilities at fair value. Fair value is a market-based measurement and is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the assets or owes the liability. In general, the transaction price will equal the exit price and, therefore, represent the fair value of the asset or liability at initial recognition. In determining whether a transaction price represents the fair value of the asset or liability at initial recognition, each reporting entity is required to consider factors specific to the transaction and the asset or liability, the principal or most advantageous market for the asset or liability, and market participants with whom the entity would transact in the market.

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

Outlined below is the application of the fair value hierarchy established by SFAS 157 to the Bank’s financial assets and financial liabilities that are carried at fair value.

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. As of December 31, 2008, the Bank did not carry any financial assets and liabilities at fair value hierarchy Level 1.

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. As of December 31, 2008, the types of financial assets and liabilities the Bank carried at fair value hierarchy Level 2 included trading securities and derivatives.

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are supported by little or no market activity or by the entity’s own assumptions. As of December 31, 2008, while the Bank did not carry any financial assets or liabilities, measured on a recurring basis, at fair value hierarchy Level 3, the Bank did value certain financial assets, measured on a nonrecurring basis, at fair value hierarchy Level 3.

The Bank utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

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Fair Value on a Recurring Basis. The following table presents for each SFAS 157 hierarchy level, the Bank’s financial assets and financial liabilities that are measured at fair value on a recurring basis on its Statements of Condition (in thousands):

	As of December 31, 2008
	Fair Value Measurements Using
	Level 1		Level 2			Level 3		Netting Adjustment*			Total
Assets
Trading securities	$	—	$	4,485,929		$	—	$	—		$	4,485,929
Derivative assets		—		2,813,328			—		(2,721,922	)		91,406
Total assets at fair value	$	—	$	7,299,257		$	—	$	(2,721,922	)	$	4,577,335
Liabilities
Derivative liabilities	$	—	$	(10,404,378	)	$	—	$	8,990,586		$	(1,413,792	)
Total liabilities at fair value	$	—	$	(10,404,378	)	$	—	$	8,990,586		$	(1,413,792	)

* Amounts represent the effect of legally enforceable master netting agreements that allow the Bank to settle positive and negative positions and also cash collateral held or placed with the same counterparties.

For financial instruments carried at fair value, the Bank reviews the fair value hierarchy classification of financial assets and liabilities on a quarterly basis. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and/or out of Level 3 at fair value in the quarter in which the changes occur. There were no transfers of financial instruments carried at fair value, on a recurring basis, in or out of the Level 3 category during the year ended December 31, 2008.

Fair Value on a Nonrecurring Basis. The Bank measures certain held-to-maturity securities at fair value on a nonrecurring basis. These held-to-maturity securities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments only in certain circumstances (i.e., when there is evidence of other-than-temporary impairment). The following table presents these investment securities by level within the SFAS 157 valuation hierarchy, for which a nonrecurring change in fair value has been recorded in the quarter ended December 31, 2008 (in thousands):

	As of December 31, 2008						Quarter ended December 31, 2008 Total Realized Loss
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Held-to-maturity securities	$	—	$	—	$	161,605	$	98,719

For the year ended December 31, 2008, the Bank recorded an other-than-temporary impairment loss of $186.1 million related to its held-to-maturity securities.

Described below are the Bank’s fair value measurement methodologies for financial assets and liabilities measured or disclosed at fair value.

Cash and due from banks and interest-bearing deposits. The estimated fair value approximates the recorded book balance.

Trading securities. The estimated fair value of trading securities is determined based on independent market-based prices received from a third party pricing service, excluding accrued interest. The Bank’s principal markets for securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective

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of bid level pricing in that market. When prices are not available, the estimated fair value is determined by calculating the present value of the expected future cash flows based on market observable inputs obtained from an outside source that are input into the Bank’s valuation model.

Held-to-maturity securities. The Bank’s held-to-maturity private-label MBS whose fair values previously were determined by reference to prices obtained from third-party broker/dealers or pricing services were changed from a Level 2 classification to a Level 3 classification beginning in the third quarter of 2008. Previously, these valuations relied on observed trades, as evidenced by both activity observed in the market, and similar prices obtained from multiple sources. Beginning in late 2007 and continuing into 2008, the divergence among prices obtained from these sources increased, and became significant in the third quarter of 2008. The significant reduction in transaction volumes and widening credit spreads led the Bank to conclude that the prices received from pricing services, which were derived from the third-party’s proprietary models, were reflective of significant unobservable inputs. Because of the significant unobservable inputs used by the pricing services, the Bank considered these to be Level 3 inputs.

Due to the reduced market activity for the Bank’s held-to-maturity private-label MBS, the Bank also determined prices for certain securities using a discounted cash flow approach. This discounted cash flow model used cash flows adjusted for credit factors calculated by a third-party model and discounted at a rate incorporating interest-rate and market liquidity factors. Other significant inputs include loan default rates, prepayment speeds, and loss severity rates. Due to the unobservable nature of the inputs, the discounted cash flow model is classified as Level 3.

The Bank evaluated the reasonableness of the two above Level 3 indicators of prices for its held-to-maturity MBS and determined that multiple inputs from different pricing sources would collectively provide the best evidence of fair value as of December 31, 2008. Generally, the Bank used prices obtained from multiple third-party pricing services to determine the fair value of its private-label MBS. When the Bank was unable to obtain a sufficient number of prices from third-party vendors (generally less than two third-party prices), the Bank utilized prices determined by a discounted cash flow model to determine the fair value of the private-label MBS.

The estimated fair value of agency MBS and other held-to-maturity securities is determined based on market-based prices received from a third party pricing service, excluding accrued interest. The prices received from third-party pricing services are generally non-binding. The Bank’s principal markets for securities portfolios are the secondary institutional markets, with an exit price that is predominantly reflective of bid level pricing in that market. In obtaining such valuation information from third parties, the Bank generally evaluates the prices for reasonableness in order to determine whether such valuations are representative of an exit price in the Bank’s principal markets.

Federal funds sold. The estimated fair value is determined by calculating the present value of the expected future cash flows. The discount rates used in these calculations are the rates for federal funds with similar terms and represent market observable rates.

Advances. The Bank determines the estimated fair values of advances by calculating the present value of expected future cash flows from the advances and excluding the amount of the accrued interest receivable. The discount rates used in these calculations are the replacement advance rates based on the market observable LIBOR curve for advances with similar terms as of December 31, 2008 and 2007. In accordance with the advances regulations, advances with a maturity or repricing period greater than six months require a prepayment fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances, thereby removing prepayment risk from the fair value calculation.

Mortgage loans held for portfolio. The estimated fair values for mortgage loans are determined based on quoted market prices of similar mortgage loans available in the pass-through securities market. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions.

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Accrued interest receivable and payable. The estimated fair value approximates the recorded book value.

Derivative assets and liabilities. The Bank calculates the fair value of derivatives using a present value of future cash flows discounted by a market observable rate, predominately LIBOR. The fair values are based on a AA credit rating, which is maintained through the use of collateral agreements.

Derivative instruments are primarily transacted in the institutional dealer market and priced with observable market assumptions at a mid-market valuation point. The Bank does not provide a credit valuation adjustment based on aggregate exposure by derivative counterparty when measuring the fair value of its derivatives. This is because the collateral provisions pertaining to the Bank’s derivatives obviate the need to provide such a credit valuation adjustment. The fair values of the Bank’s derivatives take into consideration the effects of legally enforceable master netting agreements that allow the Bank to settle positive and negative positions and offset cash collateral with the same counterparty on a net basis. The Bank and each derivative counterparty have bilateral collateral thresholds that take into account both the Bank’s and the counterparty’s credit ratings. As a result of these practices and agreements, the Bank has concluded that the impact of the credit differential between it and its derivative counterparties was mitigated to an immaterial level and no further adjustments were deemed necessary to the recorded fair values of derivative assets and liabilities in the Statements of Condition at December 31, 2008 and 2007.

Deposits. The Bank determines estimated fair values of Bank deposits by calculating the present value of expected future cash flows from the deposits and reducing this amount for accrued interest payable. The discount rates used in these calculations are based on LIBOR.

Borrowings. The Bank determines the estimated fair value of borrowings by calculating the present value of expected future cash flows from the borrowings and reducing this amount for accrued interest payable. The discount rates used in these calculations are based on market observable rates, predominantly LIBOR.

Consolidated obligations. The Bank calculates the fair value of consolidated obligation bonds and discount notes by using the present value of future cash flows using a cost of funds as the discount rate. The cost of funds discount curves are based primarily on the market observable LIBOR and to some extent on the Office of Finance cost of funds curve, which also is market observable.

Mandatorily redeemable capital stock. The fair value of mandatorily redeemable capital stock is par value, including estimated dividends earned at the time of reclassification from equity to liabilities, until such amount is paid. Capital stock can be acquired by members only at par value and redeemed by the Bank at par value. Capital stock is not traded and no market mechanism exists for the exchange of capital stock outside the cooperative structure.

Commitments to extend credit for mortgage loans. Mortgage loan purchase commitments are recorded as derivatives at their fair values.

The following estimated fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at December 31, 2008 and 2007. Although the Bank uses its best judgment in estimating the fair values of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology.

For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases, fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these estimated fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment of how a market participant would estimate the fair value. The Fair Value Summary Tables do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets versus liabilities.

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The carrying value and estimated fair values of the Bank’s financial instruments as of December 31, 2008 and 2007 were as follows (in thousands):

2008 FAIR VALUE SUMMARY TABLE

Financial Instruments	Carrying Value			Net Unrealized Gains (Losses)			Estimated Fair Value
Assets:
Cash and due from banks	$	27,841		$	—		$	27,841
Deposits with other FHLBanks		2,888			—			2,888
Federal funds sold		10,769,000			(237	)		10,768,763
Trading securities		4,485,929			—			4,485,929
Held-to-maturity securities		23,118,123			(3,524,508	)		19,593,615
Mortgage loans held for portfolio, net		3,251,074			97,301			3,348,375
Advances, net		165,855,546			(82,588	)		165,772,958
Accrued interest receivable		775,083			—			775,083
Derivative assets		91,406			—			91,406
Liabilities:
Deposits		(3,572,709	)		234			(3,572,475	)
Consolidated obligations, net:
Discount notes		(55,194,777	)		(170,909	)		(55,365,686	)
Bonds		(138,181,334	)		(559,571	)		(138,740,905	)
Mandatorily redeemable capital stock		(44,428	)		—			(44,428	)
Accrued interest payable		(1,039,002	)		—			(1,039,002	)
Derivative liabilities		(1,413,792	)		—			(1,413,792	)

2007 FAIR VALUE SUMMARY TABLE

Financial Instruments	Carrying Value			Net Unrealized Gains (Losses)			Estimated Fair Value
Assets:
Cash and due from banks	$	18,927		$	—		$	18,927
Deposits with other FHLBanks		3,403			—			3,403
Federal funds sold		14,835,000			955			14,835,955
Trading securities		4,627,545			—			4,627,545
Held-to-maturity securities		22,060,517			(483,138	)		21,577,379
Mortgage loans held for portfolio, net		3,526,582			(11,961	)		3,514,621
Advances, net		142,867,373			14,669			142,882,042
Accrued interest receivable		824,815			—			824,815
Derivative assets		43,039			—			43,039
Liabilities:
Deposits		(7,135,027	)		80			(7,134,947	)
Consolidated obligations, net:
Discount notes		(28,347,939	)		14,989			(28,332,950	)
Bonds		(142,237,042	)		(194,267	)		(142,431,309	)
Mandatorily redeemable capital stock		(55,538	)		—			(55,538	)
Accrued interest payable		(1,460,113	)		—			(1,460,113	)
Derivative liabilities		(1,305,132	)		—			(1,305,132	)

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Note 15—Commitments and Contingencies

As described in Note 9, consolidated obligations are backed only by the financial resources of the 12 FHLBanks. The Finance Agency, under 12 CFR Section 966.9(d), may at any time require any FHLBank to make principal or interest payments due on any consolidated obligations, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation. No FHLBank has had to assume or pay the consolidated obligation of another FHLBank.

The Bank has considered the guidance under FIN 45, and determined it is not necessary to recognize a liability for the fair value of the Bank’s joint and several liability for all of the consolidated obligations. The joint and several obligations are mandated by Finance Agency regulations and are not the result of arms-length transactions among the FHLBanks. The FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several obligation. Because the FHLBanks are subject to the authority of the Finance Agency as it relates to decisions involving the allocation of the joint and several liability for the FHLBanks’ consolidated obligations, the Bank’s joint and several obligation is excluded from the initial recognition and measurement provisions of FIN 45.

Accordingly, the Bank has not recognized a liability for its joint and several obligation related to other FHLBanks’ consolidated obligations as of December 31, 2008 and 2007. The par value of the FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was approximately $1.1 trillion and $1.0 trillion at December 31, 2008 and 2007, respectively, exclusive of the Bank’s own outstanding consolidated obligations.

During the third quarter of 2008, each FHLBank entered into a Lending Agreement with the U.S. Treasury in connection with the U.S. Treasury’s establishment of the Government Sponsored Enterprise Credit Facility (“GSECF”), as authorized by the Housing Act. The GSECF is designed to serve as a contingent source of liquidity for the housing government-sponsored enterprises, including each of the 12 FHLBanks. Any borrowings by one or more of the FHLBanks under the GSECF are considered consolidated obligations with the same joint and several liability as all other consolidated obligations. The terms of any borrowings are agreed to at the time of issuance. Loans under the Lending Agreement are to be secured by collateral acceptable to the U.S. Treasury, which consists of FHLBank advances to members that have been collateralized in accordance with regulatory standards and MBS issued by Fannie Mae or Freddie Mac. Each FHLBank is required to submit to the Federal Reserve Bank of New York, acting as fiscal agent of the U.S. Treasury, a list of eligible collateral, updated on a weekly basis. As of December 31, 2008, the Bank has provided the U.S. Treasury with a listing of advance collateral amounting to $21.4 billion, which provides for maximum borrowings of $18.7 billion. The amount of collateral available can be increased or decreased (subject to the approval of the U.S. Treasury) at any time through the delivery of an updated listing of collateral. As of December 31, 2008, the Bank has not drawn on this available source of liquidity.

The Bank issues standby letters of credit for members for a fee. A standby letter of credit is a financing arrangement between the Bank and its member. If the Bank is required to make payment for a beneficiary’s draw, the payment amount is converted into a collateralized advance to the member.

The Bank’s outstanding standby letters of credit were as follows:

	As of December 31,
	2008	2007
Outstanding notional (in thousands)	$10,231,656	$6,443,273
Original terms	Less than three months to 15 years	Less than three months to 15 years
Final expiration year	2023	2022

The value of the guarantees related to standby letters of credit is recorded in other liabilities and amounted to $35.0 million and $23.1 million as of December 31, 2008 and 2007, respectively. Based on management’s credit

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analyses and collateral requirements, the Bank does not deem it necessary to record any additional liability on these commitments.

The Bank monitors the creditworthiness of its standby letters of credit based on an evaluation of the guaranteed entity. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit that results in an internal credit rating, which focuses primarily on an institution’s overall financial health and takes into account quality of assets, earnings, and capital position. In general, borrowers categorized into the higher risk rating categories have more restrictions on the types of collateral they may use to secure standby letters of credit, may be required to maintain higher collateral maintenance levels and deliver loan collateral, and may face more stringent collateral reporting requirements.

Commitments that unconditionally obligate the Bank to purchase closed mortgage loans totaled $0 and $9.3 million as of December 31, 2008 and 2007, respectively. Commitments are generally for periods not to exceed 45 days. Such commitments are recorded as derivatives at their fair values under SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.

The Bank executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. As of December 31, 2008 and 2007, the Bank had pledged, as collateral to broker-dealers who have market risk exposure from the Bank related to derivatives, securities with a carrying value of $1.1 billion and $592.1 million, respectively, which can be sold or repledged by those counterparties.

The Bank committed to issue $3.0 billion (par value) of consolidated obligation bonds of which $2.8 billion were hedged with associated interest rate swaps, and $100.2 million (par value) of consolidated obligation discount notes of which $99.2 million were hedged with associated interest rate swaps that had traded but not settled at December 31, 2008.

The Bank charged to operating expenses net rental costs of approximately $2.2 million, $2.4 million, and $2.5 million for the years ended December 31, 2008, 2007, and 2006, respectively.

Lease agreements for Bank premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the Bank.

The Bank is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not, as of the date of the financial statements, anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the Bank’s financial condition or results of operations.

Note 16—Transactions with Members and their Affiliates and with Housing Associates

The Bank defines related parties as each of the other FHLBanks and those members with regulatory capital stock outstanding in excess of 10 percent of total regulatory capital stock. Based on this definition, one member institution, Countrywide Bank, FSB (“Countrywide”), which held 22.9 percent of the Bank’s total regulatory capital stock as of December 31, 2008, was considered a related party. Total advances outstanding to Countrywide were $42.7 billion and $47.7 billion as of December 31, 2008 and 2007, respectively. Total deposits held in the name of Countrywide were $20.4 million and $2.5 billion as of December 31, 2008 and 2007, respectively. No mortgage loans were acquired from this member during 2008 or 2007. Total MBS acquired from Countrywide were $0 and $1.6 billion as of December 31, 2008 and 2007, respectively. For member concentration associated with (i) mortgage-backed securities, see Note 5; (ii) advances, see Note 7; and (iii) capital stock, see Note 11.

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Note 17—Transactions with Other FHLBanks

The Bank’s activities with other FHLBanks are summarized below and have been identified in the Statements of Condition, Statements of Income and Statements of Cash Flows.

Borrowings with other FHLBanks. Occasionally, the Bank loans (or borrows) short-term funds to (from) other FHLBanks. There were no loans to or from other FHLBanks outstanding as of December 31, 2008 and 2007. Interest income on loans to other FHLBanks totaled $77 thousand, $60 thousand and $109 thousand for the years ended December 31, 2008, 2007 and 2006, respectively. During these same periods, interest expense on borrowings from other FHLBanks totaled $136 thousand, $48 thousand and $68 thousand, respectively.

The following table summarizes the cash flow activities for loans to and borrowings from other FHLBanks (in thousands):

	For the Years Ended December 31,
	2008			2007			2006
Investing activities:
Loans made to other FHLBanks	$	(1,281,000	)	$	(427,000	)	$	(762,000	)
Principal collected on loans to other FHLBanks		1,281,000			427,000			762,000
Net change in loans to other FHLBanks	$	—		$	—		$	—
Financing activities:
Proceeds from short-term borrowings from other FHLBanks	$	1,693,013		$	352,015		$	550,000
Payments of short-term borrowings from other FHLBanks		(1,693,013	)		(352,015	)		(550,000	)
Net change in borrowings from other FHLBanks	$	—		$	—		$	—

Investments in other FHLBank Consolidated Obligation Bonds. The Bank’s trading investment securities portfolio includes consolidated obligation bonds for which other FHLBanks are the primary obligors. The balances of these investments are presented in Note 4. All of these consolidated obligation bonds were purchased in the open market from third parties and are accounted for in the same manner as other similarly classified investments (see Note 1). Interest income earned on these consolidated obligation bonds on which another FHLBank is the primary obligor totaled $19.0 million, $17.9 million and $17.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Assumption of other FHLBank Consolidated Obligation Bonds. The Bank may, from time to time, assume the outstanding primary liability of another FHLBank’s consolidated obligation bonds rather than issue new debt for which the Bank is the primary obligor. During the years ended December 31, 2008, 2007 and 2006, the par value of the consolidated obligation bonds transferred to the Bank were $585.0 million, $0 and $69.0 million, respectively. The Bank accounts for these transfers in the same manner as it accounts for new debt issuances.

MPF Program Service Fees and Loan Participations. Beginning in 2005, the Bank began paying a fee to FHLBank Chicago for services performed by it under the MPF Program. These fees totaled $1.1 million, $1.0 million, and $782 thousand for the years ended December 31, 2008, 2007 and 2006, respectively.

MPF Program Purchase of Participation Interests from Other FHLBanks. In 2000 and 2001, the Bank, together with FHLBank Pittsburgh and FHLBank Chicago, participated in the funding of one master commitment with a member of FHLBank Pittsburgh. As of December 31, 2008, the Bank’s outstanding balance related to these MPF Program assets was $4.0 million.

134

Supplementary Financial Information (Unaudited)

Statements of Income

Supplementary financial information for each quarter in the years ended December 31, 2008 and 2007 is included in the following tables (in thousands):

2008	4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
Interest income	$	1,578,720		$	1,549,113		$	1,544,807		$	1,960,547
Interest expense		1,418,892			1,311,252			1,304,184			1,752,831
Net interest income		159,828			237,861			240,623			207,716
(Reversal) provision for credit losses on mortgage loans		(5	)		(135	)		(5	)		155
Net interest income after provision for credit losses		159,833			237,996			240,628			207,561
Total other income (loss)		(26,190	)		(101,163	)		(64,722	)		(21,920	)
Non-interest expense		59,067			182,939			67,236			69,000
Net income (loss)	$	74,576		$	(46,106	)	$	108,670		$	116,641
2007	4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
Interest income	$	2,402,266		$	2,253,170		$	1,915,964		$	1,844,438
Interest expense		2,202,797			2,065,925			1,757,475			1,686,093
Net interest income		199,469			187,245			158,489			158,345
Provision (reversal) for credit losses on mortgage loans		—			161			39			(128	)
Net interest income after provision for credit losses		199,469			187,084			158,450			158,473
Total other income (loss)		1,236			20,276			(4,359	)		(3,629	)
Non-interest expense		77,983			74,218			60,849			59,047
Net income	$	122,722		$	133,142		$	93,242		$	95,797

135

Investment Securities

Supplementary financial information on the Bank’s investment securities is included in the tables below (dollar amounts in thousands):

Held-to-maturity Securities

	As of December 31,
	2008		2007			2006
Certificates of deposit	$	—	$	800,000		$	708,000
States or local housing agency obligations		101,105		117,988			107,180
Mortgage-backed securities		23,017,018		21,142,529			19,222,531
Total	$	23,118,123	$	22,060,517		$	20,037,711
	Book Value		Yield
Held-to-maturity yield characteristics as of December 31, 2008 State or local housing agency obligations
Within one year	$	1,705		3.20	%
After one but within five years		71,465		4.35	%
After 10 years		27,935		6.67	%
	$	101,105		4.97	%
Mortgage-backed securities
Within one year	$	72		8.15	%
After five but within 10 years		3,258,759		4.68	%
After 10 years		19,758,187		5.37	%
	$	23,017,018		5.28	%
Trading Securities
	As of December 31,
	2008		2007			2006
Government-sponsored enterprises debt obligations	$	4,171,725	$	4,283,519		$	4,175,011
Other FHLBanks’ bonds		300,135		284,542			280,488
States or local housing agency obligations		14,069		59,484			59,810
Total	$	4,485,929	$	4,627,545		$	4,515,309
	Book Value		Yield
Trading securities yield characteristics as of December 31, 2008 Government-sponsored enterprises debt obligations
Within one year	$	275,777		4.03	%
After one but within five years		2,277,651		4.14	%
After five but within 10 years		1,618,297		4.54	%
	$	4,171,725		4.28	%
Other FHLBanks’ bonds
Within one year	$	211,007		6.16	%
After five but within 10 years		89,128		12.76	%
	$	300,135		7.45	%
State or local housing agency obligations
After five but within 10 years	$	14,069		6.66	%
	$	14,069		6.66	%

136

As of December 31, 2008, the Bank held securities of the following issuers with a book value greater than 10 percent of Bank capital. These amounts include securities issued by the issuer’s holding company, along with its subsidiaries and affiliate trusts (in thousands):

	As of December 31, 2008
Name of Issuer	Total Book Value		Total Fair Value
Countrywide Financial Corporation, Calabasas, CA	$	4,675,435	$	3,486,479
Wells Fargo & Company, San Francisco, CA		4,061,817		3,181,259
JPMorgan Chase & Co., New York, NY		2,751,787		2,045,907
Bank of America Corporation, Charlotte, NC		2,060,873		1,572,558

Loan Portfolio Analysis

The Bank’s outstanding loans, non-accrual loans, and loans 90 days or more past due and accruing interest were as follows (in thousands):

	As of December 31,
	2008		2007		2006		2005		2004
Domestic:
Advances	$	165,855,546	$	142,867,373	$	101,476,335	$	101,264,208	$	95,867,345
Real estate mortgages (1)	$	3,251,930	$	3,527,428	$	3,004,173	$	2,860,539	$	2,216,324
Non-accrual real estate mortgages	$	14,352	$	2,904	$	1,640	$	1,676	$	320
Real estate mortgages past due 90 days or more and still accruing interest (2)	$	13,704	$	2,382	$	1,278	$	916	$	1,636
Interest contractually due during the year	$	943
Interest actually received during the year		437
Shortfall	$	506

(1) Amounts include Affordable Multifamily Participation Program loans classified as substandard.

(2) Only government loans (e.g., FHA, VA) continue to accrue after 90 days or more delinquent.

The Bank places a conventional mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the borrower is 90 days or more past due.

The allowance for credit losses on real estate mortgage loans was as follows (in thousands):

	For the Years Ended December 31,
	2008		2007		2006		2005			2004
Domestic:
Balance at the beginning of year	$	846	$	774	$	557	$	671		$	322
Charge-offs		—		—		—		(131	)		(15	)
Provisions for credit losses		10		72		217		17			364
Balance at end of year	$	856	$	846	$	774	$	557		$	671

The ratio of charge-offs to average loans outstanding was less than one basis point for the years ended December 31, 2004 through 2008.

137

The allocation of the allowance for credit losses on mortgage loans was as follows (dollar amount in thousands):

	As of December 31,
	2008			2007			2006			2005			2004
	Amt (1)		% of Total Loans (2)	Amt (1)		% of Total Loans (2)	Amt (1)		% of Total Loans (2)	Amt (1)		% of Total Loans (2)	Amt (1)		% of Total Loans (2)
Single-family residential mortgages	$	—	99	$	—	99	$	—	99	$	84	99	$	16	99
Multifamily residential mortgages		856	1		846	1		774	1		473	1		655	1
Total	$	856	100	$	846	100	$	774	100	$	557	100	$	671	100

(1) Amount allocated for credit losses on mortgage loans.

(2) Mortgage loans outstanding as a percentage of total mortgage loans.

Combined mortgage loan delinquency data for all conventional and government insured/guaranteed loans in which the Bank has an ownership interest was as follows (dollar amount in thousands):

	As of December 31,
	2008			2007			2006			2005			2004
	UPB (1)		% of Total Loans (2)	UPB (1)		% of Total Loans (2)	UPB (1)		% of Total Loans (2)	UPB (1)		% of Total Loans (2)	UPB (1)		% of Total Loans (2)
Delinquency >30 days and <60 days	$	65,360	2.01	$	34,531	0.98	$	22,742	0.76	$	12,578	0.44	$	7,057	0.32
Delinquency >60 days and <90 days		20,640	0.63		7,258	0.21		2,740	0.09		1,979	0.07		1,775	0.08

(1) Unpaid principal balance.

(2) Mortgage loans outstanding as a percentage of total mortgage loans.

138

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term. The following is a summary of short-term borrowings (dollar amount in thousands).

	As of December 31,
	2008			2007			2006
Borrowings from other FHLBanks
Outstanding at end of the year	$	—		$	—		$	—
Weighted average rate at end of the year		—	%		—	%		—	%
Daily average outstanding for the year	$	8,899		$	964		$	1,301
Weighted average rate for the year		1.53	%		4.98	%		5.22	%
Highest outstanding at any month-end	$	—		$	—		$	—
Borrowings from commercial banks
Outstanding at the end of the year	$	—		$	—		$	—
Weighted average rate at the end of the year		—	%		—	%		—	%
Daily average outstanding for the year	$	28,185		$	14,196		$	11,349
Weighted average rate for the year		1.27	%		5.18	%		4.95	%
Highest outstanding at any month-end	$	—		$	—		$	—
Discount notes
Outstanding at the end of the year	$	55,194,777		$	28,347,939		$	4,934,073
Weighted average rate at the end of the year		1.73	%		4.23	%		4.92	%
Daily average outstanding for the year	$	38,467,954		$	13,645,922		$	7,134,586
Weighted average rate for the year		2.57	%		4.92	%		4.94	%
Highest outstanding at any month-end	$	61,218,227		$	30,657,457		$	12,395,780
Total short-term borrowings
Outstanding at the end of the year	$	55,194,777		$	28,347,939		$	4,934,073
Weighted average rate at the end of the year		1.73	%		4.23	%		4.92	%
Daily average outstanding for the year	$	38,505,038		$	13,661,082		$	7,147,236
Weighted average rate for the year		2.57	%		4.92	%		4.94	%
Highest outstanding at any month-end	$	61,218,227		$	30,657,457		$	12,395,780

139

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Not applicable.

Item 9A(T). Controls and Procedures.

Disclosure Controls and Procedures

The Bank’s President and Chief Executive Officer and the Bank’s Executive Vice President and Chief Financial Officer (the “Certifying Officers”) are responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

As of December 31, 2008, the Bank’s Certifying Officers have evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based on that evaluation, they have concluded that the Bank’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Bank in the reports that it files or submits under the Exchange Act (1) is accumulated and communicated to the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure; and (2) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s Certifying Officers recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Internal Control Over Financial Reporting

The Bank’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Bank. The Bank’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Bank’s management utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. As of December 31, 2008, the Bank’s management has evaluated the effectiveness of the Bank’s internal control over financial reporting. Based upon that evaluation, management has concluded that the Bank’s internal control over financial reporting is effective.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. This annual report does not include an attestation report of the Bank’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Bank’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Bank to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of 2008, there were no changes in the Bank’s internal control over financial reporting that have affected materially, or are reasonably likely to affect materially, the Bank’s internal control over financial reporting.

Item 9B. Other Information.

None.

140

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers

The following table sets forth the names, ages, and titles of the executive officers of the Bank as of the date of this Report. No executive officer has any family relationship with any other executive officer or director of the Bank.

Executive Officer	Age	Title
Richard A. Dorfman	63	President and Chief Executive Officer
Cathy C. Adams	49	Executive Vice President and Chief Administrative Officer
Steven J. Goldstein	57	Executive Vice President and Chief Financial Officer
Kirk R. Malmberg	48	Executive Vice President, Chief Credit Officer
W. Wesley McMullan	45	Executive Vice President and Director of Financial Management
Jill Spencer	56	Executive Vice President, General Counsel, Chief Strategy Officer, and Corporate Secretary

Richard A. Dorfman was appointed president and chief executive officer in June 2007. From 2005-2007, he served as an independent consultant, providing strategic and operational consulting and advisory work to several organizations, including certain other Federal Home Loan Banks and the Federal Home Loan Bank System’s Office of Finance. Prior to that time, he was the Managing Director and Head of U.S. Agencies and Mortgages at ABN Amro, Inc. from 1997 until 2005. He held a succession of senior positions in the mortgage and GSE businesses as a managing director of Lehman Brothers from 1983 to 1997, and was president of Columbia Group Advisors from 1981 to 1983. He holds a J.D. from Syracuse University and B.A. in European History from Hofstra University.

Cathy C. Adams joined the Bank in 1986 and was appointed executive vice president and chief administrative officer in August 2008. Prior to that, Ms. Adams served as senior vice president of staff services since January 2004. She is responsible for overseeing all Bank programs related to information technology, human resources, and administrative services. She holds a B.A. in business administration from Tift College and an M.B.A. from Georgia State University.

Steven J. Goldstein was appointed executive vice president and chief financial officer in August 2007, after having served in an interim position since April 2007. Prior to joining the Bank, he served as senior vice president and chief financial officer for the U.S. and international businesses of Royal Bank of Canada from 2004 to 2006, responsible for the financial management and reporting of four major U.S. and international businesses. From 2001 to 2004, he held several executive management positions with the Royal Bank of Canada, and was chief financial officer at Centura Banks, Inc. from 1997 to 2001. He earned a Bachelor of Business Administration, a Master of Business Administration and Ph.D. in finance, each from the University of Georgia.

Kirk R. Malmberg was appointed executive vice president and chief credit officer in December 2007. Prior to that time, he had served as senior vice president responsible for the Bank’s mortgage programs since December 2003. He joined the Bank in February 2001 as senior vice president, asset-liability management, after having served for five years as senior vice president, treasury, at FHLBank Chicago. Mr. Malmberg holds a B.A. from Trinity University in San Antonio, Texas, and an M.B.A. from Rice University in Houston, Texas.

W. Wesley McMullan is executive vice president and director of financial management, a position he has held since 2004. Mr. McMullan has responsibility for sales, MPP sales, asset-liability management, liquidity management, other mission-related investments, customer systems and operations, and member education. Mr. McMullan joined the Bank as a credit analyst in 1988 and later earned promotions to assistant vice president in 1993, vice president in 1995, group vice president in 1998, and senior vice president in 2001. He holds a B.S. in finance from Clemson University and is a chartered financial analyst.

141

Jill Spencer was appointed executive vice president, general counsel and chief strategy officer in August 2008, and has served as corporate secretary since January 2007. Prior to her most recent appointment, Ms. Spencer served as executive vice president and chief operating officer of the Bank beginning in January 2004. She joined the Bank in November 2002 as executive vice president, general counsel, and corporate secretary. Ms. Spencer oversees corporate communications, government relations, legal, and strategic planning. Before joining the Bank, Ms. Spencer practiced law at a private law firm from 1998 to 2002. She held various positions at FHLBank San Francisco from 1979 to 1997, serving as senior vice president and general counsel in her last eight years there. Ms. Spencer holds a B.A. from the University of Texas at Austin and a J.D. from Southern Methodist University School of Law.

Directors

The FHLBank Act, as amended by the Housing Act in 2008, provides that an FHLBank’s board of directors is to comprise 13 directors, or such other number as the Director of the Finance Agency determines appropriate. For 2009, the Director has designated 17 directorships for the Bank, 10 of which are member directorships and seven of which are independent directorships. All individuals serving as Bank directors must be United States citizens. A majority of the directors must be member directors and at least 2/5 must be independent directors. A member directorship may be held only by an officer or director of a member institution that is located within the Bank’s district and that meets all minimum regulatory capital requirements. An independent directorship may be held only by an individual who is a bona fide resident of the Bank’s district, who is not a director, officer, or employee of a member institution or of any person that receives advances from the Bank, and who is not an officer of any FHLBank.

The following table sets forth information regarding each of the Bank’s directors as of the date of this Report. Except as otherwise indicated, each director has been engaged in the principal occupation described below for at least five years. No director has any family relationship with any other director or executive officer of the Bank.

Name	Age	Director Since	Expiration of Term as Director
John M. Bond, Jr.(1)	65	2005	12-31-2010
W. Russell Carothers, II(1)	67	2002	12-31-2009
William F. Easterlin, III(1)	53	2008	12-31-2010
F. Gary Garczynski(2)	62	2007	12-31-2012
Donna Goodrich(1)	46	2007	12-31-2012
Bedford Kyle Goodwin, III(1)	57	2007	12-31-2009
William C. Handorf(2)	64	2007	12-31-2009
Linwood Parker Harrell, Jr.(2)	71	2008	12-31-2010
Scott C. Harvard(1)	54	2003	12-31-2012
J. Thomas Johnson(1)	62	2004	12-31-2009
Jonathan Kislak(2)	60	2008	12-31-2010
LaSalle D. Leffall, III(2)	46	2007	12-31-2012
Miriam Lopez(1)	58	2008	12-31-2010
Henry Gary Pannell(2)	71	2008	12-31-2010
Robert L. Strickland(2)	57	2007	12-31-2009
Thomas H. Webber, III(1)	67	2007	12-31-2009
Edward J. Woodard, Jr.(1)	66	2009	12-31-2011

⁽¹⁾ Member Director

⁽²⁾ Independent Director

142

Chairman of the board

Scott C. Harvard has served as president and chief executive officer and a director of Shore Bank since 1985. He served as president and chief executive officer of its parent, Shore Financial Corporation, from 1997 to 2008. Mr. Harvard has served as a director of Hampton Roads Bankshares and as an executive vice president of its banking subsidiary, Bank of Hampton Roads, since June 2008. Mr. Harvard has served as chairman of the board of the Bank since 2007.

Vice chairman of the board

J. Thomas Johnson is vice chairman of the board of First Community Bank, N.A., of Lexington, South Carolina, a position he has held since October 2004. From 2000 to 2004, Mr. Johnson was chairman, and from 1984 to 2004 was chief executive officer, of Newberry Federal Savings Bank in Newberry, South Carolina, which merged with First Community Bank in 2004. Mr. Johnson had been with Newberry Federal since 1977. Mr. Johnson is chairman of Business Carolina Inc., a statewide economic development lender, and has served on the boards of the South Carolina Bankers Association and a number of other civic and professional organizations. Mr. Johnson has served as vice chairman of the board of the Bank since 2008.

John M. Bond, Jr. is the chairman of The Columbia Bank, a wholly-owned affiliate of Fulton Financial Corporation, a publicly-traded company. He has served on the board of directors of The Columbia Bank since 1988 and has served as chairman of the board since May 2004. From May 2004 until February 2006 when it was acquired by Fulton Financial, Mr. Bond served as chairman and chief executive of Columbia Bancorp, a publicly-traded company and the holding company of The Columbia Bank. From 1987 to May 2004, Mr. Bond served as president, chief executive officer, and director of Columbia Bancorp. He also has served as a director of Fulton Financial Corporation, a publicly-traded financial holding company, since March 2006.

W. Russell Carothers, II is chairman, president, and chief executive officer of The Citizens Bank of Winfield, Alabama. He joined The Citizens Bank in 1963.

William F. Easterlin, III has served as the president of The Queensborough Company and its wholly owned subsidiary, the Queensborough National Bank & Trust Company since 1995. He has served on the board of directors of Queensborough National Bank & Trust Company and its predecessor, the First National Bank & Trust, since 1984, and on the board of The Queensborough Company since its inception in 1985.

F. Gary Garczynski is the president of National Capital Land and Development, Inc., a construction and real estate development company in Woodbridge, Va., a position he has held since 1997. Mr. Garczynski has served as chairman of the National Housing Endowment since 2004 and previously served as the 2002 President of the National Association of Home Builders (NAHB). Mr. Garczynski serves as a Senior Life Director of NAHB, a Life Director of the Home Builder Association of Virginia, and a Senior Life Director of the Northern Virginia Building Industry Association. He also is a member of the Prince William County, Va., Affordable Housing Task Force and a three-term appointee to the Virginia Housing Commission.

Donna C. Goodrich has served as senior executive vice president and deposit services manager of BB&T, parent to Branch Banking & Trust of North Carolina, since 2007. Ms. Goodrich joined BB&T in 1985, and has held the positions of retail services officer, financial center manager, mergers and acquisition analyst, asset/liability management specialist, and deposit and corporate funding manager. She is a member of the Senior Leadership Team and serves on several committees, including the Market Risk and Liquidity Committee.

Bedford Kyle Goodwin, III has served as chairman, president, and chief executive officer of First Fed Bancorp, Inc. and First Financial Bank, Bessemer, Alabama, since 1996.

143

William C. Handorf, Ph.D., has served as a professor of finance and real estate at The George Washington University’s School of Business in Washington, D.C., since 1975. From 2001 to 2006, Mr. Handorf served as a director of the Federal Reserve Bank of Richmond’s Baltimore Branch, including two years as chair. From 1992 to 1995, Mr. Handorf served as a private citizen director of the Federal Home Loan Bank System’s Office of Finance.

Linwood Parker Harrell, Jr. served as the Chairman of the Office of Finance of the Federal Home Loan Banks from 2003 to 2007. Prior to his retirement from Korn Ferry International, a publicly-traded company listed on the NYSE, in March 2007, Mr. Harrell held several executive positions, including chief operating officer, Korn Ferry North America and Korn Ferry Europe, and managing director of global financial services.

Jonathan Kislak has served as principal of Antares Capital Corporation, a venture capital firm investing equity capital in expansion stage companies and management buyout opportunities, since 1999. From 1993 to 2005, Mr. Kislak served as president and chairman of the board of Kislak Financial Corporation, a community bank holding company in Miami, Florida.

LaSalle D. Leffall, III is president of LDL Financial, a corporate advisory and investment firm he founded in 2006. From 2002 to 2006, he was a senior executive of The NHP Foundation, one of the nation’s largest non profit owners of affordable multifamily housing, and served as President, Chief Operating Officer, and Chief Financial Officer. In October and November 2008, he served as Acting Chief Executive Officer. From 1996 to 2002, Mr. Leffall was an investment banker in the mergers and acquisitions divisions of UBS and Credit Suisse First Boston in New York, NY. In 1992, Mr. Leffall began his career as an attorney in the corporate department of Cravath, Swaine & Moore in New York, NY. He is a member of the Council on Foreign Relations, The Federal City Council, and The Economic Club of Washington DC.

Miriam Lopez has served as chief executive officer of TransAtlantic Bank in Miami, Florida for 22 years and served as TransAtlantic’s chairman of the board from 2003 to 2007. She is a former president of the Florida Bankers Association and serves on the American Bankers Association’s Government Relations Council and Executive Committee.

Henry Gary Pannell has been a member with the law firm Jones, Walker, Waechter, Poitevent, Carrere, & Denegre, LLP, since September 2008, having been previously a member with the law firm Miller Hamilton Snider & Odom, LLC in Atlanta since 2001. He currently serves as a trustee with the Atlanta Nehemiah Housing Trust, a fund to provide interest-free construction loans to build affordable housing for municipal employees. From 1973 to 2000, he held leadership positions with the Office of the Comptroller of the Currency in Atlanta, including district counsel for the Southeastern District and regional counsel, 6^th National Bank Region. From 1988 to present, he has served as Treasurer of the Episcopal Diocese of Atlanta, and a member of the Diocesan Foundation, Inc., a non-profit corporation that makes loans for church buildings and homes for clerics.

Robert L. Strickland is the Executive Director of the Alabama Housing Finance Authority, an independent public corporation dedicated to serving the housing needs of low- and moderate-income Alabamians, a position he has held since 1987. Mr. Strickland also serves as a member of the National Association of Home Builders Mortgage Roundtable and is a board member of the Alabama MultiFamily Loan Consortium. From 1999 to 2004, Mr. Strickland served as a member of Fannie Mae’s National Advisory Council.

Thomas H. Webber, III serves as vice president corporate finance and risk management for IDB-IIC Federal Credit Union, having served as vice president since 1999. Mr. Webber previously served on the boards of industry as well as civic organizations in the Nashville, Tennessee community.

Edward J. Woodard, Jr. has served as chairman, president and CEO of the Bank of the Commonwealth in Norfolk, Virginia and its publicly-traded bank holding company, Commonwealth Bankshares, Inc., since 1973. He has been active in both the American Bankers Association and the Virginia Bankers Association since 1972.

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Nominating Procedures

Any member that is entitled to vote in a member directorship election may nominate an eligible individual to fill each available member directorship for the member’s voting state by timely delivering to the Bank a prescribed nominating certificate. A person may accept a member directorship nomination only by delivering timely a member director eligibility certification to the Bank.

Any individual who seeks to be an independent director of the Bank may deliver to the Bank, on or before the deadline set by the Bank, an independent director application form required by applicable law that demonstrates that the individual both is eligible and has met certain qualifications. Any other interested party may recommend to the Bank that it consider a particular individual as a nominee for an independent directorship; however, the Bank may consider such person only if the individual timely delivers to the Bank the required independent director application form. The Bank’s board of directors is required to consult with its Affordable Housing Advisory Council before nominating any individual for any independent directorship and provide its proposed list of nominees to the Finance Agency for review and non-objection, before submission to members for vote.

Code of Conduct

The board has adopted a Code of Conduct that applies to the Bank’s principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions, in each case, who are employees of the Bank. The Code of Conduct is posted on the governance section of the Bank’s Internet website at http://www.fhlbatl.com. Any amendments to, or waivers under, the Bank’s Code of Conduct which are required to be disclosed pursuant to the SEC’s rules will be disclosed on the Bank’s website.

Director Independence, Audit Committee and Audit Committee Financial Expert

General

The board of directors of the Bank is required to evaluate the independence of the directors of the Bank under two distinct director independence standards. First, Finance Agency regulations establish independence criteria for directors who serve as members of the Bank’s Audit Committee. Second, SEC rules require that the Bank’s board of directors apply the independence criteria of a national securities exchange or automated quotation system in assessing the independence of its directors.

As of the date of this Report, the Bank has 17 directors, ten of whom are member directors and seven of whom are independent directors. None of the Bank’s directors is an “inside” director. That is, none of the Bank’s directors is a Bank employee or officer. Further, the Bank’s directors are prohibited from personally owning stock or stock options in the Bank. Each of the member directors, however, is a senior officer or director of an institution that is a member of the Bank that is encouraged to engage in transactions with the Bank on a regular basis.

Finance Agency Regulations regarding Independence

The Finance Agency’s director independence standards prohibit an individual from serving as a member of the Bank’s Audit Committee if he or she has one or more disqualifying relationships with the Bank or its management that would interfere with the exercise of that individual’s independent judgment. Disqualifying relationships considered by the board are: employment with the Bank at any time during the last five years; acceptance of compensation from the Bank other than for service as a director; being a consultant, advisor, promoter, underwriter or legal counsel for the Bank at any time within the last five years; and being an immediate family member of an individual who is or who has been within the past five years, a Bank executive officer. The board assesses the independence of each director under the Finance Agency’s independence standards, regardless of whether he or she serves on the Audit Committee. As of March 26, 2009, each of the Bank’s directors was independent under these criteria.

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SEC Rules regarding Independence

SEC rules require the Bank’s board of directors to adopt a standard of independence to evaluate its directors. The board has adopted the independence standards of the New York Stock Exchange (the “NYSE”) to determine which of its directors are independent, which members of its Audit Committee are not independent, and whether the Bank’s Audit Committee’s financial expert(s) is independent.

After applying the NYSE independence standards, the board determined that, as of March 26, 2009, Messrs. Garczynski, Handorf, Harrell, Kislak, Leffall, and Pannell, each an independent director, and Ms. Drass, who served as an independent director during 2008, were independent. Based upon the fact that each member director is a senior official of an institution that is a member of the Bank (and thus is an equity holder in the Bank), that each such institution routinely engages in transactions with the Bank, and that such transactions occur frequently and are encouraged, the board determined that for the present time it would conclude that none of the member directors meets the independence criteria under the NYSE independence standards. For the same reasons, because Mr. Strickland is a senior official of a housing associate that is able to transact business with the Bank, the board has determined that he does not meet the independence criteria under the NYSE independence standards.

It is possible that under a strict reading of the NYSE objective criteria for independence (particularly the criterion regarding the amount of business conducted with the Bank by the director’s institution), a member director could meet the independence standard on a particular day. However, because the amount of business conducted by a member director’s institution may change frequently, and because the Bank generally desires to increase the amount of business it conducts with each member, the directors deemed it inappropriate to draw distinctions among the member directors based upon the amount of business conducted with the Bank by any director’s institution at a specific time. The same reasoning applies to Mr. Strickland.

The board has a standing Audit Committee. For the reasons noted above, the board determined that, as of March 26, 2009, none of the member directors on the Bank’s Audit Committee was independent under the NYSE standards for audit committee members. The board determined that, as of March 26, 2009, each of Messrs. Handorf, Kislak and Pannell, each of whom is an independent director that currently serves on the Audit Committee, was independent under the NYSE independence standards for audit committee members. The board also determined that directors Goodwin, Handorf, Kislak and Pannell are each an “audit committee financial expert” within the meaning of the SEC rules, and further determined that as of March 26, 2009, Mr. Goodwin is not independent and Messrs. Handorf, Kislak and Pannell are independent under NYSE standards.

The Housing Act made Section 10A(m)(3) of the Exchange Act applicable to the FHLBanks. The board assesses the independence of the Audit Committee members under this standard. As of March 26, 2009, each of the Bank’s directors was independent under these criteria. As stated above, the board determined that each member of the audit committee was independent under the Finance Agency’s standards applicable to the Bank’s Audit Committee.

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Item 11. Executive Compensation.

Compensation Discussion and Analysis

Introduction

This section describes and analyzes the Bank’s 2008 compensation program for its CEO, Chief Financial Officer, and three other most highly-compensated executive officers in 2008. These executive officers are collectively referred to as the Bank’s “named executive officers.”

In 2008 the Bank’s named executive officers were as follows:

Richard A. Dorfman	President, Chief Executive Officer
Steven J. Goldstein	Executive Vice President, Chief Financial Officer
Jill Spencer	Executive Vice President, General Counsel and Chief Strategy Officer
W. Wesley McMullan	Executive Vice President, Director of Financial Management
Kirk R. Malmberg	Executive Vice President, Chief Credit Officer

Philosophy and Objectives

The Bank’s compensation philosophy and objectives are to attract, motivate, and retain high caliber financial services executives capable of achieving strategic business initiatives that lead to enhanced business performance and member value. The Bank’s compensation program is designed to reward this performance and enhanced value, and offer competitive compensation elements that align its executives’ incentives with the interests of its members. To mitigate unnecessary or excessive risk-taking by executive management, the Bank’s incentive compensation plans contain performance thresholds which must be attained before incentive compensation is awarded, as well as maximum award levels which limit overall incentive compensation. Additionally, the board of directors maintains discretionary authority over all incentive compensation awards.

Elements of Compensation

To achieve these goals, the Bank compensates its executive officers with a combination of base salary, short-term incentive compensation, long-term incentive compensation, and benefits. The Bank is unable to offer equity-related compensation because it is a cooperative, and only member financial institutions may own its capital stock. Accordingly, the Bank offers other compensation elements, such as long-term incentive compensation and defined benefit pension plans, to motivate long-term performance and encourage retention. Additionally, because the Bank generally is exempt from federal taxes, the deductibility of compensation is not relevant to compensation plan design.

The elements of the Bank’s compensation program for executive officers, and the objective of each compensation element, are described below:

Base salary: Base salary is established on the basis of the ongoing duties associated with managing a particular set of functions at the Bank, and provides an amount of fixed compensation each year. Each executive’s base salary also is used as a basis in calculating the executive’s yearly incentive award opportunity, as described below.

Short-term incentive compensation: The Bank provides an annual cash award opportunity (the “Short-term ICP”) to executive officers based on the achievement of quantitative and qualitative goals set and evaluated by the board of directors. The Short-term ICP is designed to promote and reward achievement of annual corporate performance goals set by the board.

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Long-term incentive compensation: The Bank provides a long-term cash award opportunity (the “Long-term ICP”) based on performance over successive three-year performance periods. The Long-term ICP is designed to promote consistently high corporate performance on a long-term basis; provide a competitive reward structure for the participants; promote participants’ loyalty and dedication to the Bank and its objectives; and enhance the retention of key senior executive officers.

Benefits: The Bank provides retirement benefits to promote executive retention. The Bank also provides limited perquisites and other benefits to enhance executive officers’ ability to devote maximum attention to their primary responsibilities and to minimize the amount of time spent on non-Bank related matters.

Executive Compensation Process

Board and Committee consideration of executive compensation: The Bank’s board of directors establishes the Bank’s executive compensation philosophy and objectives. The Governance and Compensation Committee of the board of directors advises and assists the board and recommends to the board for approval any compensation decisions related to the Bank’s CEO and the officers reporting directly to the CEO.

The CEO reviews and recommends to the board the base salary of the officers that report directly to him. The CEO also determines the base salary of all Bank officers at the First Vice President level and above (other than the director of internal audit), within an overall budget approved by the board of directors.

Use of compensation consultant: The Governance and Compensation Committee of the board of directors independently engaged Towers Perrin to provide assistance in evaluating the Bank’s executive compensation programs for 2008. Towers Perrin reports directly to the Committee. In 2008 the Committee also relied upon compensation information supplied to management by Hewitt Associates.

Consideration of competitive compensation levels: The Bank’s executive compensation program is designed to be appropriately competitive with prevailing practices in the broader financial services industry, consistent with the Bank’s business and risk profile. As part of each compensation review process, the board considers the median and 75^th percentile of total compensation offered at companies included in aggregate survey information with assets comparable to those of the Bank, and which generally hold substantial volumes of complex derivative instruments, as these instruments comprise a significant component of the Bank’s operations. However, the board did not target any named executive officer’s compensation at a specific percentile of such executive officer’s peer group comparable position.

The board does not evaluate specifically the internal pay relationship among the executives and other employees when setting executive cash compensation, or the multiples by which a named executive officer’s cash compensation is greater than that of non-executive employees.

Federal Housing Finance Agency: Pursuant to the Housing Act, the Director of the Finance Agency is required to prohibit the FHLBanks from providing compensation to any executive officer that is not reasonable and comparable with compensation for employment in other similar businesses. Pursuant to this authority, on October 1, 2008, the Acting Deputy Director-Federal Home Loan Bank Supervision, directed the FHLBanks to provide to him all compensation actions relating to the five most highly compensated officers, including compensation plans of general applicability to those officers, at least four weeks in advance of any planned board decision with respect to those actions. In addition, under the new capital classifications rules issued by the Finance Agency on January 30, 2009, a significantly undercapitalized FHLBank is prohibited from paying any bonus to an executive officer, or giving any salary increase to an executive officer without the prior written approval of the Director. The Housing Act also authorizes the Director to prohibit the Bank from making any golden parachute payments to its officers, employees, and directors.

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Compensation Decisions in 2008

Overview

The board of directors bases its compensation decisions on both objective criteria related to corporate performance and subjective criteria related to general executive performance. Among the various criteria the board considered in evaluating the named executive officers’ performance in 2008 were:

1. Achievement of key long-term objectives as outlined in the Bank’s strategic plan

2. Achievement of short-term performance objectives determined annually by the board

3. Fulfillment of the Bank’s public policy mission

4. Demonstration of leadership and vision for the Bank

5. Implementation and maintenance of effective business strategies and operations, legal and regulatory compliance programs, risk management activities, and internal controls commensurate with the Bank’s size, scope, and complexity

6. Establishment and maintenance of strong relationships between the Bank and its customers, shareholders, employees, regulators, and other stakeholders

7. The Bank’s 2008 financial results. The Bank’s growth in advances and increase in net interest income indicate strong financial performance in an extremely challenging environment; however these results were moderated by the recording of an $186.1 million other-than-temporary impairment loss on the Bank’s private-label MBS for the year ended December 31, 2008 and the $170.5 million reserve on the LBSF receivable, which contributed to a $191.1 million, or 43.0 percent, decrease in net income and a lower return on equity for the year ended December 31, 2008 as compared to the year ended December 31, 2007.

Base Salary

Upon his annual review in July 2008, Mr. Dorfman’s salary was set at $775,000. In determining the base salary for Mr. Dorfman, the board considered data developed by Towers Perrin noting total cash compensation provided at FHLBanks of similar size and complexity, at commercial financial institutions with assets between $10 billion and $50 billion, and at commercial financial institutions with assets between $100 billion and $400 billion. These commercial financial institutions were:

Financial Institutions with Assets of $10B to $50B:

• Associated Banc-Corp

• Commerce Bancorp

• Compass Bancshares, Inc.

• Cullen/Frost Bankers, Inc.

• Harris Bank

• Huntington Bancshares Inc.

• IndyMac Bank

• People’s Bank

• TD Banknorth

• Webster Bank

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Financial Institutions with Assets of $100B to $400B:

• BB&T Corporation

• Countrywide Financial Corporation

• Fifth Third Bancorp

• HSBC North America Holdings Inc.

• PNC Financial Services Group, Inc.

• Regions Financial Corporation

• SunTrust Banks, Inc.

• U.S. Bancorp

Mr. Dorfman’s salary was set at a competitive level among the presidents of the FHLBanks but below the average base salary for the presidents of the commercial financial institutions listed above.

In determining the 2008 base salaries for Messrs. McMullan, Malmberg, and Ms. Spencer, and the 2008 base fee for Mr. Goldstein, the board considered comparative compensation data provided by Hewitt Associates that reflected market pay rates for similar positions at commercial financial institutions with assets greater than $25 billion. The board reviewed a single estimated market value for each position that included data from the median and 75^th percentiles for base pay, bonus pay, and total cash compensation. The market data compiled by Hewitt Associates reflected compensation survey data published by Watson Wyatt, Hewitt Associates, and Mercer Human Resources Consulting.

Mr. Goldstein’s base fee was set at a level consistent with the salaries of other internal executives and with his scope of responsibility and the risk associated with the areas under his scope of responsibility. The board also took into consideration that Mr. Goldstein would not participate in the Bank’s benefits programs based on the structure of his Services Agreement with the Bank, which is discussed below under “Employment Arrangements and Severance Benefits.”

Short-term Incentive Compensation

The 2008 award opportunities, as established by the board on March 26, 2008, under the Bank’s Executive Incentive Compensation Plan (the “Short-term ICP”), expressed as a percentage of base pay earnings during the year, were as follows:

	Threshold		Target		Maximum
CEO	30	%	45	%	65	%
Executive Vice President	20	%	35	%	45	%

These percentages are the same as those the Bank historically has used for several years for these officer designations. For 2008, the board established four incentive goals under the Short-term ICP, which correlate to the performance priorities reflected in the Bank’s strategic plan. The board used two quantitative corporate performance goals and two qualitative performance goals related to executive management performance. The board of directors establishes threshold, target, and maximum performance levels for each quantitative incentive goal. Each goal’s “target” performance level is consistent with the assumptions set forth in the annual operating budget, forecasts, and strategic plan. The “threshold” and “maximum” performance levels are designed to reward partial attainment of the goal and performance beyond the forecasted levels, respectively. Factors considered in setting threshold and maximum performance levels include management’s projections concerning economic conditions, interest rates, demand for advances products and balance sheet structure.

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The following tables provide the weights and awards for each performance target as a percentage of base salary that the board established for 2008.

CEO

		Percent of Base Salary
Goal	Weight	Threshold	Target	Maximum
Growth in Advances Penetration	30.00%	9.00%	13.50%	19.50%
ROE Spread to LIBOR	30.00%	9.00%	13.50%	19.50%
Board of Directors Discretionary	40.00%	12.00%	18.00%	26.00%
TOTAL	100.00%	30.00%	45.00%	65.00%

Executive Vice President

			Percent of Base Salary
Goal	Weight		Threshold		Target		Maximum
Growth in Advances Penetration	30.00	%	6.00	%	10.50	%	13.50	%
ROE Spread to LIBOR	30.00	%	6.00	%	10.50	%	13.50	%
Board of Directors Discretionary	30.00	%	6.00	%	10.50	%	13.50	%
CEO Discretionary	10.00	%	2.00	%	3.50	%	4.50	%
TOTAL	100.00	%	20.00	%	35.00	%	45.00	%

The return on equity performance measure is the return on equity amount (excluding the impact of extraordinary items and adjusted for the effects of SFAS 133) in excess of average three-month LIBOR. This performance measure reflects the Bank’s ability to pay quarterly dividends to its members and was established with a sliding scale so that the spread performance metrics become smaller as LIBOR increases. At December 31, 2008, the performance goals were 0.85 percent (threshold), 1.10 percent (target), and 1.35 percent (maximum).

The advances penetration performance measure, relating to growth in member advances, reflects the role of advances as the Bank’s primary product and the primary driver of net income. This performance objective was measured by averaging the ratio of total advances outstanding on December 31, 2008, to total assets as of September 30, 2007, for each eligible member. Averaging the ratio of total advances to total assets for each member and weighting each member equally provided an incentive to market advance products to the entire membership. The advances growth performance targets for 2008 were zero percent growth (threshold), two percent growth (target), and four percent growth (maximum).

In 2008 the Bank’s ROE Spread to LIBOR fell below the threshold for eligibility for an award with respect to that goal, while the Growth in Advances Penetration resulted in eligibility of each named executive officer to receive the maximum award with respect to that goal.

The board did not establish specific criteria for either of the qualitative performance goals, allowing determinations of qualitative performance to be made solely in its discretion.

For the Board of Directors Discretionary goal, the board considered improvements in the areas of risk management, regulatory, and compliance matters and awarded the target level to each officer reporting to the CEO. The board considered the CEO’s overall performance during 2008, including risk management, regulatory and compliance matters, and awarded 18.00 percent, the target level, for this goal.

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For the CEO Discretionary goal, the CEO considered the performance of his direct reports against 2008 individual goals, which included, as applicable, the installation of new credit and collateral systems and models, evaluation of alternative capital structures, strategy development, and succession planning, and recommended a maximum award for each officer reporting to the CEO.

The following table provides the award level associated with each performance goal and total award amounts for each named executive officer.

Name	2008 Short-term Incentive Compensation Plan Awards
	Growth in Advances Penetration (%)	ROE Spread to LIBOR (%)	Board of Directors Discretionary (%)	CEO Discretionary (%)	Total Award (% of Base Salary)	Total Award ($)	Overall Award Level
Richard A. Dorfman	19.50	—	18.00	N/A	37.50	276,563	Below Target
Steven J. Goldstein	13.50	—	10.50	4.50	28.50	112,290	Below Target
Jill Spencer	13.50	—	10.50	4.50	28.50	131,812	Below Target
W. Wesley McMullan	13.50	—	10.50	4.50	28.50	132,810	Below Target
Kirk R. Malmberg	13.50	—	10.50	4.50	28.50	105,569	Below Target

The amount of short-term incentive compensation received by each of the named executive officers under the plan, as shown in the preceding table, is reflected under the “Non-Equity Incentive Compensation Plan” column in the Summary Compensation Table below.

Long-Term Incentive Compensation

The Executive Long-Term Incentive Compensation Plan (the “Long-term ICP”) establishes a three-year rolling performance unit plan under which qualifying executive officers are eligible to receive long-term cash awards at the conclusion of each three-year performance cycle.

In 2008 the board approved award accruals under the 2006-2008 and 2007-2009 Long-term ICPs. The board also approved goals and award opportunities under a 2008-2010 Long-term ICP. Target award opportunities under the 2006-2008, 2007-2009, and 2008-2010 Long-term ICPs range from 25 to 30 percent of each officer’s base salary or fee. These award opportunities are based on similar programs offered at comparable FHLBanks, mortgage banks, and commercial banks. Award opportunities are designed to be conservatively competitive and remain unchanged for 2008.

In the 2006-2008, 2007-2009, and 2008-2010 Long-term ICPs, the board adopted the same performance measures and targets for each year in the Long-term ICP performance period as those included under the respective Short-term ICP for the same year. The use of the same performance measures and targets for both the Short-term ICP and the Long-term ICP is intended to motivate consistently high corporate performance year after year.

The following table provides the award accruals approved by the board for the 2008 portion of the 2006-2008, 2007-2009, and 2008-2010 plans. Following the end of 2009, the board will make any final award for the 2007-2009 plan based upon the average of the three years’ achievements. Following the end of 2010, the board will make any final award for the 2008-2010 plan based upon the average of the three years’ achievements.

The board has the right to revise, modify, or terminate the Long-term ICP in whole or in part at any time or for any reason, and the right to modify any recommended award amount (including the determination of a lesser award or no award), for any reason, without the consent of any participant. To date, no such modification has occurred, although the board is currently evaluating the continuation of the Long-term ICP beginning in 2009.

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Participation in the Long-term ICP is limited to the CEO and executive and senior vice presidents. Long-term ICP awards do not increase the value of benefits delivered under the Bank’s retirement, welfare, or insurance plans. Mr. Dorfman and Mr. Goldstein both began participation in the Long-term ICP for the 2007-2009 performance period of the plan.

Name	Accrued Award for Year 2008 of Each Performance Period
	2006 - 2008 Performance Period	2007 - 2009 Performance Period	2008 - 2010 Performance Period	Total
Richard A. Dorfman	—	63,000	63,000	126,000
Steven J. Goldstein	—	30,609	31,737	62,346
Jill Spencer	32,220	32,220	37,254	101,694
W. Wesley McMullan	31,817	31,817	37,536	101,170
Kirk R. Malmberg	20,379	21,096	28,998	70,473

Retirement Benefits

The named executive officers are eligible to participate in both tax-qualified and non-tax-qualified defined benefit pension plans and defined contribution/deferred compensation plans. These plans are described in more detail below in the sections entitled “Executive Compensation—Pension Benefits” and “—Deferred Compensation.”

The Bank’s retirement benefit plans are a vital component of the Bank’s retention strategy for executive officers and are important to the Bank’s strategy to compete with other organizations that provide executive officers with economic benefits based on equity interests in the employer, especially recognizing that some of those organizations also may provide similar retirement benefits.

Perquisites and Other Benefits

All named executive officers are eligible to participate in the benefit plans that are made available to all other employees of the Bank including medical, dental, and vision insurance coverage, group term life and long-term disability insurance coverage, and paid vacation and sick leave. The named executive officers generally participate in these plans on the same basis and terms as all other employees.

The Bank provides its named executive officers with a limited number of perquisites, including an annual physical examination, guest travel to business functions, and business club memberships. For Mr. Dorfman, the Bank provides personal use of an automobile. The board does not specifically consider perquisites when reviewing total compensation for any of the named executive officers.

Employment Arrangements and Severance Benefits

All Bank employees are employed under an “at will” arrangement. Accordingly, an employee may resign employment at any time, and the Bank may terminate employment at any time for any reason, with or without cause.

The board of directors may, in its discretion, provide severance benefits to an executive officer in the event of termination of his or her employment. In determining whether severance compensation is appropriate, the board of directors considers both the factors underlying the termination of employment and the employment history of the executive officer. The Bank does not provide a “gross up” benefit with respect to any severance.

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Mr. Dorfman. The Bank entered into an Employment Agreement with Mr. Dorfman in connection with his appointment as President and Chief Executive Officer (the “Dorfman Agreement”). Under the Dorfman Agreement, Mr. Dorfman’s employment with the Bank may be terminated by the Bank with or without “cause,” or by Mr. Dorfman with or without “good reason,” as defined in the Dorfman Agreement. Unless earlier terminated by either party as provided therein, the Dorfman Agreement has a three-year term and will extend automatically for subsequent one-year periods unless either party elects not to renew. The Dorfman Agreement established Mr. Dorfman’s 2007 base salary at $700,000 per year, which amount may be increased from year to year by the Bank’s board of directors. The board increased Mr. Dorfman’s 2008 base salary to $775,000 per year. Pursuant to the Dorfman Agreement, the Bank provides a $65,000 automobile allowance during each three-year period of employment. Mr. Dorfman is entitled to participate in all incentive, savings, and retirement plans and programs available to senior executives of the Bank. As described above, under the Dorfman Agreement, Mr. Dorfman received a bonus award for the 12 months ending June 30, 2008, equal to 100 percent of his base salary, based upon the discretion of the Bank’s board of directors.

The Bank has a formal severance arrangement with Mr. Dorfman, which is discussed below under “Potential Payments upon Termination or Change in Control.” This severance arrangement was an integral and necessary component of the Bank’s strategy to recruit Mr. Dorfman.

Mr. Goldstein. The Bank entered into an Amended and Restated Services Agreement with SJG Financial Consultants, LLC, a limited liability company of which Mr. Goldstein is the sole member, in connection with Mr. Goldstein’s appointment as chief financial officer of the Bank in 2007, and amended it during 2008 (the “Goldstein Agreement”). Pursuant to the Goldstein Agreement, the Bank paid an annual fee of $394,000 for Mr. Goldstein’s services in 2008. In addition, the Bank, in its discretion, also may pay an annual incentive fee in an amount up to the maximum annual incentive compensation award opportunity available to an executive vice president of the Bank under the Bank’s Short-term ICP and Long-term ICP. In 2008, Mr. Goldstein received the same percentage award as the Bank’s other executive vice presidents.

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Report of the Board of Directors

The board of directors of the Bank has reviewed and discussed the Compensation Discussion and Analysis above with management, and based on such review and discussion, the board of directors has determined that the Compensation Discussion and Analysis above should be included in the Bank’s Annual Report on Form 10-K.

The board of directors of the Bank has primary responsibility for establishing and determining the Bank’s compensation program. Therefore, this report is submitted by the full board of directors.

BOARD OF DIRECTORS

Scott C. Harvard, Chairman	J. Thomas Johnson, Vice Chairman
John M. Bond, Jr.	Jonathan Kislak
W. Russell Carothers, II	LaSalle D. Leffall, III
William Easterlin	Miriam Lopez
F. Gary Garczynski	Henry Gary Pannell
Bedford Kyle Goodwin III	Robert L. Strickland
William C. Handorf	Thomas H. Webber, III
Linwood Parker Harrell, Jr.	Edward J. Woodard, Jr.

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Executive Compensation

Summary Compensation Table

The following table provides a summary of cash and other compensation earned by the named executive officers for the years ended December 31, 2008, 2007, and 2006. It is important to read this table, and the other tables that follow, closely and in conjunction with the Compensation Discussion and Analysis. The narratives following the tables and the footnotes accompanying each table are important parts of each table.

2008 Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($) (1)	Non-Equity Incentive Plan Compensation ($) (2)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3)	All Other Compensation ($) (4)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
Richard A. Dorfman
President and Chief	2008	737,500	700,148	276,563	54,000	72,675	1,840,886
Executive Officer	2007	371,538	148	—	—	183,605	555,291
Steven J. Goldstein
Executive Vice President	2008	393,999	44,425	112,290	—	—	550,714
and Chief Financial Officer	2007	262,311	148	88,530	—	—	350,989
Jill Spencer
Executive Vice President, General Counsel and Chief Strategy Officer	2008	462,500	52,179	269,032	381,000	27,750	1,192,461
	2007	400,000	296	135,000	224,000	24,000	783,296
	2006	400,000	—	90,000	359,000	29,400	878,400
W. Wesley McMullan
Executive Vice President and Director, Financial Management	2008	466,000	53,683	268,315	302,000	29,992	1,119,990
	2007	395,000	148	133,313	159,497	23,700	711,658
	2006	395,000	—	88,875	133,449	24,544	641,868
Kirk R. Malmberg Executive Vice President and Chief Credit Officer	2008	370,417	2,679	179,078	143,000	22,225	717,399

Notes:

(1) The amounts in column (d) include bonuses for the executive officers reporting to the CEO, which were approved by the board on July 24, 2008, in consideration of management’s progress in meeting certain governance and risk management objectives. With respect to Mr. Dorfman, and pursuant to his employment agreement which was executed upon his hire in June 2007, the board evaluated Mr. Dorfman’s performance in June 2008. Based upon that evaluation of performance and associated achievements, the board approved, on a one-time basis, a bonus payment of 100 percent of Mr. Dorfman’s base salary. The board took into consideration progress in the areas of risk management, regulatory, and compliance matters in making this determination. The board also recognized that Mr. Dorfman did not participate in the Banks short-term incentive plan during 2007. Beginning in 2008, Mr. Dorfman participates in the Short-term ICP.

(2) The amounts in column (e) reflect the dollar value of all earnings for services performed during the fiscal years ended December 31, 2008, 2007, and 2006 pursuant to awards under the Short-term ICP and, with respect to 2008, the 2006-2008 Long-term ICP. Awards under the Long-term ICP are reported at the end of the performance period. As discussed in the Compensation Discussion and Analysis, the 2008 non-equity incentive compensation awards are subject to a four week review period and receipt of non-objection by the Finance Agency.

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(3) The amounts in column (f) reflect the sum of the actuarial increase during each fiscal year in present value of the named executive officer’s aggregate pension benefits under the Bank’s Qualified and Excess Plans, computed using the assumptions described in footnote (1) to the 2008 Pension Benefits table. These plans are described in greater detail below under “Pension Benefits” and “Deferred Compensation.”

(4) The amounts in column (g) consist of the following amounts:

	Year	Matching contributions under the Bank’s qualified 401(k) Plan ($)	Matching contributions under the Bank’s non- qualified defined contribution benefit equalization plan ($)
Richard A. Dorfman	2008	13,800	30,450
	2007	13,500	7,500
Steven J. Goldstein	2008	—	—
	2007	—	—
Jill Spencer	2008	12,300	15,450
	2007	12,300	11,700
	2006	12,000	12,000
W. Wesley McMullan	2008	13,800	14,160
	2007	13,500	10,200
	2006	13,200	10,500
Kirk R. Malmberg	2008	5,167	17,058

	Year	Home office ($)(1)	Club member- ship ($) (1)	Guest travel ($) (1)	Healthcare reimburse- ments ($) (1)	Financial Planning ($) (1)	Personal use of a Bank- provided automobile ($) (1)	Relocation ($) (1)
Richard A. Dorfman	2008	1,233	6,134	2,938	1,221	4,500	12,399	—
	2007	169	—	2,167	—	—	10,269	150,000

Notes:

(1) The amounts listed represent the actual costs incurred by the Bank, with the exception of the personal use of the Bank-provided automobile. The annual lease value of the automobile was determined in accordance with the “Lease Value Rule” as defined in the IRS Publication 15-B.

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Awards of Incentive Compensation in 2008

2008 Grants of Plan-Based Awards

The following table provides information concerning each grant of an award to a named executive officer in 2008 under the Short-term ICP and the Long-term ICP.

	Estimated Future Payments Under Non-Equity Incentive Plan Awards
Name	Threshold ($)	Target ($)	Maximum ($)
(a)	(b)(1)	(c)(1)	(d)(1)
Richard A. Dorfman
Short-term ICP	221,250	331,875	479,375
Long-term ICP (2008-2010)	105,000	210,000	348,600
Steven J. Goldstein
Short-term ICP	78,800	137,900	177,300
Long-term ICP (2008-2010)	49,250	98,500	163,510
Jill Spencer
Short-term ICP	92,500	161,875	208,125
Long-term ICP (2008-2010)	57,813	115,625	191,938
W. Wesley McMullan
Short-term ICP	93,200	163,100	209,700
Long-term ICP (2008-2010)	58,250	116,500	193,390
Kirk R. Malmberg
Short-term ICP	74,083	129,646	166,688
Long-term ICP (2008-2010)	45,000	90,000	149,400

Notes:

(1) Columns (b-d) reflect threshold, target, and maximum payment opportunities under the Bank’s Short-term ICP and Long-term ICP for the fiscal year ended December 31, 2008. The actual amounts earned pursuant to the Short-term ICP during 2008 are reported under column (e) of the summary compensation table. For information on these awards, see “Compensation Discussion and Analysis.”

Retirement Benefits

Pension Benefits

The following table provides information with respect to the Pentegra Plan, the Bank’s tax-qualified pension plan (the “Qualified Plan”), and the Bank’s non-qualified excess benefit pension plan (the “Excess Plan”). The table shows the actuarial present value of accumulated benefits as of December 31, 2008, payable to each of the named executive officers, including the number of years of service credited to each named executive under each of the plans.

Qualified Plan. The pension benefits payable under the Qualified Plan are based on a pre-established defined benefit formula that provides for an annual retirement allowance and a retirement death benefit. A participant’s benefit in the plan vests upon completion of five years of service with the Bank, and the participant then may retire under the plan at the times described below.

Employees hired on or before July 1, 2005

For participants hired on or before July 1, 2005, the Qualified Plan generally provides an annual retirement allowance equal to 2.5 percent of the participant’s highest consecutive three-year average compensation for each year of credited service under the plan (not to exceed 30 years). Average compensation is defined as base salary and annual short-term incentive compensation.

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For these participants, the standard retirement age is 65, with reduced early retirement benefits available at age 45. If the participant continues to work for the Bank until the sum of the participant’s age and years of service with the Bank equals at least 70, the annual benefit payable following retirement is reduced by 1.5 percent for each year that retirement precedes normal retirement age. If the participant terminates employment before the participant’s age and years of service with the Bank total 70, the annual benefit payable following retirement is reduced by six percent for each year between age 65 and 60, by four percent for each year between age 60 and 55, and by three percent for each year between age 55 and 45, in each case, that retirement precedes normal retirement age. For these participants, lump sum payments are available beginning at age 50.

Ms. Spencer, Mr. McMullan, and Mr. Malmberg participate in the Qualified Plan on these terms because they were hired on or before July 1, 2005. As of March 15, 2009, Ms. Spencer, Mr. McMullan, and Mr. Malmberg had attained eligibility for immediate early retirement.

Employees hired after July 1, 2005

For participants hired after July 1, 2005, the Qualified Plan generally provides an annual retirement allowance equal to 1.5 percent of the participant’s highest consecutive five-year average compensation for each year of credited service under the plan (not to exceed 30 years). Average compensation is defined as base salary only.

For these participants, the standard retirement age is 65, with reduced early retirement benefits available at age 55. If the participant terminates employment before reaching age 65, the annual benefit payable following retirement is reduced by six percent for each year between age 65 and 60, by four percent for each year between age 60 and 55, and by three percent for each year between age 55 and 50, in each case, that retirement precedes normal retirement age. For these participants, lump sum payments are not available.

Mr. Dorfman participates in the Qualified Plan on these terms because he was hired after July 1, 2005. Based on his length of employment, Mr. Dorfman has not satisfied the plan vesting requirements and therefore is not yet eligible to retire under the Qualified Plan.

Excess Plan. Payments under the Qualified Plan may be limited due to federal tax code limitations. The Excess Plan exists to restore those benefits that executives otherwise would forfeit due to these limitations. The plan operates using the same benefit formula and retirement eligibility provisions as described above under the Qualified Plan. Because the Excess Plan is a non-tax-qualified plan, the benefits received from this plan do not receive the same tax treatment and funding protection associated with the Qualified Plan.

Death Benefits. Death benefits, which do not vary based on date of hire, also are available under the qualified and non-qualified plans. If an employee dies while in active service, his/her beneficiary is entitled to a lump sum amount equal to the commuted value of 120 monthly retirement payments. If a former employee dies while in retirement, having elected the normal form of retirement benefits, his/her beneficiary also is entitled to a lump sum amount equal to the commuted value of 120 monthly retirement payments less payments received before the former employee died.

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2008 Pension Benefits

Name	Plan Name	Number of Years of Credited Service (#)	Present Value of Accumulated Benefit ($) (1)	Payments during last fiscal year ($)
(a)	(b)	(c)	(d)	(e)
	Qualified Plan	0.5	17,000	—
Richard A. Dorfman	Excess Plan	0.5	37,000	—
	Qualified Plan	0	—	—
Steven J. Goldstein (2)	Excess Plan	0	—	—
	Qualified Plan	22.3	412,000	—
Jill Spencer (3)	Excess Plan	22.3	1,258,000	—
	Qualified Plan	20.8	372,000	—
W. Wesley McMullan	Excess Plan	20.8	668,000	—
	Qualified Plan	11.8	232,000	—
Kirk R. Malmberg (4)	Excess Plan	11.8	201,000	—

Notes:

(1) The “Present Value of Accumulated Benefit” is the present value of the annual pension benefit that was earned as of December 31, 2008, assuming retirement at age 65. Benefits under the Qualified Plan were calculated using a 6.70 percent discount rate; 5.85 percent was used to calculate benefits under the Excess Plan. The 2000 RP Mortality Table (50% static mortality table for lump sums; 50% generational mortality table for annuities) was used for both plans.

(2) Mr. Goldstein is not a participant in the Qualified Plan or the Excess Plan.

(3) In accordance with plan provisions, the years of credited service for Ms. Spencer include 16.16 years credited for prior service earned while employed by FHLBank San Francisco. The incremental value of this prior service, as valued in the Bank’s Excess Plan, using the methodology described in note 1, is $882,000.

(4) In accordance with plan provisions, the years of credited service for Mr. Malmberg include 4.0 years credited for prior service earned while employed by FHLBank Chicago. The incremental value of this prior service, as valued in the Bank’s Excess Plan, using the methodology described in note 1, is $69,000.

Deferred Compensation

Each named executive officer of the Bank is eligible to participate in the Bank’s non-qualified, elective deferred compensation plan and defined contribution benefit equalization plan (the “DC BEP”). Directors are eligible to participate in the deferred compensation plan but are not eligible to participate in the DC BEP.

The deferred compensation plan permits a participant to defer all or a portion of his or her compensation, including base salary and awards under the Short-term ICP, and to direct such compensation into a series of 16 mutual fund and 11 target retirement date fund options designed to mirror the Bank’s 401(k) Plan. Directors also may select an interest crediting rate based on the Bank’s return on equity. Distributions from the deferred compensation plan may be made either in a specific year, whether or not a participant’s employment has ended, or at a time that begins at or after the participant’s retirement or separation. Participants may elect to receive either a lump sum distribution or annual installment payments over periods ranging from two to five years. The Bank does not match contributions to the deferred compensation plan.

The deferred compensation plan was amended and restated effective January 1, 2009, primarily to bring it into compliance with Section 409A of the Internal Revenue Code. The amendment also added a one-time lump-sum payment option, as permitted under the transition rules, which expired December 31, 2008, and relevant guidance of Section 409A. The amendment and restatement was approved on December 4, 2008 by the Bank’s board of directors and became effective on expiration of the regulatory waiting period.

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Two of the Bank’s named executive officers, W. Wesley McMullan and Jill Spencer, elected to receive the lump-sum payment option as of December 31, 2008. Their account balances of $190,919 and $147,551, respectively, were distributed on March 2, 2009.

Named executive officers also are permitted to defer up to 40 percent of salary under the Bank’s qualified (401(k)) and non-qualified DC BEP plans. In addition, the Bank matches the amount contributed by a participating employee on the first six percent of his or her base salary.

The DC BEP, like the 401(k) plan, is self-directed and provides participants with 16 mutual fund and 11 target retirement date fund options through the Vanguard Group. Participants earn a market rate of return based on the mutual funds selected. Distributions from the DC BEP occur when a participant’s employment has ended. Participants may elect to receive either a lump sum distribution or annual installment payments over periods ranging from two to five years. These plans are designed to encourage additional voluntary savings and to offer a valuable financial planning tool.

The amounts shown in the tables below include compensation earned and deferred in prior years, and earnings on, or distributions of, such amounts. In accordance with SEC rules, the amounts shown in the table do not include any amounts in respect of the 401(k) plan.

2008 Nonqualified Deferred Compensation

Deferred Compensation Plan

Name	Executive Contributions in Last Fiscal Year ($)	Bank Contributions in Last Fiscal Year ($)	Aggregate Earnings in Last Fiscal Year ($) (1)		Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last FYE ($)
(a)	(b)	(c)	(d)		(e)	(f)
Richard A. Dorfman	—	—	—		—	—
Steven J. Goldstein	—	—	—		—	—
Jill Spencer	101,250	—	(48,891	)	—	151,599
W. Wesley McMullan	—	—	(61,423	)	—	206,915
Kirk R. Malmberg	—	—	—		—	—

Notes:

(1) Amounts under column (d) are actual market returns for mutual funds selected by participants and interest credit received under the Bank’s core economic income return on equity interest crediting rate.

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Defined Contribution Benefit Equalization Plan (DC BEP)

Name	Executive Contributions in Last Fiscal Year ($)	Bank Contributions in Last Fiscal Year ($)	Aggregate Earnings in Last Fiscal Year ($) (1)		Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last FYE ($)
(a)	(b)	(c)	(d)		(e)	(f)
Richard A. Dorfman	30,450	30,450	(17,628	)	—	58,250
Steven J. Goldstein	—	—	—		—	—
Jill Spencer	25,750	15,450	(45,667	)	—	152,899
W. Wesley McMullan	14,160	14,160	(16,243	)	—	111,691
Kirk R. Malmberg	51,175	17,058	(77,090	)	—	194,417

Notes:

(1) Amounts under column (d) are actual market returns for mutual funds selected by participants and interest credit received under the Bank’s core economic income return on equity interest crediting rate.

Potential Payments upon Termination or Change in Control

No executive officer has a change-in-control agreement with the Bank. With the exception of Mr. Dorfman, none of the current executive officers has a severance agreement with the Bank.

For Mr. Dorfman, the board approved a severance arrangement providing that upon the Bank’s termination of Mr. Dorfman for any reason other than “cause,” or upon Mr. Dorfman’s termination of his employment for “good reason,” the Bank shall pay a total of the base salary in effect at the date of termination plus an amount equal to the amount that would have been payable pursuant to Mr. Dorfman’s short-term incentive compensation award for the year in which the date of termination occurs, payable at the time such incentive compensation awards are paid to other executives.

Under the Dorfman Agreement, “cause” is defined to include Mr. Dorfman’s willful failure to perform his duties; his willful engagement in illegal conduct or gross misconduct injurious to the Bank; a written request from the Finance Agency or any other regulatory agency or body requesting that the Bank terminate his employment; crimes involving fraud or other dishonest acts; certain other notices from or actions by the Finance Agency; or his breach of fiduciary duty or breach of certain covenants in the Dorfman Agreement. In addition, the Dorfman Agreement defines “good reason” to include a material diminution in Mr. Dorfman’s base salary or in his authority, duties, or responsibilities, or the authority, duties, or responsibilities of the person to whom Mr. Dorfman reports; the Bank’s requiring Mr. Dorfman to be based at any office or location other than in Atlanta, Georgia; or a material breach of the Dorfman Agreement by the Bank.

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The following table provides information about potential payments to Mr. Dorfman in the event his employment had terminated on December 31, 2008. He is not entitled to any 280G gross-up payments in the event of termination.

	Severance		Medical, Dental and Life Insurance Benefits($)	Pension Benefit Enhancements ($)(1)	Other Perquisites ($)	Total($)
	2008 Short- Term ICP Award ($)	Annual Base Salary($)
Richard A. Dorfman
Voluntary Resignation	0	0	0	0	0	0
Involuntary For Cause	0	0	0	0	0	0
Involuntary Without Cause	276,563	775,000	0	0	0	1,051,563
Voluntary For Good Reason	276,563	775,000	0	0	0	1,051,563

(1) At December 31, 2008, Mr. Dorfman was not yet vested in benefits under the Bank’s Qualified Plan or Excess Plan.

Employees, including named executive officers, are entitled to receive amounts earned during their terms of employment, regardless of the manner in which their employment terminated. These amounts include:

• Amounts accrued and vested through the Bank’s qualified and non-qualified defined benefit plans. Up to three months of incremental service under the Bank’s pension plan may be granted if an employee is provided with severance pay.

• Amounts accrued and vested through the Bank’s qualified and non-qualified defined contribution plans and amounts contributed and associated earnings under the Bank’s deferred compensation plan.

• Accrued vacation and applicable retiree medical benefits and applicable retiree life insurance.

In the event of the death or disability of an employee, including a named executive officer, in conjunction with the benefits above, the employee may receive benefits under the Bank’s disability plan or payments under the Bank’s life insurance plan, as appropriate. The actual amounts to be paid can be determined only at the time of such individual’s separation from the Bank.

Director Compensation

The FHLBank Act, as amended by the Housing Act, provides the each FHLBank may pay its directors reasonable compensation for the time required of them, and their necessary expenses, in the performance of their duties, subject to approval by the Director of the Finance Agency. In accordance with the FHLBank Act, the Bank has adopted a policy governing the compensation and travel expense reimbursement provided to its directors. Under this policy, directors receive fees paid for attendance at each meeting of the board of directors, meeting of a committee of the board of directors, or certain official Bank-related events. These fees are subject to the annual caps established under the policy. Directors do not receive separate retainers.

Directors are reimbursed for reasonable Bank-related travel expenses associated with meeting attendance in accordance with Bank policy. Total expenses paid under that policy in 2008 were $671,720. In specified instances, the Bank may reimburse a director for the transportation and other ordinary travel expenses of the director’s guest.

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During 2008, Scott C. Harvard, the chairman of the board of directors, received fees of between $2,000 per meeting day, for chairing a meeting of the board of directors, to $300 per meeting, for attending a telephonic meeting of a board committee, subject to an annual cap of $45,000. J. Thomas Johnson, the vice chairman of the board of directors, received fees of between $1,800 per meeting day, for attending meetings of the board of directors, to $300 per meeting, for attending a telephonic meeting of a board committee, subject to an annual cap of $45,000 in 2008. Other members of the board of directors received fees of between $1,500 per meeting day, for attending meetings of the board of directors, and $300 per meeting, for attending a telephonic meeting of a board committee, subject to an annual cap of $45,000 in 2008.

The following table sets forth the cash and other compensation paid by the Bank to the members of the board of directors for all services in all capacities during 2008.

Name	Fees Earned or Paid in Cash ($)		Total ($)
(a)	(b)		(h)
John M. Bond, Jr.	$	35,639	$	35,639
W. Russell Carothers, II		28,989		28,989
M. Joy Drass		34,200		34,200
William F. Easterlin, III		31,739		31,739
F. Gary Garczynski		35,789		35,789
Donna Goodrich1		19,300		19,300
Bedford Kyle Goodwin, III		31,389		31,389
William C. Handorf		34,539		34,539
Linwood Parker Harrell, Jr.		32,950		32,950
Scott C. Harvard		45,000		45,000
J. Thomas Johnson		45,000		45,000
Jonathan Kislak		32,639		32,639
LaSalle D. Leffall, III		34,639		34,639
Miriam Lopez		31,739		31,739
Henry Gary Pannell		32,339		32,339
Reid Pollard		4,000		4,000
Robert L. Strickland		36,189		36,189
Thomas H. Webber, III		34,639		34,639
Frederick Willetts, III		21,250		21,250

¹ At the request of Ms. Goodrich, this amount was paid to a charity of her choosing.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The Bank is a cooperative whose members or former members own all of the outstanding capital stock of the Bank, and the members elect the directors of the Bank. The exclusive voting right of members is for the election of the Bank’s board of directors. A member is eligible to vote for the number of open member director seats in the state in which its principal place of business is located, and all members are eligible to vote for the number of open independent director seats. Membership is voluntary, and a member must give notice of its intent to withdraw from membership. A member that withdraws from membership may not acquire shares of any FHLBank before the end of the five-year period beginning on the date of the completion of its divestiture of Bank stock.

164

The Bank does not offer any compensation plan under which equity securities of the Bank are authorized for issuance. Ownership of the Bank’s capital stock is concentrated within the financial services industry and is stratified across various institution types as noted in the following table.

Capital Stock Outstanding by Member Type

(In millions)

	Commercial Banks		Thrifts		Credit Unions		Insurance Companies		Other (1)		Total
December 31, 2008	$	4,508	$	3,024	$	816	$	115	$	44	$	8,507
December 31, 2007		3,501		3,464		528		63		56		7,612
December 31, 2006		4,094		1,284		334		60		216		5,988
December 31, 2005		4,134		1,295		259		65		143		5,896
December 31, 2004		3,849		1,102		217		57		239		5,464

(1) “Other” includes capital stock held by a member that has merged or otherwise been consolidated into a nonmember and the resulting institution is not a member of the Bank.

The following table sets forth information about those members that are beneficial owners of more than five percent of the Bank’s capital stock as of the date indicated.

Member Institutions Holding Five Percent or More of Outstanding Capital Stock

As of February 20, 2009

(Dollar amount in millions)

Name and Address	Capital Stock	Percent of Total Capital Stock
Branch Banking and Trust Company	478.8	6.0
200 W 2nd Street
Winston Salem, NC 27104
Regions Bank	420.2	5.3
1900 Fifth Avenue North
Birmingham, AL 35203

In July 2008, Bank of America Corporation completed its acquisition of Countrywide Financial Corporation, parent of Countrywide Bank, FSB, the Bank’s largest borrower. In February 2009, Countrywide Bank FSB relocated its principal place of business to Colorado, which action resulted in its termination of membership pursuant to the Bank’s Capital Plan. As of February 20, 2009, Countrywide Bank, FSB held $1,847.5 million in capital stock, equaling 23.2 percent of total capital stock as of that date. Bank of America Corporation has stated that it intends to convert Countrywide Bank, FSB into a national bank and merge it into Bank of America, NA, a member of the Bank, in April 2009.

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Additionally, member directors, which comprise a majority of the board of directors of the Bank, are officers or directors of member institutions that own the Bank’s capital stock. The following table lists these institutions.

Capital Stock Outstanding to Member Institutions whose

Officers or Directors Serve as a Director of the Bank

As of February 20, 2009

(Dollar amount in millions)

Member Name	Capital Stock		Percent of Total Capital Stock
Branch Banking and Trust Company, Winston Salem, NC	$	478.8	6.0
Bank of the Commonwealth, Norfolk, VA		7.3	*
First Community Bank, N.A., Lexington, SC		5.6	*
The Columbia Bank, Columbia, MD		5.6	*
Queensborough National Bank & Trust Company, Louisville, GA		4.0	*
The Citizens Bank of Winfield, Winfield, AL		3.0	*
Shore Bank, Onley, VA		2.8	*
First Financial Bank, Bessemer, AL		2.4	*
TransAtlantic Bank Miami, FL		2.2	*
IDB-IIC Federal Credit Union, Washington, D.C.		1.5	*

* Less than 0.1 percent

Item 13. Certain Relationships, Related Transactions and Director Independence.

Because the Bank is a cooperative, capital stock ownership is a prerequisite to transacting any business with the Bank. The Bank’s member directors, which comprise a majority of the Bank’s board of directors, are officers or directors of member institutions. As a result, all members and most directors would be classified as related parties, as defined by securities law and SEC regulations. In the ordinary course of its business, the Bank transacts business with each of the members that has an officer or director serving as a director of the Bank. All such transactions:

• Have been made in the ordinary course of the Bank’s business

• Have been made subject to the same Bank policies as transactions with the Bank’s members generally and

• In the opinion of management, do not involve more than the normal risk of collection or present other unfavorable features.

The Bank has adopted a written related person transaction policy which requires the Bank’s Governance and Compensation Committee to review and, if appropriate, to approve any transaction between the Bank and any related person (as defined by applicable SEC regulations). Pursuant to the policy, the committee will review any transaction the Bank would be required to disclose in filings with the SEC in which the Bank is or will be a participant and the amount involved exceeds $120,000, and in which any related person had, has, or will have a direct or indirect material interest. The Bank has exemptive relief from disclosing certain related person transactions that arise in the ordinary course of the Bank’s business. The committee may approve those transactions that are in, or are not inconsistent with, the best interests of the Bank and its shareholders.

In addition, the Bank has a written Code of Conduct applicable to all employees and a Code of Conduct and Ethics for Directors as well as other written policies and procedures that also may apply to or prohibit certain related person transactions.

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Director Independence

For a discussion of director independence, refer to Item 10, “Directors, Executive Officers and Corporate Governance—Director Independence, Audit Committee and Audit Committee Financial Expert.”

Item 14. Principal Accountant Fees and Services.

The aggregate fees billed to the Bank by PricewaterhouseCoopers, LLP (“PwC”) the Bank’s independent registered public accounting firm, are set forth in the following table for each of the years ended December 31, 2008 and 2007 (in thousands).

	For the Years Ended December 31,
	2008		2007
Audit fees	$	764	$	610
Audit-related fees		106		62
All other fees		32		14
Total fees	$	902	$	686

Audit fees for the years ended December 31, 2008 and 2007 were for professional services rendered by PwC in connection with the Bank’s annual audits and quarterly reviews of the Bank’s financial statements.

Audit-related fees for the years ended December 31, 2008 and 2007 were for assurance and related services primarily related to the adoption of accounting standards and interpretations and services related to the Bank’s 401k Savings Plan.

All other fees for the years ended December 31, 2008 and 2007 relate to non audit-related advisory service, PwC’s attendance at FHLBanks’ Accounting Conferences and the annual license for PwC’s accounting research software.

The Bank’s Audit Committee has adopted the Audit Committee Pre-Approval Policy (the “Pre-Approval Policy”). In accordance with the Pre-Approval Policy and applicable law, the Audit Committee pre-approves audit services, audit-related services, tax services and non-audit services to be provided by the Bank’s independent registered public accounting firm. The term of any pre-approval is 12 months from the date of pre-approval unless the Audit Committee specifically provides otherwise. On an annual basis, the Audit Committee reviews the list of specific services and projected fees for services to be provided for the next 12 months and pre-approves services as the Audit Committee sees necessary. Under the Pre-Approval Policy, the Audit Committee has granted pre-approval authority to the Chairman and the Vice-Chairman of the Audit Committee, subject to limitation as set forth in the Pre-Approval Policy. The Chairman or the Vice-Chairman must report any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting. New services that have not been pre-approved by the Audit Committee that are in excess of the pre-approval fee level established by the Audit Committee must be presented to the entire Audit Committee for pre-approval.

167

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) Financial Statements. The following financial statements of the Federal Home Loan Bank of Atlanta, set forth in Item 8 above, are filed as part of this Report.

Report of Independent Registered Public Accounting Firm

Statements of Condition as of December 31, 2008 and 2007

Statements of Income for the Years Ended December 31, 2008, 2007 and 2006

Statements of Capital Accounts for the Years Ended December 31, 2008, 2007 and 2006

Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006

Notes to Financial Statements

(b) Exhibits. The following exhibits are filed as a part of this Report:

Exhibit No.	Description
3.1	Restated Organization Certificate of the Federal Home Loan Bank of Atlanta (1)
3.2	Bylaws of the Federal Home Loan Bank of Atlanta (Revised and Restated) (2)
4.1	Capital Plan of the Federal Home Loan Bank of Atlanta
10.1	Federal Home Loan Bank of Atlanta Benefit Equalization Plan (2009 revision)
10.2	Federal Home Loan Bank of Atlanta Deferred Compensation Plan (2009 revision) (3)
10.3	Form of Officer and Director Indemnification Agreement (1)
10.4	Federal Home Loan Bank of Atlanta 2009 Directors’ Compensation Policy
10.5	Agreement and Release of All Claims, dated February 20, 2007, between the Bank and Raymond R. Christman (5)
10.6	Amended and Restated Consulting Agreement, dated April 26, 2007, between the Federal Home Loan Bank of Atlanta and PEAC Ventures, Inc. (6)
10.7	Employment Agreement, dated June 13, 2007, between the Bank and Richard A. Dorfman (7)
10.8	Amended and Restated Services Agreement, dated November 14, 2008, between the Bank, SJG Financial Consultants, LLC, and Steven J. Goldstein
10.9	Federal Home Loan Bank of Atlanta Short-Term Incentive Compensation Plans (4)
10.10	Federal Home Loan Bank of Atlanta Executive Long-Term Incentive Plan (1)
10.11	Federal Home Loan Banks P&I Funding and Contingency Plan Agreement, effective as of July 20, 2006, by and among the Office of Finance and each of the Federal Home Loan Banks (8)
10.12	United States Department of the Treasury Lending Agreement, dated September 9, 2008 (9)
12.1	Statement regarding computation of ratios of earnings to fixed charges
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 Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 135, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 +
99.1	Audit Committee Report +

168

(1) Filed on March 17, 2006 with the Securities and Exchange Commission in the Bank’s Form 10 Registration Statement and incorporated herein by reference.

(2) Filed on January 29, 2008 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

(3) Filed on January 16, 2009 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

(4) Filed on March 30, 2007 with the Securities and Exchange Commission in the Bank’s Form 10-K and incorporated herein by reference.

(5) Filed on May 17, 2007 with the Securities and Exchange Commission in the Bank’s Form 8-K/A and incorporated herein by reference

(6) Filed on May 10, 2007 with the Securities and Exchange Commission in the Bank’s Form 10-Q and incorporated herein by reference.

(7) Filed on June 27, 2006 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

(8) Filed on August 13, 2007 with the Securities and Exchange Commission in the Bank’s Form 10-Q and incorporated herein by reference.

(9) Filed on September 9, 2008 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

 + Furnished herewith.

169

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 Atlanta
Date:    March 30, 2009	By	/s/    RICHARD A. DORFMAN
	Name:	Richard A. Dorfman
	Title:	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date:    March 30, 2009	By	/s/    RICHARD A. DORFMAN
	Name:	Richard A. Dorfman
	Title:	President and Chief Executive Officer
Date:    March 30, 2009	By	/s/    STEVEN J. GOLDSTEIN
	Name:	Steven J. Goldstein
	Title:	Executive Vice President and Chief Financial Officer
Date:    March 30, 2009	By	/s/    J. DANIEL COUNCE
	Name:	J. Daniel Counce
	Title:	First Vice President and Controller
Date:    March 30, 2009	By	/s/    SCOTT C. HARVARD
	Name:	Scott C. Harvard
	Title:	Chairman of the Board of Directors
Date:    March 30, 2009	By	/s/    J. THOMAS JOHNSON
	Name:	J. Thomas Johnson
	Title:	Vice Chairman of the Board of Directors
Date:    March 30, 2009	By	/s/    JOHN M. BOND, JR.
	Name:	John M. Bond, Jr.
	Title:	Director
Date:    March 30, 2009	By	/s/    W. RUSSELL CAROTHERS, II
	Name:	W. Russell Carothers, II
	Title:	Director
Date:    March 30, 2009	By	/s/    WILLIAM F. EASTERLIN, III
	Name:	William F. Easterlin, III
	Title:	Director
Date:    March 30, 2009	By	/s/    F. GARY GARCZYNSKI
	Name:	F. Gary Garczynski
	Title:	Director
Date:    March 30, 2009	By	/s/    DONNA GOODRICH
	Name:	Donna Goodrich
	Title:	Director

S-1

Date:    March 30, 2009	By	/s/    BEDFORD KYLE GOODWIN III
	Name:	Bedford Kyle Goodwin III
	Title:	Director
Date:    March 30, 2009	By	/s/    WILLIAM C. HANDORF
	Name:	William C. Handorf
	Title:	Director
Date:    March 30, 2009	By	/s/    LINWOOD PARKER HARRELL
	Name:	Linwood Parker Harrell
	Title:	Director
Date:    March 30, 2009	By	/s/    JONATHAN KISLAK
	Name:	Jonathan Kislak
	Title:	Director
Date:    March 30, 2009	By	/s/    LASALLE D. LEFFALL, III
	Name:	LaSalle D. Leffall, III
	Title:	Director
Date:    March 30, 2009	By	/s/    MIRIAM LOPEZ
	Name:	Miriam Lopez
	Title:	Director
Date:    March 30, 2009	By	/s/    HENRY GARY PANNELL
	Name:	Henry Gary Pannell
	Title:	Director
Date:    March 30, 2009	By	/s/    ROBERT STRICKLAND
	Name:	Robert Strickland
	Title:	Director
Date:    March 30, 2009	By	/s/    THOMAS H. WEBBER, III
	Name:	Thomas H. Webber, III
	Title:	Director
Date:    March 30, 2009	By	/S/    EDWARD J. WOODARD, JR.
	Name:	Edward J. Woodard, Jr.
	Title:	Director

S-2

EX-4.1

Exhibit 4.1

CAPITAL PLAN OF THE

FEDERAL HOME LOAN BANK OF ATLANTA

As Last Amended by the Board of Directors on

July 24, 2008

Approved by the Federal Housing Finance Agency on

March 6, 2009

I.	DEFINITIONS	1
II.	CAPITAL STOCK	5
	A.     CHARACTERISTICS OF CAPITAL STOCK	5
	B.     INTEREST IN RETAINED EARNINGS	5
III.	ISSUANCE OF CAPITAL STOCK	5
	A.     SUBJECT TO PLAN	5
	B.     NEW MEMBERS	5
	C.     FORMER MEMBERS AND NONMEMBER STOCKHOLDERS	5
IV.	MINIMUM STOCK REQUIREMENT	6
	A.     CALCULATION OF MINIMUM STOCK REQUIREMENT	6
	B.     AUTHORIZED RANGES	7
	1.      Authorized Ranges for Membership Stock Requirement	7
	2.      Authorized Ranges for Activity-Based Stock Requirement	7
	3.      No Adjustment Outside Authorized Ranges Without Plan Amendment	7
	C.     ADJUSTMENTS TO MINIMUM STOCK REQUIREMENTS	7
	1.      Notice of Change in Minimum Stock Investment Requirement	7
	2.      Adjustment to Membership Stock Requirement	8
	3.      Adjustment to Activity-Based Stock Requirement	9
	4.      Application of Change Within Authorized Ranges	10
V.	OWNERSHIP AND TRANSFER OF CAPITAL STOCK	11
VI.	VOTING RIGHTS	11
VII.	DIVIDENDS	11
	A.     DECLARATION OF DIVIDENDS	11
	B.     NO PREFERENCE	11
	C.     STOCK HELD BY WITHDRAWING OR FORMER MEMBER	11
VIII.	LIQUIDATION, MERGER OR CONSOLIDATION	12
	A.     LIQUIDATION	12
	B.     MERGER OR CONSOLIDATION	12
	C.     NO LIMITATION ON FINANCE BOARD’S AUTHORITY	12
IX.	REDEMPTION AND REPURCHASE OF CAPITAL STOCK (CONTINUING MEMBERSHIP)	12
	A.     REDEMPTION UPON APPLICATION BY THE MEMBER	12
	1.      Conditions Applicable to Redemption	12
	2.      Cancellation of Redemption Notice	12
	3.      Redemption	13
	B.     REPURCHASE UPON INITIATION BY THE BANK	13
	C.     CONTINUED BENEFITS OF OWNERSHIP PRIOR TO REDEMPTION OR REPURCHASE	13

As of July 24, 2008 i

X.	REDEMPTION AND REPURCHASE OF CAPITAL STOCK (WITHDRAWAL OR TERMINATION OF MEMBERSHIP)	13
	A.     VOLUNTARY WITHDRAWAL	13
	1.      Notice of Intention to Withdraw from Membership	13
	2.      Termination of Membership	14
	3.      Continued Benefits of Membership Prior to Termination	14
	4.      Cancellation of Notice of Withdrawal	14
	5.      Circumstances Requiring Finance Board Certification for Withdrawal	14
	B. TERMINATION OF MEMBERSHIP AS A RESULT OF A CONSOLIDATION OR RELOCATION	15
	1.      Consolidation of Members	15
	2.      Consolidation into Nonmember	15
	3.      Relocation of Member	16
	C.     OTHER INVOLUNTARY TERMINATION OF MEMBERSHIP	16
	D.     REDEMPTION	17
XI.	LIMITATIONS ON REDEMPTION AND REPURCHASE OF CAPITAL STOCK	17
	A.     LIMITATIONS DUE TO CHARGES AGAINST CAPITAL STOCK	17
	B.     LIMITATIONS DUE TO FAILURE TO SATISFY MINIMUM REQUIREMENTS	17
	C.     OTHER RESTRICTIONS ON REDEMPTION	17
	D.     OTHER RESTRICTIONS ON REPURCHASE	18
	E.     NOTICE OF SUSPENSION OF REPURCHASES OR REDEMPTIONS	18
	F.      NO PRIORITY FOR NOTICES OF REDEMPTION IN THE EVENT OF LIQUIDATION	18
XII.	DISPOSITION OF CLAIMS	18
	A.     IN GENERAL	18
	B.     LIEN ON CAPITAL STOCK	18
	C.     PREPAYMENT FEES	19
XIII.	AMENDMENT TO THE CAPITAL PLAN	19

As of July 24, 2008 ii

CAPITAL PLAN OF THE

FEDERAL HOME LOAN BANK OF ATLANTA

I. Definitions

For the purposes of this Plan, all capitalized terms used but not defined elsewhere have the following meanings:

Acquired Member Assets (“AMA”) means assets acquired by the Bank from a Member pursuant to Part 955 of the Regulations.

Acquired Member Asset Stock Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Member must own for as long as the Bank owns any Acquired Member Asset sold by the Member to the Bank.

Acquired Member Asset Stock Retention Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Former Member or Nonmember Stockholder must own for as long as the Bank owns any Acquired Member Asset sold by the Former Member to the Bank. The Acquired Member Asset Stock Retention Requirement for a Former Member or Nonmember Stockholder shall be calculated according to the same formula used to calculate the Acquired Member Asset Stock Requirement for a Member.

Act means the Federal Home Loan Bank Act, as amended from time to time.

Activity-Based Stock Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Member must own for as long as a particular transaction between the Bank and the Member remains outstanding.

Activity-Based Stock Retention Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Former Member or Nonmember Stockholder must own for as long as a particular transaction between the Bank and the Former Member remains outstanding. The Activity-Based Stock Retention Requirement for a Former Member or Nonmember Stockholder shall be calculated according to the same formula used to calculate the Activity-Based Stock Requirement for a Member.

Advance or Advances means the principal balance of all loans from the Bank to a Member or Former Member that are outstanding from time to time and that are (1) provided pursuant to a written agreement, (2) supported by a note or other written evidence of the borrower’s obligation, and (3) fully secured by collateral in accordance with the Act and the Regulations, including, without limitation, all such loans that are outstanding on the Conversion Date.

Advances Stock Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Member must own for as long as Advances made by the Bank to the Member remain outstanding.

Advances Stock Retention Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Former Member or Nonmember Stockholder must own for as long as Advances made by the Bank to the Former Member remain outstanding. The Advances Stock Retention Requirement for a Former Member or Nonmember Stockholder shall be calculated according to the same formula used to calculate the Advances Stock Requirement for a Member.

As of July 24, 2008 1

Bank means the Federal Home Loan Bank of Atlanta.

Board of Directors means the board of directors of the Bank.

Business Day means any day on which the Bank is open to conduct business.

Capital Stock means capital stock that has the characteristics of class B stock as described in the Act and the Regulations.

Consolidation means a merger, a consolidation, a sale of all, or substantially all, of the assets and liabilities of an entity to another entity, or other similar transaction.

Conversion Date means December 17, 2004.

Daily Investment Account means a Member’s, Former Member’s or Nonmember Stockholder’s demand deposit transaction account established at the Bank.

Excess Stock (or “Excess Shares”) means the amount of each subclass of Capital Stock held by a Member, Former Member or Nonmember Stockholder that exceeds the amount of Capital Stock for that subclass that the Member, Former Member or Nonmember Stockholder is required to own in accordance with the provisions of the Plan.

Excess Stock Threshold Amount means the amount, as determined by the Bank from time to time, of Excess Shares of Subclass B2 Capital Stock that generally shall trigger the Repurchase by the Bank of some or all of such Excess Shares of Subclass B2 Capital Stock owned by the Member, Former Member or Nonmember Stockholder.

Exchange means the exchange on the Bank’s books of each share of Bank stock outstanding prior to the exchange on the Conversion Date for one share of Capital Stock, upon which each share of Bank stock shall be retired.

Finance Board means the Federal Housing Finance Board or any successor agency.

Former Member means an institution, other than a Member or Nonmember Stockholder, that owns Capital Stock, and includes without limitation (1) an institution that has withdrawn voluntarily from Membership, (2) an institution whose Membership has been terminated and ceased to exist as a result of Consolidation and the Capital Stock of which is now owned by a Nonmember Stockholder, (3) an institution whose Membership has been terminated as a result of Relocation outside of the Bank’s district, and (4) an institution whose Membership has been terminated involuntarily pursuant to Section X.C. of this Plan.

GAAP means generally accepted accounting principles in the United States.

Indebtedness means all indebtedness of a Member, Former Member or Nonmember Stockholder to the Bank that is outstanding from time to time, including, without limitation, all Advances and all other obligations and liabilities of the Member, Former Member or Nonmember Stockholder to the Bank.

Issue or Issuance means the issuance of Capital Stock to a Member, Former Member or Nonmember Stockholder by the Bank (1) in the Exchange or (2) in a sale or (3) as a dividend.

Member means any institution, other than a Former Member, that has been approved for Membership in the Bank and has purchased and owns the required amount of Capital Stock.

As of July 24, 2008 2

Membership means membership in the Bank.

Membership Stock Requirement means the amount of Subclass B1 Capital Stock (rounded up to the nearest whole share) that a Member must own in order to become and remain a Member.

Membership Stock Retention Requirement means the amount of Subclass B1 Capital Stock (rounded up to the nearest whole share) that a Former Member or Nonmember Stockholder must own until the expiration of the Redemption Period applicable to the Capital Stock. The Membership Stock Retention Requirement for a Former Member or Nonmember Stockholder shall be the amount of Capital Stock that comprised the Former Member’s Membership Stock Requirement on the date on which its Membership was terminated, unless adjusted in accordance with the provisions of Section IV.C.2.c. of this Plan.

Minimum Regulatory Capital Requirement means each and all of the following: (1) the Regulatory Leverage Capital Requirement, (2) the Regulatory Risk-Based Capital Requirement, and (3) the Regulatory Total Capital Requirement.

Minimum Stock Requirement for a Member means the sum of (1) the Member’s Membership Stock Requirement, and (2) the Member’s Activity-Based Stock Requirement.

Minimum Stock Retention Requirement for a Former Member or Nonmember Stockholder means the sum of (1) the Former Member’s or Nonmember Stockholder’s Membership Stock Retention Requirement, and (2) the Former Member’s or Nonmember Stockholder’s Activity-Based Stock Retention Requirement.

Nonmember Stockholder means an institution, other than a Member or a Former Member, that owns Capital Stock, and has acquired a Member or Former Member in connection with a Consolidation.

Notice to Members (or “Notice”) means any written notice from the Bank to Members, Former Members or Nonmember Stockholders regarding any element of the Plan, and also includes any electronic writing related to the Plan, including electronic mail.

Opt-Out Date means November 17, 2004.

Permanent Capital means the sum of (1) the amount of the retained earnings of the Bank, determined in accordance with GAAP, and (2) the amounts paid-in for Capital Stock.

Plan means this capital plan as adopted by the Board of Directors and approved by the Finance Board.

Principal Place of Business means, for an institution, the state in which the institution maintains its home office established as such in conformity with the laws under which the institution is organized, or, if such institution has designated another state as such institution’s principal place of business in accordance with Section 925.18(c) of the Regulations, such other state.

Record Date means December 31 of the prior calendar year.

Redeem or Redemption means the acquisition and retirement by the Bank of Capital Stock and payment at par value to a Member, Former Member or Nonmember Stockholder following the expiration of the Redemption Period.

As of July 24, 2008 3

Redemption Period for Capital Stock means the five-year period following (1) the Bank’s receipt of a Member’s written Redemption notice to the Bank provided in accordance with the provisions of Section IX. of the Plan, (2) the Bank’s receipt of a Member’s written notice to the Bank of the Member’s intention to withdraw from Membership provided in accordance with the provisions of Section X. of the Plan, or the date of acquisition or receipt by the Member of any additional shares of Capital Stock after the Bank’s receipt of such notice, (3) a Member’s termination from Membership as a result of a Consolidation into a nonmember, or the date of acquisition or receipt by the successor to the Member of any additional shares of Capital Stock after such Member’s termination from Membership, (4) a Member’s termination from Membership as a result of Relocation, or the date of acquisition or receipt by such Member of any additional shares of Capital Stock after the termination of Membership, or (5) a Member’s involuntary termination from its Membership, or the date of acquisition or receipt by such Member of any additional shares of Capital Stock after the termination of its Membership.

Regulations mean the regulations of the Finance Board, as amended from time to time.

Regulatory Leverage Capital Requirement means the ratio of Total Capital to total assets that the Bank is required to maintain in accordance with the Regulations.

Regulatory Risk-Based Capital Requirement means the amount of Permanent Capital that the Bank is required to maintain in accordance with the Regulations.

Regulatory Total Capital Requirement means the amount of Total Capital that the Bank is required to maintain in accordance with the Regulations.

Relocation means an institution’s Principal Place of Business is no longer located or designated in a state within the Bank’s district.

Repurchase means the acquisition and retirement by the Bank of Excess Stock and payment at par value to a Member, Former Member or Nonmember Stockholder without regard to the expiration of any Redemption Period.

Targeted Debt/Equity Investment means a debt or equity investment that meets the criteria set forth in Section 940.3(e) of the Regulations.

Targeted Debt/Equity Investment Stock Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Member must own for as long as the Bank owns any Targeted Debt/Equity Investment sold by the Member to the Bank.

Targeted Debt/Equity Investment Stock Retention Requirement means the amount of Subclass B2 Capital Stock (rounded up to the nearest whole share) that a Former Member or Nonmember Stockholder must own for as long as the Bank owns any Targeted Debt/Equity Investment sold by the Former Member to the Bank.

Total Capital means the sum of (1) Permanent Capital; (2) the amount of any general allowance for losses reserved on the books of the Bank; and (3) the value of other instruments identified in the Plan that the Finance Board has determined by regulation to be available to absorb losses incurred by the Bank.

As of July 24, 2008 4

II. Capital Stock

A. Characteristics of Capital Stock

The Board of Directors hereby authorizes the Bank to Issue, Redeem, and Repurchase Capital Stock, and take other actions in accordance with the provisions of the Plan, at the Exchange and thereafter. Capital Stock shall have a par value of $100 per share and shall be Issued, Redeemed, and Repurchased only at its stated par value.

The Bank may Issue Capital Stock only in book-entry form, only in whole shares, and only in the following subclasses: (i) Subclass B1, which a Member must own in order to become and remain a Member and (ii) Subclass B2, which a Member must own for as long as certain transactions between the Bank and the Member remain outstanding. A Member may not use shares of (i) Subclass B1 Capital Stock to meet any Activity-Based Stock Requirement or (ii) Subclass B2 Capital Stock to meet any Membership Stock Requirement.

B. Interest in Retained Earnings

Each Issued and outstanding share of Capital Stock shall represent an undivided ownership interest (proportionate to the number of shares of Capital Stock Issued and outstanding from time to time) in the retained earnings, paid-in surplus, undivided profits, and equity reserves of the Bank. No Member, Former Member or Nonmember Stockholder shall have a right to receive a distribution of its undivided interest in the retained earnings, paid-in surplus, undivided profits, or equity reserves of the Bank at any time, including but not limited to, upon withdrawal or termination from Membership, except through a dividend or capital distribution approved by the Board of Directors or as a result of the liquidation of the Bank.

III. Issuance of Capital Stock

A. Subject to Plan

The terms, rights, and preferences applicable to any Capital Stock Issued by the Bank shall be identical to those set forth in this Plan. The Bank may not Issue Capital Stock other than in accordance with the Regulations and this Plan.

B. New Members

Within 60 calendar days following Membership approval by the Bank, an approved applicant must purchase and hold sufficient shares of Capital Stock to satisfy its Minimum Stock Requirement in effect on the date of the purchase. The Membership Stock Requirement for a new Member shall be calculated using the applicant’s total assets as of the most recent quarter-end for which data is available.

C. Former Members and Nonmember Stockholders

Any Former Member or Nonmember Stockholder must purchase and hold sufficient shares of Capital Stock to satisfy its Minimum Stock Retention Requirement.

As of July 24, 2008 5

IV. Minimum Stock Requirement

A. Calculation of Minimum Stock Requirement

From time to time, the Board of Directors shall set the Minimum Stock Requirement for Members so that the aggregate of (i) the Minimum Stock Requirements of all Members and (ii) the Minimum Stock Retention Requirements of all Former Members and Nonmember Stockholders is sufficient for the Bank to meet its Minimum Regulatory Capital Requirement. The Board of Directors shall have a continuing obligation to review and adjust the Minimum Stock Requirement to ensure that the Bank remains in compliance with its Minimum Regulatory Capital Requirement. Each Member shall comply promptly with any such requirement. As of the Conversion Date, and for as long as its Membership continues or a relevant transaction is outstanding, each Member shall hold Capital Stock in an amount equal to the sum of:

1. The Member’s Membership Stock Requirement, which shall be shares of Subclass B1 Capital Stock equal to the lesser of:

a. The percentage (initially 0.20%) of the Member’s total assets as of the Record Date specified by the Board of Directors in accordance with Section IV.B. of this Plan; or

b. The dollar cap (initially $25 million) on the Subclass B1 Membership Stock Requirement applicable to all Members specified by the Board of Directors in accordance with Section IV.B. of this Plan; plus

2. The Member’s Activity-Based Stock Requirement, which shall be shares of Subclass B2 Capital Stock equal to the sum of:

a. The Member’s Advances Stock Requirement, which shall be the percentage (initially 4.50%) of the Member’s outstanding Advances specified by the Board of Directors in accordance with Section IV.B. of this Plan; plus

b. The Member’s Acquired Member Asset Stock Requirement, which shall be the percentage (initially 0.00%) of any Acquired Member Asset sold by the Member to the Bank specified by the Board of Directors in accordance with Section IV.B. of this Plan; plus

c. The Member’s Targeted Debt/Equity Investment Stock Requirement, which shall be the percentage (initially 8.00%) of any Targeted Debt/Equity Investment sold by the Member and owned by the Bank specified by the Board of Directors in accordance with Section IV.B. of this Plan.

Provided, however, that (i) the Member’s Acquired Member Asset Stock Requirement shall not include any Acquired Member Asset sold by the Member and owned by the Bank pursuant to a master commitment executed prior to the Conversion Date; and (ii) the Member’s Targeted Debt/Equity Investment Stock Requirement shall not include any Targeted Debt/Equity Investment sold by the Member and owned by the Bank prior to the Conversion Date.

The Bank provided at least 75 days’ advance notice of the initial factors used to calculate, and the dollar cap applicable to, the Minimum Stock Requirement via a Notice to Members. Such Notice was also provided to any institution with a pending application for Membership on the date of the Notice and to any institution that requested or submitted an application for Membership subsequent to the date of the Notice, but prior to the Conversion Date.

As of July 24, 2008 6

B. Authorized Ranges

1. Authorized Ranges for Membership Stock Requirement

From time to time, the Board of Directors may adjust the factor used to calculate the Membership Stock Requirement to an amount of Subclass B1 Capital Stock equal to but not less than 0.05% nor greater than 0.40% of the Member’s total assets.

From time to time, the Board of Directors may adjust the dollar cap applicable to the Membership Stock Requirement to an amount of Subclass B1 Capital Stock equal to but not less than $15 million nor greater than $35 million.

2. Authorized Ranges for Activity-Based Stock Requirement

From time to time, the Board of Directors may adjust the Activity-Based Stock Requirement to an amount equal to the sum of:

a. The Advances Stock Requirement, which shall equal an amount of Subclass B2 Capital Stock not less than 3.50% nor greater than 6.00% of the Member’s outstanding Advances; plus

b. The Acquired Member Asset Stock Requirement, which shall equal an amount of Subclass B2 Capital Stock not less than 0.00% nor greater than 6.00% of any Acquired Member Asset sold by the Member and owned by the Bank; plus

c. The Targeted Debt/Equity Investment Stock Requirement, which shall equal an amount of Subclass B2 Capital Stock not less than 6.00% nor greater than 9.00% of any Targeted Debt/Equity Investment sold by the Member and owned by the Bank.

3. No Adjustment Outside Authorized Ranges Without Plan Amendment

The Bank may not adjust the factors or the dollar cap used to calculate the Membership Stock Requirement or the Activity-Based Stock Requirement outside the ranges authorized in this Section IV.B., except upon an amendment to the Plan approved by the Board of Directors and the Finance Board.

C. Adjustments to Minimum Stock Requirements

1. Notice of Change in Minimum Stock Investment Requirement

The Bank shall provide a Notice to Members at least 10 business days prior to the effective date of any change in the Membership Stock Requirement or Activity-Based Stock Requirement approved by the Board of Directors within the ranges authorized under Section IV.B. of this Plan.

As of July 24, 2008 7

2. Adjustment to Membership Stock Requirement

a. Annual Recalculation

No later than March 31 of each year, the Bank shall recalculate the Membership Stock Requirement of each Member holding Membership on the Record Date using financial data as of the Record Date. The Bank shall provide a Notice to Members at least 10 business days prior to the date of the transaction to adjust the Member’s Subclass B1 Capital Stock balance to the new Membership Stock Requirement. In its discretion, the Bank may recalculate any Member’s Membership Stock Requirement more frequently, using financial data from the fiscal year-end or the fiscal quarter-end immediately preceding the date of such recalculation, whichever period data is most-recently available.

b. Recalculation Due to Adjustment Within Authorized Ranges

The Bank shall recalculate each Member’s Membership Stock Requirement on the effective date of any adjustment to the factors and/or dollar cap used to calculate the Membership Stock Requirement within the authorized ranges described in Section IV.B of this Plan, using either the most recently available quarter-end financial data or financial data as of the prior calendar year-end, as determined by the Bank and specified in the Notice to Members.

c. Recalculation Due to Termination of Membership as a Result of Consolidation, Relocation or Involuntary Action

The Bank, in its sole discretion, may recalculate the Membership Stock Retention Requirement for a Nonmember Stockholder or Former Member after the termination of the Former Member’s Membership as a result of a Consolidation, Relocation or involuntary action as specified in Section X.C. of this Plan. In the case of a termination of a Former Member’s Membership as a result of the appointment of a receiver, liquidating agent or similar party for such Former Member, and after the Bank, in its sole discretion, has determined that the Former Member has satisfied all outstanding obligations to the Bank, the Membership Stock Retention Requirement for such Former Member shall be zero.

d. Adjustment Transaction

If any adjustment results in an increase to the Member’s Membership Stock Requirement, on the transaction date specified in the Notice to Members the Bank shall (i) Issue sufficient additional shares of Subclass B1 Capital Stock so that the Member meets its Membership Stock Requirement; and (ii) debit the Member’s Daily Investment Account in the amount of the par value of the additional shares of Subclass B1 Capital Stock Issued. In the event that the Member’s Daily Investment Account reflects insufficient funds, the Bank may take any of the actions authorized pursuant to the account terms and conditions then in effect.

If any adjustment results in a decrease to a Member’s Membership Stock Requirement or a Former Member’s or Nonmember Stockholder’s Membership Stock Retention Requirement, on the transaction date specified in the Notice to Members, the Bank, in its discretion, may Repurchase any Excess Shares of Subclass B1 Capital Stock then held by the Member, Former Member or Nonmember Stockholder. The Notice to Members shall specify whether the Bank will Repurchase any Excess Shares of Subclass B1 Capital

As of July 24, 2008 8

Stock. If the Bank will Repurchase only a portion of the Excess Shares, the Notice to Members shall specify either the amount of Excess Shares that the Bank will Repurchase or the methodology used to determine the amount of Excess Shares that the Bank will Repurchase.

3. Adjustment to Activity-Based Stock Requirement

a. Recalculation of Activity-Based Requirement

The Bank shall recalculate each Member’s Activity-Based Stock Requirement or each Former Member’s or Nonmember Stockholder’s Activity-Based Stock Retention Requirement at the time of any change in the amount of transactions outstanding between the Bank and the Member, Former Member or Nonmember Stockholder and on the effective date of any adjustment to the factors used in calculating the Activity-Based Stock Requirement within the authorized ranges described in Section IV.B. Any adjustment to the Activity-Based Stock Requirement for Members also shall apply to the Activity-Based Stock Retention Requirement for Former Members and Nonmember Stockholders. This Plan shall constitute Notice to Members of any change in the Member’s, Former Member’s or Nonmember Stockholder’s Activity-Based Stock Requirement resulting from a change in the amount of transactions outstanding between the Bank and the Member, Former Member or Nonmember Stockholder.

b. Adjustment Transaction

If the adjustment results in an increase to a Member’s Activity-Based Stock Requirement, the Bank shall (i) Issue sufficient additional shares of Subclass B2 Capital Stock so that the Member meets its Activity-Based Stock Requirement; and (ii) debit the Member’s Daily Investment Account in the amount of the par value of the additional shares of Subclass B2 Capital Stock Issued. In the event that the Member’s Daily Investment Account reflects insufficient funds, the Bank may take any of the actions authorized pursuant to the account terms and conditions then in effect.

If the adjustment results in a decrease to a Member’s Activity-Based Stock Requirement or to a Former Member’s or Nonmember Stockholder’s Activity-Based Stock Retention Requirement, and the decrease results in ownership by the Member, Former Member or Nonmember Stockholder of an amount of Subclass B2 Capital Stock that exceeds the Excess Stock Threshold Amount, or in the case of a Former Member or Nonmember Stockholder with no outstanding Indebtedness, is less than the Excess Stock Threshold Amount, the Bank generally shall promptly Repurchase some or all of the Excess Shares of Subclass B2 Capital Stock held by the Member, Former Member or Nonmember Stockholder. This Plan shall constitute Notice of the Bank’s general practice to promptly Repurchase some or all of the Excess Shares of Subclass B2 Capital Stock held by the Member, Former Member or Nonmember Stockholder when the par value of Excess Shares of Subclass B2 Capital Stock held by such Member exceeds the Excess Stock Threshold Amount, or in the case of a Former Member or Nonmember Stockholder with no outstanding Indebtedness, is less than the Excess Stock Threshold Amount.

In the event that the Bank suspends such Repurchases, the Bank shall provide a Notice to Members in accordance with Section XI.E. of this Plan.

As of July 24, 2008 9

c. Notice Regarding Excess Stock Threshold Amount

The Excess Stock Threshold Amount is $100,000.

The Bank shall provide a Notice to Members at least five business days prior to the effective date of any change in the Excess Stock Threshold Amount. Such Notice to Members shall include the par value of Excess Shares of Subclass B2 Capital Stock, if any, that the Bank generally shall permit the Member, Former Member or Nonmember Stockholder to retain when the amount of Subclass B2 Capital Stock held by the Member, Former Member or Nonmember Stockholder exceeds the Excess Stock Threshold Amount.

4. Application of Change Within Authorized Ranges

The Bank shall apply any adjustment caused by a change within the authorized ranges to the factors and/or dollar cap used in calculating the Membership Stock Requirement, the Activity-Based Stock Requirement, and the Activity-Based Stock Retention Requirement either retroactively or prospectively, as outlined below:

a. Any adjustment caused by a change to the factor and/or dollar cap used in calculating the Membership Stock Requirement shall be applied retroactively by applying the new factor and/or dollar cap to the Member’s total assets as of the date specified in accordance with Section IV.C.2. of this Plan.

b. Any adjustment caused by a change to the factor used in calculating the Advances Stock Requirement shall be applied retroactively by applying the new factor to the outstanding balance of advances on the effective date of the change as specified in the Notice to Members. Any retroactive application of an adjustment to the Advances Stock Requirement also shall apply to the Advances Stock Retention Requirement.

c. If the adjustment results in an increase to the factor used to calculate the Acquired Member Asset Stock Requirement, the Bank shall apply the new requirement on a prospective basis only to any Acquired Member Asset sold by the Member and owned by the Bank pursuant to a master commitment executed subsequent to the effective date of the adjustment.

d. If the adjustment results in a decrease to the factor used to calculate the Acquired Member Asset Stock Requirement, the Bank, in its sole discretion, may apply the new requirement (i) on a prospective basis only to any Acquired Member Asset sold by the Member and owned by the Bank pursuant to a master commitment executed subsequent to the effective date of the adjustment, or (ii) on a retroactive and a prospective basis to any Acquired Member Asset sold by the Member or Former Member and owned by the Bank on the effective date of the change, as well as to Acquired Member Asset sold by the Member and owned by the Bank subsequent to the effective date of the adjustment. Any retroactive application of an adjustment to the Acquired Member Asset Stock Requirement shall also apply to the Acquired Member Asset Stock Retention Requirement.

e. If the adjustment results in an increase to the factor used to calculate the Targeted Debt/Equity Investment Stock Requirement, the Bank shall apply the new requirement on a prospective basis only to any Targeted Debt/Equity Investment sold by the Member and owned by the Bank subsequent to the effective date of the adjustment.

As of July 24, 2008 10

V. Ownership and Transfer of Capital Stock

Except for any Former Member or Nonmember Stockholder subject to a Minimum Stock Retention Requirement, Capital Stock may only be Issued to or held by Members. Capital Stock shall be tradable only between the Bank, on the one hand, and Members, Former Members and Nonmember Stockholders, on the other, and any transfer of Capital Stock shall be made at par value. The Bank shall act as the transfer agent for any such transfer, and it shall record promptly the transaction on the books of the Bank. Transfers among any Member, Former Member and Nonmember Stockholder are prohibited, except as approved by the Bank in connection with a Consolidation.

VI. Voting Rights

The Members shall be entitled to vote in connection with the election of directors in accordance with the provisions of the Act and the Regulations. A Member may cast in any such election a number of votes equal to the number of shares of Capital Stock that it was required to hold pursuant to Section IV. of the Plan as of the Record Date; provided, however, that the number of votes that any Member may cast in any such election shall not exceed the average of the number of shares of Capital Stock that all Members located in that Member’s state were required to hold pursuant to Section IV. of the Plan as of the Record Date. For purposes of this Section VI., “Member” includes any Member that was a Member as of the Record Date, any Former Member that was a Member as of the Record Date and any Nonmember Stockholder whose predecessor-in-interest was a Member as of the Record Date.

VII. Dividends

A. Declaration of Dividends

From time to time, the Board of Directors, in its sole discretion (subject to the regulatory oversight of the Finance Board), may declare and the Bank may pay dividends on Capital Stock. Any such dividend may be paid in the form of cash or Capital Stock, shall be paid to the Members, Former Members and Nonmember Stockholders holding Capital Stock during the time period for which the dividend is declared, and shall be computed on the amount of time during the relevant time period that the Capital Stock was outstanding. The amount of any dividend paid in the form of Capital Stock shall be rounded down to the nearest whole share, and the remainder, if any, shall be paid in the form of cash.

The Bank may not pay any dividend if it is not in compliance with its Minimum Regulatory Capital Requirement or if, after paying such dividend, it would fail to comply with its Minimum Regulatory Capital Requirement.

B. No Preference

All Capital Stock shall share in any dividends without preference. Any dividends shall be payable only from the net earnings or retained earnings of the Bank, determined in accordance with generally accepted accounting principles.

C. Stock Held by Withdrawing or Former Member

A Member, Former Member or Nonmember Stockholder shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank.

As of July 24, 2008 11

VIII. Liquidation, Merger or Consolidation

A. Liquidation

In the event of the liquidation of the Bank, after making provision for the payment of the Bank’s liabilities, the Bank shall pay to each Member, Former Member and Nonmember Stockholder the par value of its Capital Stock; provided, however, that if sufficient funds are not available to make payment in full to all Members, Former Members and Nonmember Stockholders, payment shall occur on a pro rata basis. In addition, any undistributed retained earnings, paid-in surplus, undivided profits, equity reserves, and other assets not otherwise identified shall be allocated among the Members, Former Members and Nonmember Stockholders, in proportion to the number of shares of Capital Stock owned by each.

B. Merger or Consolidation

In the event that the Bank merges with or consolidates into another Federal Home Loan Bank, the Members, Former Members and Nonmember Stockholders shall be entitled to the rights and benefits set forth in the agreement of merger or consolidation approved by the Board of Directors and the Finance Board.

C. No Limitation on Finance Board’s Authority

Notwithstanding the provisions of Section VIII.A. and B., no provision of this Plan shall limit the authority of the Finance Board to prescribe rules, regulations or orders governing the liquidation or reorganization of the Bank.

IX. Redemption and Repurchase of Capital Stock (Continuing Membership)

A. Redemption Upon Application by the Member

1. Conditions Applicable to Redemption

Subject to the limitations in Section XI. of this Plan, a Member may obtain Redemption of its Capital Stock by providing a written Redemption notice to the Bank, in a form acceptable to the Bank. The Redemption notice must identify the particular subclass and number of shares to be Redeemed, and the identified shares may not be the subject of an outstanding Redemption notice. If the Redemption notice fails to identify either the particular subclass or the number of shares to be Redeemed, or if the shares identified in the Redemption notice are subject to a pending Redemption notice, the Redemption notice shall be deemed invalid.

2. Cancellation of Redemption Notice

a. Cancellation by Member

A Member may cancel its Redemption notice at any time prior to the expiration of the Redemption Period by providing a written cancellation notice to the Bank. Any Member that cancels its Redemption notice shall pay a fee to the Bank equal to the greater of (i) $500, or (ii) two basis points (.02%) multiplied by the par value of the number of shares of Capital Stock subject to the Redemption notice.

As of July 24, 2008 12

b. Automatic Cancellation of Redemption Notice

The Bank shall not Redeem a Member’s Capital Stock if, following the Redemption, the Member would fail to meet its Minimum Stock Requirement. If, upon expiration of the Redemption Period, the Bank is prevented from Redeeming a Member’s Capital Stock for such reason, the Bank shall attempt the Redemption on each of the five business days following the expiration of the Redemption Period. If at the end of such time the Bank is prevented from Redeeming the Member’s Capital Stock because, following the Redemption, the Member would fail to meet its Minimum Stock Requirement, the Bank shall automatically cancel the Member’s Redemption notice. Such automatic cancellation shall have the same effect as a notice of cancellation provided by the Member to the Bank.

c. Waiver of Cancellation Fee

The Board of Directors may waive a cancellation fee only for bona fide business purposes and only if consistent with the provisions of Section 7(j) of the Act.

3. Redemption

Except as set forth in Sections IX.A.2 and XI., and so long as the Member has complied with the conditions set forth in Section IX.A.1., the Bank shall Redeem the Member’s Capital Stock upon expiration of the Redemption Period.

B. Repurchase Upon Initiation by the Bank

The Bank may Repurchase Excess Shares of Subclass B1 Capital Stock and Subclass B2 Capital Stock in accordance with the provisions of Section IV.C. of this Plan. If the Bank intends to Repurchase Excess Stock from a Member, a Former Member or a Nonmember Stockholder that has submitted a Redemption notice pursuant to Section IX.A.1., before Repurchasing any other Excess Stock of the Member, Former Member or Nonmember Stockholder, the Bank shall first Repurchase from that Member, Former Member or Nonmember Stockholder the shares of Excess Stock that are subject to a Redemption notice.

C. Continued Benefits of Ownership Prior to Redemption or Repurchase

A Member, Former Member or Nonmember Stockholder shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank. A Member also shall be entitled to exercise the other benefits associated with ownership of such Capital Stock prior to the date of Redemption or Repurchase.

X. Redemption and Repurchase of Capital Stock (Withdrawal or Termination of Membership)

A. Voluntary Withdrawal

1. Notice of Intention to Withdraw from Membership

A Member may voluntarily withdraw and terminate its Membership by providing to the Bank written notice of its intention to withdraw from Membership. The Redemption Period for all Capital Stock then held by that Member that is not subject to a pending Redemption notice shall begin on the date the notice is received by the Bank.

As of July 24, 2008 13

The Redemption Period for any Capital Stock acquired or received by the Member subsequent to the Bank’s receipt of the Member’s notice of intention to withdraw shall begin on the date of acquisition or receipt of the Capital Stock by the Member; provided, however, that any Capital Stock that is not required to meet the Member’s Minimum Stock Requirement shall be Excess Stock and shall be subject to Repurchase by the Bank.

2. Termination of Membership

The Membership of a Member that has submitted a notice of intention to withdraw shall terminate on the date on which the Redemption Period ends with respect to the Capital Stock that comprised the Member’s Membership Stock Requirement on the date on which the Bank received the Member’s notice of intention to withdraw, unless the Bank has received written notice from the Member prior to the date on which its Membership terminates that the Member is canceling its notice of intention to withdraw. Until the date on which its Membership terminates, a Member shall continue to maintain Capital Stock sufficient to meet its Minimum Stock Requirement in accordance with the provisions of the Plan.

3. Continued Benefits of Membership Prior to Termination

A Member that has submitted a notice of intention to withdraw shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank. The Member also shall be entitled to exercise the other benefits associated with Membership until the date on which its Membership terminates, but the Bank in its sole discretion (subject to the regulatory oversight of the Finance Board) may limit a Member’s ability to enter into transactions with the Bank, including but not limited to Advances, that would mature or otherwise terminate subsequent to the date on which its Membership terminates.

4. Cancellation of Notice of Withdrawal

a. Conditions Applicable to Cancellation

A Member may cancel its notice of intention to withdraw at any time prior to the date on which its Membership terminates by providing a written cancellation notice to the Bank. Any Member that cancels its notice of intention to withdraw shall pay a fee to the Bank equal to the greater of (i) $500, or (ii) two basis points (.02%) multiplied by the par value of the number of shares of Capital Stock held by the Member on the date the Bank receives the notice of cancellation.

b. Waiver of Cancellation Fee

The Board of Directors may waive a cancellation fee only for bona fide business purposes and only if consistent with the provisions of Section 7(j) of the Act.

5. Circumstances Requiring Finance Board Certification for Withdrawal

No Member may withdraw from Membership unless, on the date that the Membership is to terminate, there is in effect a certification from the Finance Board that the withdrawal will not cause the Federal Home Loan Bank System to fail to satisfy its obligations under 12 U.S.C. 1441b(f)(2)(C) to contribute toward the interest payments owed on obligations issued by the Resolution Funding Corporation.

As of July 24, 2008 14

B. Termination of Membership as a Result of a Consolidation or Relocation

1. Consolidation of Members

Upon Consolidation of two or more Members, the Membership of each disappearing Member shall terminate upon the cancellation of its charter. At such time, the Capital Stock of the disappearing Member shall be transferred on the Bank’s books to the account of the surviving Member. The Redemption Period for the Capital Stock held by the disappearing Member on the date of its termination from Membership and that is not subject to a pending Redemption notice shall not be deemed to begin solely by virtue of the termination from Membership, but shall begin only upon (i) the Bank’s receipt of the surviving Member’s written notice to the Bank requesting Redemption of Capital Stock, (ii) the Bank’s receipt of the surviving Member’s written notice to the Bank of its intention to withdraw from Membership, (iii) the surviving Member’s termination from Membership as a result of a Consolidation into a nonmember, (iv) the surviving Member’s termination from Membership as a result of a Relocation, or (v) the surviving Member’s involuntary termination from Membership.

2. Consolidation into Nonmember

Upon Consolidation of a Member into an institution that is not a Member pursuant to a transaction in which the surviving institution operates under the charter of the institution that is not a Member, the Membership of the Member shall terminate upon the cancellation of the Member’s charter. The Redemption Period for the Capital Stock held by the disappearing Member on the date of its termination from Membership and that is not subject to a pending Redemption notice shall be deemed to begin, on the date of its termination from Membership. At such time, the Capital Stock of the disappearing Member shall be transferred on the Bank’s books to the account of the surviving institution, a Nonmember Stockholder.

Capital Stock held by a Nonmember Stockholder shall not be deemed automatically to be Excess Stock solely by virtue of the disappearing Member’s termination of Membership; provided, however, that any Capital Stock that is not required to meet the Minimum Stock Retention Requirement for the Nonmember Stockholder, as adjusted pursuant to Section IV.C.2.c. or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

The Redemption Period for any Capital Stock acquired or received by a Nonmember Stockholder subsequent to the termination of the disappearing Member’s Membership shall begin on the date of acquisition or receipt of the Capital Stock by the Nonmember Stockholder; provided, however, that any Capital Stock that is not required to meet the Minimum Stock Retention Requirement for the Nonmember Stockholder, as adjusted pursuant to Section IV.C.2.c or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

The Nonmember Stockholder shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank, but the Nonmember Stockholder shall have no right to exercise any of the other benefits of Membership after the termination of the disappearing Member’s Membership.

As of July 24, 2008 15

3. Relocation of Member

Upon Relocation by a Member, the Member shall promptly notify the Bank in writing of such Relocation. Upon the later of the receipt of such notice or the effective date of the Relocation, the Membership of the Member shall terminate. The Redemption Period for the Capital Stock held by the Member on the date of its termination from Membership and that is not subject to a pending Redemption notice shall be deemed to begin on the date of its termination from Membership.

Capital Stock held by the Member on the date of its termination from Membership shall not be deemed automatically to be Excess Stock solely by virtue of the Member’s termination of Membership; provided, however, that any Capital Stock that is not required to meet the Minimum Stock Retention Requirement for the Former Member, as adjusted pursuant to Section IV.C.2.c. or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

The Redemption Period for any Capital Stock acquired or received by the Former Member subsequent to its termination from Membership shall begin on the date of acquisition or receipt of the Capital Stock by the Former Member; provided, however, that any Capital Stock that is not required to meet the Minimum Stock Retention Requirement of the Former Member, as adjusted pursuant to Section IV.C.2.c. or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

The Former Member shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank, but the Former Member shall have no right to exercise any of the other benefits of Membership after the termination of its Membership.

C. Other Involuntary Termination of Membership

The Membership of any Member shall terminate automatically upon the appointment of a receiver, liquidating agent or similar party for such Member.

The Board of Directors may immediately terminate the Membership of any Member that:

1. Fails to comply with any requirement of the Act, the Regulations, or the Capital Plan;

2. Becomes insolvent or otherwise subject to the appointment of a conservator, receiver, or other legal custodian under federal or state law; or

3. Would jeopardize the safety or soundness of the Bank if it were to remain a

Member.

Upon termination of the Membership of any Member by action of the Board of Directors or as a result of the appointment of a receiver, liquidating agent or similar party for such Member as provided above, the Redemption Period for all Capital Stock then held by such Former Member that is not subject to a pending Redemption notice shall begin, on the effective date of the Board of Directors’ action or the appointment of such receiver, liquidating agent or similar party.

Capital Stock held by a Former Member whose Membership has been terminated shall not be deemed automatically to be Excess Stock solely by virtue of the termination of Membership; provided, however, that any Capital Stock that is not required to meet the Former Member’s Minimum Stock Retention Requirement, as adjusted pursuant to Section IV.C.2.c. or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

As of July 24, 2008 16

The Redemption Period for any Capital Stock acquired or received by the Former Member subsequent to the termination of Membership shall begin on the date of acquisition or receipt of the Capital Stock by the Former Member; provided, however, that any Capital Stock that is not required to meet the Former Member’s Minimum Stock Retention Requirement, as adjusted pursuant to Section IV.C.2.c. or Section IV.C.3. of this Plan, shall be Excess Stock and shall be subject to Repurchase by the Bank.

The Former Member shall be entitled to receive any dividends attributable to its Capital Stock (subject to the Bank’s lien thereon) through the date of Redemption or Repurchase by the Bank, but the Former Member shall have no right to exercise any of the other benefits of Membership after the termination of Membership.

D. Redemption

Except as set forth in Section XI., and unless the Former Member or Nonmember Stockholder must continue to comply with an Activity-Based Stock Retention Requirement, the Bank shall Redeem the Former Member’s or Nonmember Stockholder’s Capital Stock upon expiration of the Redemption Period.

XI. Limitations on Redemption and Repurchase of Capital Stock

A. Limitations Due to Charges Against Capital Stock

Notwithstanding any other provision of this Plan, if the Finance Board or the Board of Directors determines that the Bank has incurred or is likely to incur losses that result in, or are likely to result in, charges against Capital Stock that create an other than temporary decline in the Bank’s Total Capital such that the value of Total Capital falls below the Bank’s aggregate amount of Capital Stock, the Bank shall not Redeem or Repurchase any Capital Stock without the prior written approval of the Finance Board for however long the Bank continues to incur such charges or until the Finance Board determines that such charges are not expected to continue.

B. Limitations Due to Failure to Satisfy Minimum Requirements

The Bank shall not Redeem or Repurchase any Capital Stock if, following the Redemption or Repurchase, the Bank would fail to satisfy its Minimum Regulatory Capital Requirement, the Member would fail to maintain its Minimum Stock Requirement, or the Former Member or Nonmember Stockholder would fail to maintain its Minimum Stock Retention Requirement. Further, the Bank shall not Redeem or Repurchase any Capital Stock if prohibited from doing so by any Regulation or Finance Board order.

C. Other Restrictions on Redemption

In the event that the Board of Directors, or a committee of the Board of Directors, determines that continued Redemption is not consistent with the Regulations because (i) following such Redemption, the Bank would fail to meet or would be likely to fail to meet its Minimum Regulatory Capital Requirement, or (ii) Redemption would otherwise prevent the Bank from operating in a safe and sound manner, including, without limitation, a reasonable belief that the Redemption would prevent the Bank from maintaining sufficient Permanent Capital or Total Capital against a potential risk that may not be reflected adequately in the Bank’s Minimum Regulatory Capital Requirement, then the Board of Directors, or a committee of the Board of

As of July 24, 2008 17

Directors, in its sole discretion (subject to the regulatory oversight of the Finance Board), may temporarily suspend Redemptions. The Bank shall not Repurchase any Capital Stock without prior written approval of the Finance Board during the period that Redemptions are suspended under this provision.

The Bank shall notify the Finance Board in writing within two Business Days following the determination by the Board of Directors, or a committee of the Board of Directors, to suspend Redemption of Capital Stock, informing the Finance Board of the reasons for the suspension and of the Bank’s strategies and time frames for addressing the conditions that led to the suspension.

D. Other Restrictions on Repurchase

On any Business Day that the Repurchase of some or all Excess Shares of Subclass B2 Capital Stock would cause the Bank to fail to satisfy its Minimum Regulatory Capital Requirement, the Bank shall suspend Repurchases until the Bank can honor such Repurchases in full, or the Board of Directors establishes pro rata Repurchase procedures.

E. Notice of Suspension of Repurchases or Redemptions

The Bank shall provide a Notice to Members regarding the suspension of Redemptions or Repurchases on or before the effective date of the suspension. The Bank shall provide a Notice to Members at least one business day prior to resuming Repurchases or Redemptions.

F. No Priority for Notices of Redemption in the Event of Liquidation

In the event that the Finance Board determines to liquidate the Bank, from and after the date of any such determination, all of the Capital Stock held by the Members, Former Members and Nonmember Stockholders whether or not subject to a notice of Redemption or Repurchase, shall thereafter be treated exactly the same, and no further Redemptions or Repurchases shall occur except in connection with the liquidation of the Bank in accordance with the provisions of the Act, the Regulations and this Plan.

XII. Disposition of Claims

A. In General

If a Member withdraws from Membership or its Membership is otherwise terminated, the Bank, in its sole discretion (subject to the regulatory oversight of the Finance Board), shall determine an orderly manner for liquidating all Indebtedness owed by the Former Member or Nonmember Stockholder to the Bank and for settling all other claims against the Former Member or Nonmember Stockholder. After the obligations and claims have been extinguished or settled, the Bank shall return to the Former Member or Nonmember Stockholder the collateral pledged by the Former Member or Nonmember Stockholder to the Bank to secure its obligations to the Bank.

B. Lien on Capital Stock

The Bank shall have a lien on all of the Capital Stock owned by a Member, Former Member or Nonmember Stockholder, and all dividends and other proceeds of such Capital Stock, to secure the performance by the Member, Former Member or Nonmember Stockholder of its obligations pursuant to the Capital Plan and to secure its performance with respect to any Indebtedness to the Bank or any transaction with the Bank. The Bank shall not Redeem or Repurchase any

As of July 24, 2008 18

Capital Stock that is required to meet the Member’s Activity-Based Stock Requirement or the Former Member’s or Nonmember Stockholder’s Activity-Based Stock Retention Requirement until after the relevant Indebtedness or transactions have been extinguished or settled. The Bank shall have the right to collect any dividends and other proceeds of Capital Stock otherwise payable to a Member, Former Member or Nonmember Stockholder in default to satisfy any monetary obligations of the Member, Former Member or Nonmember Stockholder to the Bank or, in the sole discretion of the Bank (subject to the regulatory oversight of the Finance Board), to pay any dividends to the Member, Former Member or Nonmember Stockholder in Capital Stock.

C. Prepayment Fees

Any liquidation of Indebtedness that results in payment of the Indebtedness before its stated maturity shall be deemed a prepayment of the Indebtedness, and shall be subject to any fees applicable to the prepayment.

XIII. Amendment to the Capital Plan

Any amendment to the Capital Plan must be approved by the Board of Directors and by the Finance Board. The Bank shall provide a Notice to Members at least five business days prior to the effective date of any amendment.

As of July 24, 2008 19

EX-10.1

Exhibit 10.1

THE FEDERAL HOME LOAN BANK

OF ATLANTA

BENEFIT EQUALIZATION PLAN

(2009 REVISION)

Effective as of

January 1, 2009

TABLE OF CONTENTS

Introduction		1
Article 1.	Definitions	1
Article II.	Membership	3
Article III.	Amount and Payment of Pension Benefits	4
Article IV.	Amount and Payment of Savings Plan Benefits	7
Article V.	Source of Payment	11
Article VI.	Designation of Beneficiaries	11
Article VII.	Administration of the Plan	12
Article VIII.	Amendment and Termination	13
Article IX.	General Provisions	13

FEDERAL HOME LOAN BANK OF ATLANTA

BENEFIT EQUALIZATION PLAN

(2008 REVISION)

Effective January 1, 2009, THE FEDERAL HOME LOAN BANK OF ATLANTA (the “Bank”) hereby amends and completely restates its Benefit Equalization Plan (the “Plan”) as follows, primarily in order to add provisions necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended. As permitted under guidance issued under Code Section 409A, the Plan does not contain provisions retroactive to the effective date of Section 409A (January 1, 2005), but the Plan has complied with Section 409A and guidance thereunder since the effective date of such legislation.

INTRODUCTION

The purpose of this Plan is to provide benefits to certain employees of the Bank which would have been payable under the Pentegra Defined Benefit Plan for Financial Institutions (the “Retirement Fund”) and benefits equivalent to the matching contributions and 401(k) contributions which would have been available under the Federal Home Loan Bank of Atlanta 401(k) Savings Plan (“Savings Plan”), but for the limitations placed on benefits and matching contributions for such employees by Sections 401(a)(17), 401(k)(3)(A)(ii), 401(m), 402(g), and 415 of the Internal Revenue Code of 1986, as amended from time to time, or any successor body of law thereto. In addition, under the Plan the Board may grant additional benefits to Participants from time to time in order to attract and retain key employees of the Bank.

This Plan is intended to constitute a nonqualified unfunded deferred compensation arrangement for a select group of management or highly compensated employees. All benefits payable under this Plan shall be paid solely out of the general assets of the Bank. No benefits under this Plan shall be payable by the Retirement Fund or from its assets or by the Savings Plan or from its assets.

Article 1. Definitions

When used in the Plan, the following terms shall have the following meanings:

1.01 “Account” means the account established and maintained under Article IV to record the contributions deemed to be made by the Member and the Bank, as well as the change in value attributable to the deemed gains and losses thereon, all as described hereafter. For a Member who participated in the Plan prior to January 1, 2005, the Account includes both a Grandfathered Account and a Section 409A Account.

1.02 “Actuary” means the independent consulting actuary retained by the Bank to assist the Committee in its administration of the Plan.

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1.03 “Adoption Date” means January 1, 2009.

1.04 “Bank” means the Federal Home Loan Bank of Atlanta.

1.05 “Beneficiary” means the beneficiary or beneficiaries designated in accordance with Article VI of the Plan to receive the benefit, if any, payable upon the death of a Member of the Plan.

1.06 “Board of Directors” means the Board of Directors of the Bank.

1.07 “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

1.08 “Code Limitations” mean the cap on compensation taken into account by a plan under Code Section 401(a)(17), the limitations on 401(k) contributions necessary to meet the average deferral percentage (“ADP”) test under Code Section 401(k)(3)(A)(ii), the limitations on employee and matching contributions necessary to meet the average contribution percentage (“ACP”) test under Code Section 401(m), the dollar limitations on elective deferrals under Code Section 402(g), and the overall limitations on contributions and benefits imposed on qualified plans by Code Section 415, as such provisions may be amended from time to time, and any similar successor provisions of federal tax law.

1.09 “Committee” means the Governance and Compensation Committee or any successor committee appointed by the Board of Directors to administer the Plan.

1.10 “Deferral Agreement” means the Agreement under which a Member elected to defer compensation under the Plan in accordance with the provisions of Article IV.

1.11 “Eligible Executive” means (1) an officer of the Bank who holds the title of Senior Vice President or higher, or (2) an officer of the Bank who was a participant of the plan as of December 31, 2007, who has been selected to be an Eligible Executive by the Committee, and who is or potentially is affected by the cap on compensation set out in Code Section 401(a)(17) during the current or next following calendar year. For purposes of determining who is an Eligible Executive, the dollar amount of the Code Section 401(a)(17) cap on compensation shall at all times be deemed to be at least $205,000, so that all Eligible Executives have or potentially have compensation of at least $205,000 for the current or next following calendar year.

1.12 “Grandfathered Account” means the value of the Member’s Account on December 31, 2004, together with earnings accruing to the Member’s Grandfathered Account thereafter, and is exempt from Code Section 409A.

1.13 “Grandfathered Benefit” shall mean the portion of the Member’s pension benefit under Article III, determined as if the Member terminated employment as of December 31, 2004, but only if the Member was vested in such benefit as of December 31, 2004. Such Grandfathered Benefit shall remain exempt from Code Section 409A.

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1.14 “Member” means any person included in the membership of the Plan as provided in Article II.

1.15 “Section 409A Account” shall mean the value of the Member’s Account, minus the value of the Member’s Grandfathered Account. The Section 409A Account shall be subject to Code Section 409A and applicable guidance thereunder.

1.16 “Section 409A Benefit” means, as applicable (i) the portion of the Member’s pension benefit under Article III of the Plan, minus the Grandfathered Benefit; or (ii) the Member’s entire pension benefit under Article III if the Member was not vested in his or her benefit as of December 31, 2004. The Section 409A Benefit shall be subject to Code Section 409A and applicable guidance thereunder.

1.17 “Termination of Employment” whether or not capitalized herein, means separation from service under Code Section 409A and applicable guidance thereunder.

Article II. Membership

2.01 Each Eligible Executive of the Bank who is included in the membership of the Retirement Fund shall become a Member of the Plan on the date the Member first accrues a benefit under Article III.

2.02 Each Eligible Executive of the Bank who is included in the membership of the Savings Plan shall become a Member of the Plan on the earliest date on which he is credited with an elective contribution addition or makeup contribution addition under Section 4.01, 4.03 or 4.09 of the Plan.

2.03 If on the date that payment of a Member’s benefit from the Retirement Fund commences, the Member is not entitled under Section 3.01 below to receive a benefit under the Plan, his membership in the Plan for purposes of benefits under Article III shall terminate on such date.

2.04 A benefit shall be payable under the Plan to or on account of a Member only upon the Member’s retirement, death or other Termination of Employment with the Bank, except as provided in Article IV.

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Article III. Amount and Payment of Pension Benefits

3.01 The amount, if any, of the annual pension benefit payable to or on account of a Member pursuant to the Plan shall equal the excess of (i) over (ii), as determined by the Committee, where:

(i) Is the annual pension benefit determined as of a Member’s Termination of Employment on the basis of the Regular Form of payment that would otherwise be payable to or on account of the Member by the Retirement Fund if its provisions were administered without regard to the Code Limitations, and with the inclusion in the definition of “Base Salary” (for the year deferred) of any amount deferred by a Member under (A) the Deferred Compensation Plan and (B) under Sections 4.01 and 4.02 of this Plan; and

(ii) Is the annual pension benefit determined as of a Member’s Termination of Employment on the basis of the Regular Form of payment that is payable to or on account of the Member by the Retirement Fund.

For purposes of this Section 3.01, “annual pension benefit” includes any “Active Service Death Benefit,” “Retirement Adjustment Payment,” “Annual Increment” and “Single Purchase Fixed Percentage Adjustment” which the Bank elected to provide its employees under the Retirement Fund. For purposes of this Section 3.01, “Base Salary” is the basic annual salary rate as of each January 1st including bonuses paid in the prior calendar year.

3.02 Unless the Member elects an optional form of payment under the Plan pursuant to Section 3.03 below, the annual pension benefit, if any payable to or on account of a Member under Section 3.01 above, shall be converted by the Actuary and shall be payable to or on account of the Member in the “Regular Form” of payment, utilizing for that purpose the same actuarial factors and assumptions then used by the Retirement Fund to determine the actuarial equivalence. For purposes of the Plan, the “Regular Form” of payment means an actual pension benefit payable for the Member’s lifetime and the death benefit described in Section 3.04 below.

3.03 (a) A Member may elect in writing pursuant to paragraph (c) below to have the annual pension benefit, if any, payable to or on account of a Member under Section 3.02 above converted by the Actuary to any optional form of payment then permitted for such Member under the Retirement Fund; and for this purpose it is noted that, depending on their date of hire, Members may have different optional forms of payment available to them under the Retirement Fund. The Actuary shall utilize for the purpose of that conversion the same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial equivalence.

(b) If a Member who had elected an optional form of payment under this Section 3.03 dies after the date his benefit payments under the Plan had commenced, the only death benefit, if any, payable under the Plan in respect of said Member shall be the amount, if any, payable under

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the optional form of payment which the Member had elected under the Plan. If a Member who had elected an optional form of payment under this Section 3.03 dies before the date his benefit payments under the Plan commence, his election of an optional form of benefit shall be inoperative.

(c) An election of any optional form of payment under this Section 3.03 may be made only in writing and filed by the Member with the Committee, and shall be subject to the following additional rules:

(i) A Member shall be permitted to make an initial election with respect to the form of payment under this Article III no later than January 30 following the end of the calendar year in which the Member first accrues a benefit under Article III.

(ii) Any subsequent election (i.e., any election following the Member’s initial election under paragraph (c)(i) above) must be made no later than twelve (12) months preceding the Member’s Termination of Employment; and

(iii) Any subsequent election (i.e., any election following the Member’s initial election under paragraph (c)(i) above) with respect to the Member’s Section 409A Benefit must defer the commencement of distribution of the Section 409A Benefit for a period of at least five (5) years from the date such payment would have otherwise commenced, provided, however, that if the subsequent election is a change in the form of payment between two life annuities (as determined under Section 409A and applicable guidance thereunder) that are actuarially equivalent applying reasonable actuarial methods and assumptions, such election shall not be subject to the five year delay rule under this clause (iii).

3.04 Upon the death of a Member before the date his benefit payments under the Plan commence or after the date his benefit payments commence, if he had not elected an optional form of payment under Section 3.03 above, a death benefit shall be paid to the Member’s Beneficiary in a lump sum equal to the excess, if any, of (i) over (ii), where:

(i) is an amount equal to 12 times the annual pension benefit, if any, payable under Section 3.01 above, and

(ii) is the sum of the benefit payments, if any, which the Member had received under the Plan.

3.05 If a Member to whom an annual pension benefit is payable under this Plan dies before the commencement of the payment of his benefit, the death benefit payable under Section 3.04 shall be payable to the Member’s beneficiary as if the payment of the Member’s benefit had commenced on the first day of the month in which his death occurred.

3.06 If a Member is restored to employment with the Bank, payment of any pension benefits under this Plan shall continue as though the Member had not been re-employed, and the Member may not cease the payment of pension benefits or change the form of payment of such benefits. However, the Member, if eligible to participate in the Plan upon his re-employment,

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shall accrue pension benefits under the terms of this Article III as though the Member had not previously retired, and upon the Member’s subsequent Termination of Employment, his pension benefits under Article III of the Plan shall be reduced by the equivalent actuarial value of the amount of any pension benefit under Article III previously paid by the Plan to the Member. For purposes of this Section 3.06, the equivalent actuarial value of the pension benefits previously paid to the Member shall be determined by the Actuary utilizing for that purpose the same actuarial factors and assumptions then used by the Retirement Fund to determine actuarial equivalence under the Retirement Fund. In addition, with respect to pension benefits under Article III of this Plan which accrue after the Member’s re-employment, the Member may make initial and subsequent elections regarding the form of payment, as provided under the terms of this Article III.

3.07 If (i) a Member or beneficiary is eligible to commence his or her pension benefit under this Article III or has already commenced receiving such benefit, (ii) such Member or beneficiary does not participate in any other non-qualified deferred compensation plan that would be aggregated with this Plan under Treasury Regulation Section 1.409A-1(c)(2) (i.e., another defined benefit-type deferred compensation plan), and (iii) during a given calendar year the equivalent actuarial value of the remaining pension benefit payable to such Member or beneficiary under Article III of this Plan does not exceed the applicable dollar amount under Code Section 402(g)(1)(B) for such calendar year ($15,500 for calendar year 2008), then the equivalent actuarial value of such remaining benefit shall be paid in a single lump sum to such Member or beneficiary, as applicable, on a date determined by the Committee in its discretion, but no later than December 31 of the calendar year for which such determination is made.

3.08 Except in cases where the Member properly elects to receive his benefit in the form of a lump sum payment, all annual pension benefits under the Plan shall be paid in monthly, or annual installments, as elected by the Member. Benefits shall commence on a date determined by the Committee in its sole discretion, but no later than ninety (90) days after the Member’s Termination of Employment with the Bank. If a Member has properly elected to receive his benefit in the form of a lump sum payment, such benefit shall be paid to the Member within ninety (90) days following the later of (i) the date the Member reaches age 50 or (ii) the date of the Member’s Termination of Employment with the Bank.

3.09 The Board in its sole discretion may from time to time grant to one or more Members or prospective Members under this Plan additional benefits which the Board deems appropriate to attract or retain such Member. Such benefits may include, but shall not be limited to, treating a newly employed Member as though the Member’s service with a prior employer constituted service with the Bank. In crediting such additional benefits, the Board may attach vesting or other conditions as it deems appropriate. Any such additional benefits, and the terms and conditions associated with such additional benefits, shall be set forth on an Appendix to this Plan. Such Appendix shall be incorporated in and made a part of this Plan, but shall not be required to be disclosed to any Member other than the Member who receives such additional benefits, except as required by applicable law. Any additional benefits credited pursuant to this Section 3.09 shall be treated as part of the Member’s Section 409A Benefit and shall be fully subject to Section 409A.

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3.10 The timing of a distribution of a Member’s Section 409A Benefit may not be accelerated, except in the event of permissible acceleration under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), (j)(4)(vi) (payment of employment taxes), (j)(4)(vii) (payment upon income inclusion under Section 409A), (j)(4)(ix) (plan terminations and liquidation), (j)(4)(xi) (payment of state, local or foreign taxes), (j)(4)(xiii) (certain offsets) and (j)(4)(xiv) (bona fide disputes).

Article IV. Amount and Payment of Savings Plan Benefits

4.01 During each calendar year, if the Eligible Executive’s 401(k) account contributions under the Savings Plan for such year have reached the maximum permitted by the Code Limitations as determined by the Committee, and if the Eligible Executive has elected to reduce his compensation for the current calendar year in accordance with the provisions of Section 4.02, then such Eligible Executive shall be credited with an elective contribution addition under this Plan equal to the reduction in his compensation made in accordance with such election; provided, however, that the sum of all such elective contribution additions for an Eligible Executive with respect to any single calendar year shall not be greater than the excess of (i) over (ii), where

(i) is an amount equal to the regular account and maximum 401(k) account contributions permitted under the Savings Plan for the calendar year as determined under the Savings Plan if its provisions were administered without regard to the Code Limitations and if compensation as defined in the Savings Plan included any deferrals made under this Section 4.01; and

(ii) is an amount equal to his regular account and 401(k) account contributions actually made under the Savings Plan for the calendar year.

4.02 A Member’s election under Section 4.01 shall be made in accordance with the following provisions:

(a) The Committee shall provide each Member with a Deferral Agreement at least 30 days prior to the commencement of the calendar year in which compensation is to be earned and paid. Each Member shall execute and deliver the Deferral Agreement to the Committee no later than the last business day preceding the calendar year in which compensation is to be earned and paid.

Notwithstanding the above, provided the Eligible Executive does not already participate in a deferred compensation plan of the Bank that is considered to be the same type of plan as this Plan under the plan aggregation rules contained in Treasury Regulation 1.409A-1(c)(2), an Eligible Executive who first becomes eligible to participate in the plan during a calendar year may execute a Deferral Agreement with respect to his elections under Section 4.01 within 30 days of the date he becomes eligible to participate. An individual who is an Eligible Executive immediately prior to the Adoption Date may file a Deferral Agreement with the Committee

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within such period prior to the Adoption Date and in such manner as the Committee may prescribe. With respect to Section 4.01, the Deferral Agreement shall only apply to compensation earned by the Member in the payroll periods beginning on or after the later of the date such Agreement is submitted to the Committee or the Adoption Date.

(b) The Deferral Agreement shall provide for separate elections with respect to elective contribution additions under Section 4.01, and shall provide for separate distribution elections with respect to the Grandfathered Account and the Section 409A Account.

(c) An Eligible Executive’s elections on his Deferral Agreement of the rates at which he authorizes deferrals under Section 4.01 shall be irrevocable for the calendar year for which the deferral is elected. Notwithstanding the foregoing, a Member may, in the event of an unforeseeable emergency which results in severe financial hardship, request a suspension of his salary deferrals under the Plan. The request shall be made in a time and manner determined by the Committee. The suspension shall be effective with respect to the portion of the calendar year remaining after the Committee’s determination that the Member has incurred a severe financial hardship. The Committee shall apply standards, to the extent applicable, identical to those described in Section 4.07 in making its determination.

4.03 For each elective contribution addition credited to a Member under Section 4.01, such Member shall also be credited with a matching contribution addition under this Plan equal to the matching contribution, if any, that would be credited under the Savings Plan with respect to such amount if contributed to the Savings Plan, determined as if the provisions of the Savings Plan were administered without regard to the Code Limitations and determined after taking into account the Member’s actual contributions to and actual matching contributions under the Savings Plan.

4.04 The Committee shall maintain an Account on the books and records of the Bank for each Eligible Executive who is a Member by reason of amounts credited under Sections 4.01 and 4.03. The elective contribution additions, makeup contribution additions and matching contribution additions of a Member under Section 4.01 and 4.03 shall be credited to the Member’s Account as soon as practical after the date that the compensation reduced under Section 4.01 would otherwise have been paid to such Member.

4.05 In addition to the amounts described in Section 4.04, the Account of a Member shall be credited from time to time with deemed investment gains and losses based upon such hypothetical investment options as the Committee shall announce to Members from time to time. A Member may request how his Account shall be allocated among such investment options in increments of not less than one percent (1%), but the Committee or its delegate may in its sole discretion override any such request, and, if so, the Committee or its delegate may allocate such funds in a different manner. A Member may make investment requests on a daily basis, using such electronic or other media as the Committee may permit. Investment requests shall be subject to such additional rules and conditions as the Committee may prescribe from time to time (including a delay in implementing such request, in order to give the Committee or its delegate an opportunity to override such request). The Bank shall not be required under any circumstance

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to obtain an actual investment vehicle which reflects the investment request made by the Member, nor shall the Committee’s acceptance of a Member’s investment request give the Member a right or interest in any specific assets of the Bank.

4.06 A Member shall at all times be 100% vested in his deferrals under Section 4.01. A Member shall become vested in employer matching contributions under Section 4.03 at the same time the Member becomes vested in his or her employer matching contributions under the Savings Plan. Members hired prior to 12/1/08 shall vest in employer matching contributions on a graded two year schedule where the Member is 40% vested after one year of employment and 100% vested after two years of employment. Members hired after 12/1/08 shall vest in employer matching contributions on a two year cliff schedule where the Member is 0% vested until two years of employment with the Bank. The balance credited to a Member’s Account under this Article IV, as adjusted by deemed gains and losses under Section 4.05, shall be paid to him either in a lump sum payment or annual installments over a period of two (2) to five (5) years, as elected by the Member, with such payments to commence on a date determined by the Committee in its sole discretion, but no later than ninety (90) days after the Member’s Termination of Employment with the Bank. A Member’s election of lump sum or installments (and, if applicable, the number of installments), shall be made in writing on a form acceptable to the Committee, and shall be subject to the following additional rules:

(i) Any subsequent election (i.e., any election following the Member’s initial election under Section 4.02) with respect to the Member’s Grandfathered Account must be made no later than six (6) months preceding the Member’s Termination of Employment; and

(ii) Any subsequent election (i.e., any election following the Member’s initial election under Section 4.02) with respect to the Member’s Section 409A Account (A) must be made no later than twelve (12) months preceding the Member’s Termination of Employment; and (B) other than in the event of the death of the Member, must defer the commencement of distribution of the Section 409A Account for a period of at least five (5) years from the date such payment would have otherwise commenced.

If installments are elected, a Member may continue to request that the balance of his or her Account be invested under the procedures set out in Section 4.05. Subsequent installments shall be paid on the anniversary of the date the first installment is paid, and the amount paid on each installment shall be determined by the multiplying the Member’s balance as most recently determined by the Committee for this purpose, by a fraction, the numerator of which is one, and the denominator of which is the number of remaining installments (including the installment being paid); therefore, for example, if a Member elects installments over five years, the fraction in the first year would be  ¹/5, in the second year would be  ¹/4, in the third year would be  ¹/3, and so forth, until the fraction in the final year is  ¹/1.

Notwithstanding the foregoing, if (i) a Member or beneficiary is eligible to commence distribution of his or her Account under this Article IV or has already commenced distribution, (ii) such Member or beneficiary does not participate in any other non-qualified deferred compensation plan that would be aggregated with this Plan under Treasury Regulation Section 1.409A-1(c)(2)(i.e., another voluntary deferral-type deferred compensation plan), and (iii) during

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a given calendar year the value of the Account payable to such Member or beneficiary under Article IV does not exceed the applicable dollar amount under Code Section 402(g)(1)(B) for such calendar year ($15,500 for calendar year 2008), then the remaining value of such Account shall be paid in a single lump sum to such Member or beneficiary, as applicable, on a date determined by the Committee in its discretion, but no later than December 31 of the calendar year for which such determination is made.

4.07 If a Member dies prior to receiving the balance credited to his Account under Section 4.06 above, the balance in his Account shall be paid to his Beneficiary in a lump sum payment on a date determined by the Committee in its sole discretion, but no later than ninety (90) days after his death, regardless of whether the Member had elected installment payments under Section 4.06.

4.08 While employed by the Bank, a Member may, in the event of an unforeseeable emergency, request a withdrawal from this Account. The request shall be made in a time and manner determined by the Committee, shall be for an amount not greater than the lesser of (i) the amount required to meet the financial hardship, or (ii) the amount of his Account, and shall be subject to approval by the Committee. For purposes of this Section 4.08, an unforeseeable emergency means a severe financial hardship resulting from an illness or accident of the Member or a dependent (as defined in Section 152 of the Code without regard to Section 152(b)(1), (b)(2), and (d)(1)(B)), loss of the Member’s property due to casualty (including the need to rebuild a home not otherwise covered by insurance), or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Member. Except as otherwise provided herein, the purchase of a home and the payment of college tuition are not unforeseeable emergencies. Whether a Member or dependent is faced with an unforeseeable emergency is to be determined by the Committee based on the relevant facts and circumstances of each case, but, in any case, a distribution on account of unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Member’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the arrangement.

4.09 The Board in its sole discretion may from time to time credit to one or more Members or prospective Members under this Plan additional amounts which the Board deems appropriate to attract or retain such Member. Such benefits may include, but shall not be limited to, treating a newly employed Member as though the Member’s service with a prior employer constituted service with the Bank. In crediting such additional amounts, the Board may attach vesting or other conditions as it deems appropriate. Any such additional credits, and the terms and conditions associated with such additional credits, shall be set forth on an Appendix to this Plan. Such Appendix shall be incorporated in and made a part of this Plan, but shall not be required to be disclosed to any Member other than the Member who receives such additional credits. Any additional amounts credited pursuant to this Section 4.09 shall be added to the Member’s Section 409A Account and shall be fully subject to Section 409A.

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4.10 The timing of a distribution of a Member’s Section 409A Account may not be accelerated, except in the event of an Unforeseeable Emergency or other permissible acceleration of distribution under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), (j)(4)(vi) (payment of employment taxes), (j)(4)(vii) (payment upon income inclusion under Section 409A), (j)(4)(ix) (plan terminations and liquidation), (j)(4)(xi) (payment of state, local or foreign taxes), (j)(4)(xiii) (certain offsets) and (j)(4)(xiv) (bona fide disputes).

Article V. Source of Payment

5.01 All payments of benefits under the Plan shall be paid from, and shall only be a general claim upon, the general assets of the Bank, notwithstanding that the Bank, in its discretion, may establish a bookkeeping reserve or a grantor trust (as such term is used in Sections 671 through 677 of the Code) to reflect or to aid it in meeting its obligations under the Plan with respect to any Member or prospective Member or Beneficiary. No benefit whatever provided by the Plan shall be payable from the assets of the Retirement Fund or the Savings Plan.

5.02 No Member shall have any right, title or interest whatsoever in or to any investments which the Bank may make or any specific assets which the Bank may reserve to aid it in meeting its obligations under the Plan. To the extent that any person acquires a right to receive payments from the Bank under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Bank.

Article VI. Designation of Beneficiaries

6.01 For purposes of benefits payable under Article III of this Plan, the Member’s designated beneficiary shall be the same individual or entity designated by the Member to receive benefits under the Retirement Fund in case of the Member’s death. For purposes of benefits payable under Article IV hereof, each Member of the Plan may file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon his death. The Member may, from time to time, revoke or change his beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Member’s death, and in no event shall it be effective as of a date prior to such receipt.

6.02 If no such beneficiary designation is in effect at the time of a Member’s death, or if no designated Beneficiary survives the Member, or if, in the opinion of the Committee, such designation conflicts with applicable law, the Member’s estate shall be deemed to have been designated his Beneficiary and shall be paid the amount, if any, payable under the Plan upon the Member’s death. If the Committee is in doubt as to the right of any person to receive such amount, the Committee may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Bank therefor.

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Article VII. Administration of the Plan

7.01 The Board of Directors has delegated to the Governance and Compensation Committee, subject to those powers which the Board has reserved as described in Article VIII below, general authority over and responsibility for the administration and interpretation of the Plan. The Committee shall have full power and discretionary authority to interpret and construe the Plan, to make all determinations considered necessary or advisable for the administration of the Plan and any trust referred to in Article V above, and the calculation of the amount of benefits payable thereunder, and to review claims for benefits under the Plan. Unless arbitrary or capricious, the Committee’s interpretations and constructions of the Plan and its decisions or actions thereunder shall be binding and conclusive on all persons for all purposes.

7.02 The Committee shall arrange for the engagement of the Actuary, and if the Committee deems it advisable, it shall arrange for the engagement of legal counsel and certified public accountants (who may be actuary, counsel or accountants for the Bank), and other consultants, and make use of agents and clerical or other personnel for purposes of the Plan. The Committee may rely upon the written opinions of such Actuary, counsel, accountants and consultants, and upon any information supplied by the Retirement Fund or the Savings Plan for purposes of Sections 3.01, 4.01 and 4.02 of the Plan, and delegate to any agent or to any sub-committee or Committee member its authority to perform any act hereunder, including without limitations those matters involving the exercise of discretion; provided, however, that such delegation shall be subject to revocation at any time at the discretion of the Committee. The Committee shall report to the Board of Directors, or to a committee designated by the Board of Directors, at such intervals as shall be specified by the Board of Directors or such designated committee, with regard to the matters for which it is responsible under the Plan.

7.03 No Committee member shall be entitled to act on or decide any matters relating solely to such member or any of his rights or benefits under the Plan.

7.04 No Committee member shall receive any special compensation for serving in such capacity but shall be reimbursed for any reasonable expenses incurred in connection therewith. No bond or other security need be required of the Committee or any member thereof in any jurisdiction.

7.05 Any action of the Committee may be taken upon the affirmative vote of a majority of the members at a meeting or, at the direction of its Chairman, without a meeting by mail, e-mail or telephone, provided that all of the Committee members are informed in writing of the vote.

7.06 All claims for benefits under the Plan shall be submitted in writing to the Chairman of the Committee. Written notice of the decision on each such claim shall be furnished

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with reasonable promptness to the Member or his Beneficiary (the “claimant”). The claimant may request a review by the Committee of any decision denying the claim in whole or in part. Such request shall be made in writing and filed with the Committee within 30 days of such denial. A request for review shall contain all additional information which the claimant wishes the Committee to consider. The Committee may hold any hearing or conduct any independent investigation which it deems desirable to render its decision, and the decision on review shall be made as soon as feasible after the Committee’s receipt of the request for review. Written notice of the decision on review shall be furnished to the claimant. For all purposes under the Plan, such decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding and conclusive on all interested persons as to all matters relating to the Plan.

7.07 All expenses incurred by the Committee in its administration of the Plan shall be paid by the Bank.

Article VIII. Amendment and Termination

8.01 The Board of Directors of the Bank may amend, suspend or terminate, in whole or in part, the Plan in accordance with applicable law without the consent of the Committee, any Member, Beneficiary or other person, provided, however, that (i) no amendment, suspension or termination shall retroactively impair or otherwise adversely affect the rights of any Member, Beneficiary or other person to benefits under the Plan which have accrued prior to the date of such action; and (ii) termination with respect to the portion of the Plan that includes the Section 409A Accounts and/or the Section 409A Accrued Benefits must comply with the requirements of Treas. Reg. Section 1.409A-3(j)(4)(ix). The Board may without the consent of any Member, Beneficiary or other person eliminate the lump sum payment provision under Section 3.02. The Board may also take any other action which may be necessary or appropriate to facilitate the administration, management and interpretation of the Plan or to conform the Plan thereto, provided that any such amendment or action does not have a material detrimental effect on the then currently estimated cost to the Bank of maintaining the Plan.

Article IX. General Provisions

9.01 The Plan shall be binding upon and inure to the benefit of the Bank and its successors and assigns and the Members, and the successors, assigns, designees and estates of the Members. The Plan shall also be binding upon and inure to the benefit of any successor bank or organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan shall preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another bank or organization which assumes the Plan and all obligations of the Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of the rights of Members under the Plan in any agreement or plan which it may enter into to effect any merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of Plan obligations of the Bank, the term “Bank” shall refer to such other bank or successor entity and the Plan shall continue in full force and effect.

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9.02 Neither the Plan nor any action taken thereunder shall be construed as giving to a Member the right to be retained in the employ of the Bank or as affecting the right of the Bank to dismiss any Member from its employ.

9.03 The Bank shall withhold or cause to be withheld from all benefits payable under the Plan all federal, state, local or other taxes required by applicable law to be withheld with respect to such payments.

9.04 No right or interest of a Member under the Plan may be assigned, sold, encumbered, transferred or otherwise disposed of and any attempted disposition of such right or interest shall be null and void. Further, no right or interest of a Member may be reached by any creditor of the Member.

9.05 If the Committee shall find that any person to whom any amount is or was payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment, or any part thereof, due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative), may, if the Committee is so inclined, be paid to such person’s spouse, child or other relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be in complete discharge of the liability of the Plan and the Bank therefore.

9.06 All elections, designations, requests, notices, instructions, and other communications from a Member, Beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee and shall be mailed by first-class mail or delivered to such location as shall be specified by the Committee and shall be deemed to have been given and delivered only upon actual receipt thereof at such location.

9.07 The benefits payable under the Plan shall be in addition to all other benefits provided for employees of the Bank and shall not be deemed salary or other compensation by the Bank for the purpose of computing benefits to which he may be entitled under any other plan or arrangement of the Bank.

9.08 No Committee member shall be personally liable by reason of any instrument executed by him or on his behalf, or action taken by him, in his capacity as a Committee member nor for any mistake of judgment made in good faith. Consistent with applicable law, regulation or governing bylaw of the Bank, the Bank shall indemnify and hold harmless the Retirement Fund or the Savings Plan and each Committee member and each employee, officer or director of the Bank or the Retirement Fund or Savings Plan, to whom any duty, power, function or action in respect of the Plan may be delegated or assigned, or from whom any information is requested for Plan purposes, against any cost or expense (including fees of legal counsel) and liability (including any sum paid in settlement of a claim or legal action with the approval of the Bank) arising out of anything done or omitted to be done in connection with the Plan, unless arising out of such person’s fraud or bad faith.

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9.09 As used in the Plan, the masculine gender shall be deemed to refer to the feminine, and the singular person shall be deemed to refer to the plural, wherever appropriate.

9.10 The captions preceding the Sections of the Plan have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

9.11 The Plan shall be construed according to the laws of the State of Georgia in effect from time to time.

9.12 With respect to a specified employee (within the meaning of Code Section 409A), payment of benefits under the Plan, if conditioned upon the employee’s Termination of Employment, may not occur before the date that is six months after the Participant’s Termination of Employment (or, if earlier, the date of death of the Member).

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IN WITNESS WHEREOF, THE FEDERAL HOME LOAN BANK of Atlanta has caused this amended and restated Benefit Equalization Plan to be executed effective as of the 1st day of January, 2009.

The Federal Home Loan Bank of Atlanta
By:	/s/ Richard A. Dorfman
Title:	President and Chief Executive Officer

Attest:

/s/ Jill Spencer

Secretary

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EX-10.4

Exhibit 10.4

Department: Corporate Secretary	Name of Policy: 2009 Directors’ Compensation Policy	Department Policy Number: 1
Effective Date: January 1, 2009	Supersedes Revisions: September 26, 2008	Authority to Approve and Amend: Board of Directors
Next Review Date: January 2010	Department Policy Owner: Corporate Secretary

A. General

1. The Bank will pay each member of the board of directors a fee for attendance at any official meeting (in person or by telephone) of the board or a committee of the board. An official meeting includes a meeting of any ad hoc committee established by the board for a specific purpose. In addition, the Bank will pay any director representative to the Council of Federal Home Loan Banks (FHLBanks) a fee for attendance at any official meeting of that group. The Bank will not pay a fee for a director’s attendance at any Federal Home Loan Bank System meeting. The fees for attendance at these meetings are outlined below.

2. The Bank will pay a fee only for a director’s actual attendance and participation at a meeting, unless the director’s absence is due to unanticipated transportation problems encountered while in route to the meeting. Participation by telephone for in-person meetings is discouraged unless necessary to attain a quorum. The Bank will not pay for a director’s participation by telephone for an in-person meeting unless the Chairman approves such participation. The Bank will not pay a fee for a director’s attendance at meetings other than those described above.

3. The Bank will not advance the payment of fees to any director.

4. The board has adopted annual compensation limits effective January 1, 2009. Those limits are:

a)      Chairman of the Board	$	60,000
b)      Vice Chairman of the Board	$	55,000
c)      Chairman of the Audit Committee	$	50,000
d)      All Other Directors	$	45,000

Compensation Policy	Page 1 of 3
January 2009

Once a director reaches his or her annual compensation limit, the Bank will not pay additional fees to that director, even if the director attends a meeting at which a fee otherwise would be paid under this policy.

B. Meeting Fees

1. Chairman

a) $ 4,600 per meeting day of the board when chairing a board meeting

b) $ 1,400 per meeting of a committee of the board of which he/she is chairman

c) $ 1,200 per meeting of a committee of the board of which he/she is a member

d) $    800 per meeting day of the Council of FHLBanks

e) $    800 per meeting day of the FHLBanks’ Chairs/Vice Chairs

2. Vice Chairman

a) $ 4,500 per meeting day of the board

b) $ 1,400 per meeting of a committee of the board of which he/she is chairman

c) $ 1,200 per meeting of a committee of the board of which he/she is a member

d) $ 4,600 per meeting day of the board when serving as Chairman for the entire meeting

e) $    800 per meeting day of the Council of FHLBanks

f) $    800 per meeting day of the FHLBanks’ Chairs/Vice Chairs

3. Director (other than Chairman or Vice Chairman)

a) $ 4,100 per meeting day of the board

b) $ 1,400 per meeting of a committee when serving as committee chairman

c) $ 1,200 per meeting of a committee of the board of which he/she is a member

d) $    800 per meeting day of the Council of FHLBanks

e) $    500 for attending new director orientation (new directors only)

C. Miscellaneous

1. Fees for Special Meetings Held Telephonically

a) Chairman; Vice Chairman, if serving as Chairman; or Committee Chairman, if serving as Chairman

$500 per meeting

b) Director (other than individual Chairman for the telephonic meeting)

$300 per meeting

2. Travel Expenses

a) In accordance with the Bank’s normal reimbursement policy, the Bank will reimburse a director’s travel expenses incurred in connection with attendance at any meeting for which the director is paid a fee. Please consult the Bank’s Travel and Entertainment Policy for a more detailed explanation regarding expense reimbursement.

Compensation Policy	Page 2 of 3
January 2009

b) The Bank will reimburse a director’s registration fees and travel expenses incurred in connection with any other meeting, hearing, ceremony, continuing education seminar, etc. only if the Chairman determines that the meeting is relevant to the Bank’s business activities or the director’s duties as a board member and the director attends the meeting at the request of, or with the approval of, the Chairman. The Vice-Chairman shall approve all such fees and expenses for the Chairman. These amounts will be reimbursable to the extent provided for such purpose in the Bank’s annual budget and in accordance with the Bank’s Travel and Entertainment Policy. The Bank will not pay a fee for a director’s participation in these types of activities, and in accordance with 12 CFR 918.4, the Bank will not reimburse directors for entertainment expenses at these events.

c) The Bank will pay the transportation and other ordinary travel expenses of one guest of a director to attend a board meeting only as specified in advance by the Bank. It will be the director’s responsibility to pay the transportation and other travel expenses of a guest that accompanies such director to any other board meeting.

d) A board member may invite a guest to Bank-sponsored board dinners or receptions held in connection with board meetings at the expense of the Bank, so long as such guest otherwise pays his or her own transportation and travel expenses.

e) The Bank will pay for activities of directors and their guests at board meetings only as specified in advance by the Bank.

Compensation Policy	Page 3 of 3
January 2009

EX-10.8

Exhibit 10.8

AMENDED AND RESTATED SERVICES AGREEMENT

THIS AMENDED AND RESTATED SERVICES AGREEMENT (the “Agreement”) originally entered into as of this 9th day of August, 2007, and further amended as of November 14, 2008, is between the Federal Home Loan Bank of Atlanta (the “Bank”) and SJG Financial Consultants, LLC, a Georgia limited liability company (“Contractor”).

WHEREAS, the parties entered into that certain Services Agreement, dated as of April 23, 2007 (the “Original Services Agreement”), and the parties now wish to amend and restate the Original Services Agreement, together with the Indemnification Agreement, dated as of April 23, 2007 (“Indemnification Agreement”), among the Bank, Contractor and Steven J. Goldstein (“Goldstein”);

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Bank and Contractor hereby agree as follows:

1. Engagement

Subject to the terms and conditions of this Agreement, the Bank hereby engages Contractor to perform the Services (defined below), and Contractor hereby accepts such engagement. Contractor’s relationship with the Bank will be strictly that of an independent contractor. Nothing in this Agreement should be construed to create a partnership, joint venture, employer-employee relationship, or promise of any future employment by the Bank or any affiliate thereof. Contractor is not the agent of the Bank and is not authorized to make any representation, contract, or commitment on behalf of the Bank except as is necessary in order for him to perform the Services. Contractor will not be entitled to any of the benefits or forms of compensation which the Bank may make available to its employees, including but not limited to bonuses, insurance, profit-sharing or retirement benefits, social security benefits, paid vacations or paid sick leave.

2. Scope of Services

Subject to the provisions of this Agreement, Contractor shall assign one of its employees, Goldstein, to perform the usual and customary duties of chief financial officer, and such other assignments as may be given to him by the president and chief executive officer of the Bank from time to time (the “Services”). Goldstein will report directly to the president and chief executive officer of the Bank. During the term of this Agreement, Contractor shall cause Goldstein to devote as much of his productive time, energy and abilities to the performance of the Services as is necessary for the performance of such Services in a timely and productive manner. The parties further expect that Goldstein will conduct most of the Services at the principal office of the Bank. Contractor agrees to cause Goldstein to behave in a responsible and professional manner at all times while performing the Services under this Agreement. The parties hereby agree and acknowledge that Goldstein shall be the only employee of Contractor that is authorized by the parties to perform the Services on behalf of the Contractor hereunder.

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3. Compensation; Taxes

(a) The Bank shall pay Contractor $394,000 per year for the year beginning January 1, 2008, in twelve equal monthly installments (each such monthly installment, the “Base Fee”), for the Services provided to the Bank under this Agreement. The Base Fee may be amended at any time in writing by mutual agreement of the parties.

(b) The Contractor also shall be eligible to receive, in the Bank’s discretion, each calendar year, an incentive fee (“Incentive Fee”), determined as a percentage of the Base Fee paid to the Contractor for the immediately preceding calendar year, in an amount up to the maximum annual incentive compensation award opportunity available to an executive vice president of the Bank under the Bank’s Executive Incentive Compensation Plan for such immediately preceding calendar year.

(c) Contractor shall send the Bank an invoice for its Base Fee and expenses provided hereunder for the immediately preceding calendar month by the 15th day of the following calendar month. Contractor’s failure to send the Bank an invoice by such date shall not relieve the Bank of its obligation to pay Contractor for its performance of the Services. The Bank shall pay the invoice by the end of the calendar month in which such invoice is received.

(d) Contractor understands and agrees that, as an independent contractor, it is solely responsible for all taxes and other costs and expenses attributable to the compensation payable to and the Services provided by it under this Agreement. Contractor understands and agrees that it is obligated to pay federal, state and local income tax, if any, due on any monies paid to it pursuant to this Agreement, and Contractor represents that it has taken and will take any and all actions required to comply with all applicable federal, state and local laws pertaining to the same.

4. Equipment and Expenses

(a) The Bank shall supply Contractor with the equipment and support reasonably necessary to perform the Services under this Agreement, including office space for Goldstein at the Bank’s principal office and access to facsimile, telephone, and internet services at such location.

(b) The Bank shall reimburse Contractor for reasonable and documented expenses incurred by Contractor in the performance of the Services, in accordance with the Bank’s normal policies and procedures. Contractor shall not be reimbursed for meal costs while performing the Services at the Bank’s principal office, commuting costs or other expenses associated with the normal performance of the Services at the Bank’s principal office on a daily basis.

5. Representations and Warranties of Contractor

(a) Contractor represents that it shall have control over the means of providing the Services identified herein. Contractor agrees to accept exclusive liability for complying with all applicable state and federal laws governing self-employed individuals and employers, including but not limited to obligations such as payment and withholding of taxes, social security,

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disability, workers’ compensation insurance, and other contributions based on fees paid to Contractor under this Agreement. Contractor agrees to provide to the Bank a certificate of workers’ compensation insurance or confirmation of exemption.

(b) Contractor commits to perform, and to cause Goldstein to perform, the Services ethically and honestly and in a competent and efficient manner using their best efforts to accomplish the objectives of the Bank. Contractor agrees to perform, and to cause Goldstein to perform, all Services in strict compliance with any and all applicable federal, state, and local laws, regulations and guidelines known to Contractor, and in accordance with any other relevant professional or other standards known to Contractor. Contractor agrees, and agrees to cause Goldstein, to act ethically and honestly with respect to reports and documents that the Bank files with, or submits to, the United States Securities and Exchange Commission, and other regulatory filings and public communications, for which preparation Contractor or Goldstein is involved with, or supervises, on behalf of the Bank.

6. Conflicts of Interest

(a) Contractor represents that it has advised the Bank in writing prior to the date of signing this Agreement of any of its or Goldstein’s relationship with any third parties, including members and competitors of the Bank, or other legal obstacles that would present a conflict of interest with Contractor’s or Goldstein’s performance of the Services, or which would prevent Contractor or Goldstein from carrying out the terms of this Agreement. Contractor affirms that it shall, and it shall cause Goldstein to, advise the Bank of any such conflicts of interest, legal or ethical obstacles or other violations of this Agreement that arise during the term of this Agreement. In such event, the Bank shall have the option to terminate this Agreement without further liability to Contractor other than the obligation to pay for Services actually rendered as of the date of such termination. Contractor further agrees to refrain from making any recommendations or taking any actions that would elevate its interests, or the interests of any client, over the interests of the Bank.

(b) During the term of his appointment as an officer of the Bank, Goldstein agrees to comply with the provisions of the Bank’s Code of Conduct, subject to any exceptions or waivers granted thereunder in accordance therewith.

7. Term and Termination

(a) The term of this Agreement shall begin on April 23, 2007, and continue until April 23, 2008, unless earlier terminated as provided for herein, and shall be automatically extended for additional one-year terms (the “Term”), on April 23 of each year, unless either party gives notice, in writing, to the other party prior to such renewal date that it does not wish to extend such Term.

(b) The Bank may terminate this Agreement at any time prior to the end of the Term by giving written notice to Contractor. If this Agreement is terminated by the Bank, the Bank shall have no continuing financial obligation to Contractor other than (i) to pay the Base Fee for Services actually performed by Contractor through the date of termination to the extent not theretofore paid; and (ii) to reimburse Contractor for any expenses incurred by Contractor in accordance with the provisions of this Agreement (collectively, the “Accrued Obligations”).

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(c) Contractor may terminate this Agreement at any time prior to the end of the Term for any reason by giving written notice to the Bank. If Contractor terminates this Agreement, or if the Agreement is not renewed or extended at the end of the Term, the Bank shall have no continuing financial obligation to Contractor other than to pay the Accrued Obligations.

8. Right of Review

During the Term, and for a period of one year after the termination of this Agreement for any reason whatsoever, the Bank and/or its representatives at reasonable times agreed to by Contractor, and upon reasonable written notice to Contractor, shall have the right to review all contracts, correspondence, books, accounts, files, and records of Contractor directly relating to Contractor’s performance of the Services or the compensation he received therefore.

9. Indemnification of the Bank

(a) Contractor shall defend, indemnify, and hold harmless the Bank from and against all liabilities, claims, losses, costs, fines, expenses, penalties and damages of any type (including reasonable attorneys’ fees and costs) arising out of actions taken (or failed to be taken) by Contractor in its performance of the Services that are determined by a court of competent jurisdiction to be grossly negligent, intentionally reckless or with willful disregard to the consequences of the Bank or other parties.

(b) The Bank shall promptly notify Contractor of any third party claim or potential claim that could give rise to a claim for indemnification under this Section 10. Contractor shall have the right to assume the defense of any such third party claim with counsel of its choice reasonably satisfactory to the Bank at any time within 15 days after the Bank has given Contractor notice of the third party claim; provided, however, that the Bank may retain separate co-counsel at its sole cost and expense, unless the Bank and Contractor have reasonably concluded that there may be a conflict of interest between them in the conduct of such defense, or the Contractor shall have failed to diligently pursue such defense, in which case the reasonable fees and expenses of the Bank’s counsel shall be paid by the Contractor. The Bank may participate in the defense of any third party claim against it, and the Contractor shall not settle any such claim in any manner that would impose any penalty or limitation on the Bank, or could damage its reputation, without the Bank’s prior written consent.

(c) The indemnification obligations of the Contractor hereunder shall continue in full force and effect in accordance with their terms upon termination of this Agreement if the acts or omissions resulting in indemnification liability to the Bank occurred during the Term in which this Agreement was in effect.

10. Indemnification of Contractor and Goldstein

(a) Indemnity. Subject to the provisions of Subsection (c) hereof, the Bank shall defend, hold harmless and indemnify each of the Contractor and Goldstein (hereinafter collectively referred to as “Indemnitee”) in any threatened, pending or completed action, suit or proceeding, whether formal or informal and whether civil, criminal, administrative, arbitrative or investigative (any of the foregoing being a “Proceeding”), by reason of the fact that it or he is or was (a) performing the usual and customary duties of chief financial officer of the Bank, (b) serving at the request of the Bank as a director, officer, partner,

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trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity or as a member of any committee or council, or (c) named in a report filed by the Bank under the Securities Exchange Act of 1934, from and against all costs, liabilities, obligations, expenses (including reasonable attorneys’ fees), judgments, fines (including an excise tax assessed with respect to an employee benefit plan) and amounts paid in settlement actually and reasonably incurred by it or him in connection with such Proceeding, to the fullest extent permitted by the laws of the State of Georgia and, to the extent not inconsistent therewith, Federal laws (including without limitation the Federal Home Loan Bank Act), as currently in effect or as they may hereafter be amended.

(b) Insurance Policies.

(i) In the reasonable business judgment of the Bank’s Board of Directors, the Bank may purchase and maintain, for its own benefit and for the benefit of Indemnitee, one or more valid, binding and enforceable policy or policies of directors and officers insurance (“D&O Insurance”). It is the express intent of the Bank that Goldstein be an “Executive” and thus an “Insured Person” for the purpose of the D&O Insurance.

(ii) In the reasonable business judgment of the Board of Directors, but without limiting the full discretion of the Board of Directors to create or not create a fund or to otherwise secure or not secure the Bank’s indemnification obligations under this Agreement, the Board of Directors may create a fund of any nature, which may, but need not, be irrevocable or under the control of a trustee, or otherwise secure or insure in any manner its obligations to indemnify and advance expenses to the Indemnitee and to other officers and directors of the Bank, whether arising under or pursuant to this Agreement or any similar agreement or otherwise. The Indemnitee shall be an intended beneficiary of any such fund or arrangement.

(c) Limitations on Indemnity

No indemnity pursuant to this Agreement shall be made by the Bank:

(i) to the extent of any liability for which any Indemnittee is paid pursuant to any D&O Insurance;

(ii) if a final judgment or other final adjudication by a court having jurisdiction in the matter shall determine that such indemnity is not lawful;

(iii) in respect to remuneration paid to any Indemnitee, if a final judgment or other final adjudication by a court having jurisdiction in the matter shall determine that such remuneration was not lawful;

(iv) for acts or omissions that involve fraud, intentional misconduct or a knowing violation of law by any Indemnitee; or

(v) for any conduct for which any Indemnitee is adjudged liable on the basis that it or he improperly received a personal benefit.

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(d) Notification and Defense of Claim

(i) Promptly after receipt by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will, if a claim in respect thereto is to be made against the Bank under this Agreement, notify the Bank of the commencement thereof. Such notification shall include all documents and other information necessary for the Bank to determine whether Indemnitee is entitled to indemnification and reasonably available to Indemnitee. The failure so to notify the Bank will not relieve the Bank from any liability except to the extent that the Bank is prejudiced by such failure. With respect to any such Proceeding as to which Indemnitee so notifies the Bank:

(1) the Bank will be entitled to participate therein at its own expense; and

(2) except as otherwise provided below, to the extent that it may wish, the Bank may assume the defense thereof.

(ii) After notice from the Bank to Indemnitee of its election to assume the defense thereof, the Bank will not be liable to Indemnitee under this Agreement or otherwise for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ counsel of his choosing in such Proceeding but the fees and expenses of such counsel incurred after notice from the Bank of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized in writing by the Bank, (ii) the Bank and Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Bank and Indemnitee in the conduct of the defense of such Proceeding, or (iii) the Bank shall have failed or refused to employ counsel to assume the defense of such Proceeding, or shall have failed to diligently pursue such defense, in each of which cases the reasonable fees and expenses of Indemnitee’s counsel shall be paid by the Bank.

(iii) The Bank shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding without its prior written consent. The Bank, without Indemnitee’s prior written consent, shall not settle any such Proceeding in any manner which would in any way impose any penalty or limitation on Indemnitee, or if the terms of any such settlement, directly or indirectly, could damage or affect the business or personal reputation of Indemnitee. Neither the Bank nor Indemnitee will unreasonably withhold his or its consent to any proposed settlement.

(iv) If the Bank and Indemnitee employ the same legal counsel in connection with a Proceeding and there develops a conflict of interest between the Bank and Indemnitee in the conduct of the defense of such Proceeding, then Indemnitee agrees to employ different counsel (the reasonable fees and expenses of which shall be paid by the Bank) and to take all actions reasonably necessary to allow the Bank to continue to employ the counsel employed by both the Bank and Indemnitee prior to such conflict arising.

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(e) Prepayment of Expenses

Unless Indemnitee otherwise elects, reasonable fees and expenses incurred in defending any Proceeding will be paid by the Bank in advance of the final disposition of such Proceeding upon receipt of a written agreement from Indemnitee in form and substance satisfactory to the Bank agreeing to repay any advances if it shall be ultimately determined that it or he is not entitled to be indemnified by the Bank under this Agreement.

(f) Determination of Entitlement to Indemnification

Following notification by Indemnitee to the Bank of the commencement of a Proceeding pursuant to Subsection (d)(i) of this Agreement, unless ordered by a court of competent jurisdiction, the determination of whether Indemnitee is entitled to indemnification pursuant to this Agreement shall be made by the following person or persons: (a) if there are two or more Disinterested Directors (as defined below), then at the Bank’s option, and with notice to Indemnitee of the method for determination chosen by the Bank, (i) by the Board of Directors by a majority vote of all of the Disinterested Directors (a majority of whom shall for such purpose constitute a quorum), (ii) by a majority of the members of a committee of two or more Disinterested Directors appointed by a vote described in the preceding clause (i), or (iii) by special legal counsel selected in the manner described in the preceding clause (i); or (b) if there are fewer than two Disinterested Directors, by special legal counsel selected by the Board of Directors (in which selection directors who do not qualify as Disinterested Directors may participate). “Disinterested Director” means a member of the Board of Directors who both (i) is not a party to the Proceeding giving rise to the indemnification claim and (ii) does not have a familial, financial, professional or employment relationship with Indemnitee, which relationship would, in the circumstances, reasonably be expected to exert an influence on the judgment of such member of the Board of Directors when voting on the decision being made.

(g) Continuation of Indemnity

The Bank’s indemnification obligations under this Agreement shall remain in effect for the Term of this Agreement. All agreements and obligations of the Bank and Indemnitee contained in this Agreement shall continue thereafter so long as Indemnitee is or becomes subject to any Proceeding instituted with regard to acts or omissions on the part of Indemnitee while performing the usual and customary duties of chief financial officer of the Bank, or while serving at the request of the Bank as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other entity or as a member of any committee or council, if such acts or omissions occurred during the Term in which this Agreement was in effect.

(h) Reliance

The Bank has entered into the indemnification obligations under this Agreement in order to induce Indemnitee to perform the usual and customary duties of chief financial officer of the Bank, and acknowledges that Indemnitee is relying upon this Agreement with respect thereto.

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(i) Effect of Bylaw Amendment

Any amendment to or repeal of the bylaws of the Bank relating to indemnification of officers and directors shall not affect in any way the Bank’s agreements and obligations under this Agreement or alter the indemnification provided to Indemnitee under this Agreement.

(j) Payments

Any payment required to be made pursuant to the indemnification provisions of this Agreement shall be made as promptly as practicable after the obligation to make the payment and the amount of the payment have been determined.

11. Assignment

No assignment by Contractor of this Agreement or any of its rights, duties or obligations hereunder, shall be binding on the Bank without the Bank’s prior written consent.

12. Entire Agreement

Other than the Non-Disclosure and Confidentiality Agreement (the “Confidentiality Agreement”), dated as of April 11, 2007, between the Bank and Contractor, this Agreement contains the entire agreement of the parties relating to the provision of Services, and except for such Confidentiality Agreement, it supersedes all prior agreements and understandings between the parties related to this subject matter, including the Original Services Agreement and the Indemnification Agreement.

13. No Alteration, Change or Amendment Without Signed Writing

This Agreement may not be altered, changed or amended except by a writing signed by each of the parties hereto.

14. Waiver

The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver by the waiving party of any subsequent similar or other breach by the other party.

15. Governing Law

This Agreement shall be construed according to the laws of Georgia.

16. Jurisdiction and Venue

Any proceedings or actions commenced hereunder shall be brought exclusively in any state or federal court within Fulton County, Georgia.

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17. Execution in Counterparts

This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document.

18. Acknowledgement of Opportunity to Review and Rules of Construction

The parties acknowledge that they have had an opportunity to review each and every provision contained in this Agreement and to submit the same to legal counsel for review and comment. Based on the foregoing, the parties agree that any rule of construction that a contract be construed against the drafter will not be applied in the interpretation and construction of this Agreement.

19. Severability

The invalidity or unenforceability of any provisions of this Agreement, whether in whole or in part, shall not in any way affect the validity and/or enforceability of any other provision of this Agreement. Any invalid or unenforceable provision shall be deemed severable to the extent of any such invalidity or unenforceability.

20. Third Party Beneficiaries

Other than Goldstein, there are no third party beneficiaries of this Agreement, and no party other than the Bank and Contractor shall have any legal rights hereunder, except for Goldstein pursuant to the indemnification provisions applicable to him.

21. Limitation of Liability

IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, MULTIPLE, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND, WHETHER BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE), WARRANTY, GUARANTEE, PRODUCT LIABILITY OR STRICT LIABILITY OR ANY OTHER LEGAL OR EQUITABLE GROUNDS, EVEN IF SUCH PARTY HAS BEEN ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT WILL A PARTY BE LIABLE TO THE OTHER FOR ANY REPRESENTATION OR WARRANTY MADE TO ANY THIRD PARTY BY THE OTHER PARTY.

9

22. Notices

Any and all notices referred to herein shall be in writing and shall be deemed to have been given when personally delivered or when mailed, registered or certified mail, postage prepaid, to the following addresses:

To the Bank:

Attn: President and Chief Executive Officer

Federal Home Loan Bank of Atlanta

1475 Peachtree Street, NE

Atlanta, GA 30309

With a copy to:

Attn: General Counsel

Federal Home Loan Bank of Atlanta

1475 Peachtree Street, NE

Atlanta, GA 30309

To Contractor and Goldstein:

SJG Financial Consultants, LLC

1640 Misty Oaks Drive

Atlanta, Georgia 30350

[Signatures appear on following page.]

10

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives.

FEDERAL HOME LOAN BANK OF ATLANTA
By:	/s/ Richard A. Dorfman
	Richard A. Dorfman, President and Chief Executive Officer
SJG FINANCIAL CONSULTANTS, LLC
By:	/s/ Steven J. Goldstein
	Steven J. Goldstein, Manager

FOR PURPOSES OF SECTION 6(b) AND SECTION 10 ONLY:

/s/ Steven J. Goldstein

Steven J. Goldstein

11

EX-12.1

Exhibit 12.1

	Years Ended December 31,
	2008		2007		2006		2005		2004
Earnings:
Income before assessments and cumulative effect of change in accounting principle	$	345,591	$	606,819	$	564,798	$	473,406	$	400,389
Fixed charges		5,787,159		7,712,290		6,515,669		4,373,095		2,205,502
Earnings available for fixed charges	$	6,132,750	$	8,319,109	$	7,080,467	$	4,846,501	$	2,605,891
Fixed charges:
Interest on consolidated obligations	$	5,673,829	$	7,419,087	$	6,263,775	$	4,181,838	$	2,127,790
Interest on deposits		109,726		266,562		218,831		152,872		59,813
Interest on borrowings from other FHLBanks		136		48		68		33		9
Interest on securities sold under agreement to repurchase		1,607		14,550		23,200		28,776		16,593
Mandatorily redeemable capital stock		1,504		11,307		9,234		9,405		1,239
Interest on other borrowings		357		736		561		171		58
Fixed charges	$	5,787,159	$	7,712,290	$	6,515,669	$	4,373,095	$	2,205,502
Ratio of earnings to fixed charges		1.06		1.08		1.09		1.11		1.18

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard A. Dorfman, certify that:

1. I have reviewed this annual report on Form 10-K of the Federal Home Loan Bank of Atlanta;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009	/S/    RICHARD A. DORFMAN
	Richard A. Dorfman
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven J. Goldstein, certify that:

1. I have reviewed this annual report on Form 10-K of the Federal Home Loan Bank of Atlanta;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2009	/S/    STEVEN J. GOLDSTEIN
	Steven J. Goldstein
	Executive Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of the Federal Home Loan Bank of Atlanta (the “Registrant”) for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Richard A. Dorfman, President and Chief Executive Officer of the Bank, and Steven J. Goldstein, Executive Vice President and Chief Financial Officer of the Bank, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his or her knowledge:

1. The Registrant’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: March 30, 2009
	/S/    RICHARD A. DORFMAN
	Richard A. Dorfman
	President and Chief Executive Officer
	/S/    STEVEN J. GOLDSTEIN
	Steven J. Goldstein
	Executive Vice President and Chief Financial Officer

The foregoing certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

EX-99.1

Exhibit 99.1

Audit Committee Report

March 25, 2009

The Audit Committee has adopted and is governed by a written charter. The Audit Committee Charter is available on the governance section of the Bank’s website at http://www.fhlbatl.com.

The Audit Committee has reviewed and discussed the audited financial statements with management. The Audit Committee has discussed with its independent registered public accounting firm, PricewaterhouseCoopers LLP, the matters required to be discussed by SAS No. 61, as amended. The Audit Committee has also received the written disclosures and the letter from PricewaterhouseCoopers required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with PricewaterhouseCoopers its independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the board of directors that the Bank’s audited financial statements be included in the Bank’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for filing with the Securities and Exchange Commission.

2009 AUDIT COMMITTEE MEMBERS

B.K. Goodwin, Chairman

W. Russell Carothers, Vice Chairman

John M. Bond, Jr.

William C. Handorf

Scott C. Harvard

J. Thomas Johnson

Jonathan Kislak

Miriam Lopez

H. Gary Pannell