UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

OR

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

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

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 for the past 90 days.    x    Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨  Yes     ¨  No                            

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

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

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

The number of shares outstanding of the registrant’s Class B Stock, par value $100, as of April 30, 2010, was 83,388,076.

Table of Contents

PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	STATEMENTS OF CONDITION	1
	STATEMENTS OF INCOME	2
	STATEMENTS OF CAPITAL	3
	STATEMENTS OF CASH FLOWS	4
	NOTES TO FINANCIAL STATEMENTS	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	69
PART II.	OTHER INFORMATION	70
Item 1.	Legal Proceedings	70
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	(Removed and Reserved)	70
Item 5.	Other Information	70
Item 6.	Exhibits	71
SIGNATURES		72

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CONDITION

(Unaudited)

(In millions, except par value)

	As of
	March 31, 2010		December 31, 2009
ASSETS
Cash and due from banks	$	4	$	465
Deposit with other FHLBanks		2		3
Federal funds sold		15,230		10,043
Trading securities (includes $113 and $137 pledged as collateral as of March 31, 2010 and December 31, 2009, respectively, that may be repledged and includes other FHLBanks’ bonds of $71 and $72 as of March 31, 2010 and December 31, 2009, respectively)		3,358		3,553
Available-for-sale securities		2,660		2,256
Held-to-maturity securities, net (fair value of $15,765 and $16,442 as of March 31, 2010 and December 31, 2009, respectively)		16,087		17,085
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $1 as of March 31, 2010 and December 31, 2009		2,418		2,522
Advances, net		105,474		114,580
Accrued interest receivable		465		515
Premises and equipment, net		34		34
Derivative assets		23		39
Other assets		526		216
TOTAL ASSETS	$	146,281	$	151,311
LIABILITIES
Interest-bearing deposits	$	2,941	$	2,989
Loans from other FHLBanks		35		—
Consolidated obligations, net:
Discount notes		17,778		17,127
Bonds		115,492		121,450
Total consolidated obligations, net		133,270		138,577
Mandatorily redeemable capital stock		481		188
Accrued interest payable		619		612
Affordable Housing Program payable		128		125
Payable to REFCORP		14		21
Derivative liabilities		469		409
Other liabilities		225		137
Total liabilities		138,182		143,058
Commitments and contingencies (Note 13)
CAPITAL
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 15 as of March 31, 2010 and December 31, 2009		1,497		1,520
Subclass B2 issued and outstanding shares: 63 and 66 as of March 31, 2010 and December 31, 2009, respectively		6,355		6,604
Total capital stock Class B putable		7,852		8,124
Retained earnings		916		873
Accumulated other comprehensive loss		(669)		(744)
Total capital		8,099		8,253
TOTAL LIABILITIES AND CAPITAL	$	146,281	$	151,311

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

1

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF INCOME

(Unaudited)

(In millions)

	Three Months Ended March 31,
	2010		2009
INTEREST INCOME
Advances	$	69	$	432
Prepayment fees on advances, net		3		3
Interest-bearing deposits		1		3
Federal funds sold		5		8
Trading securities		42		54
Available-for-sale securities		39		—
Held-to-maturity securities		172		275
Mortgage loans held for portfolio		32		42
Total interest income		363		817
INTEREST EXPENSE
Consolidated obligations:
Discount notes		3		163
Bonds		207		615
Deposits		—		2
Mandatorily redeemable capital stock		—		2
Total interest expense		210		782
NET INTEREST INCOME		153		35
OTHER INCOME (LOSS)
Total other-than-temporary impairment losses		(64)		(698)
Portion of impairment losses recognized in other comprehensive loss		18		609
Net impairment losses recognized in earnings		(46)		(89)
Net gains (losses) on trading securities		4		(34)
Net (losses) gains on derivatives and hedging activities		(17)		112
Other		—		1
Total other loss		(59)		(10)
OTHER EXPENSE
Compensation and benefits		14		16
Other operating expenses		11		8
Finance Agency		2		2
Office of Finance		2		1
Total other expense		29		27
INCOME (LOSS) BEFORE ASSESSMENTS		65		(2)
Affordable Housing Program		5		—
REFCORP		12		—
Total assessments		17		—
NET INCOME (LOSS)	$	48	$	(2)

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

2

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)

(In millions)

	Capital Stock Class B Putable			Retained          Earnings		Accumulated Other    Comprehensive Loss
	Shares	Par Value						Total Capital
BALANCE, DECEMBER 31, 2008	85	$	8,463	$	435	$	(5)	$	8,893
Cumulative effect of adjustment to opening balance relating to other-than-temporary impairment guidance	—		—		179		(179)		—
Issuance of capital stock	7		655		—		—		655
Repurchase/redemption of capital stock	(11)		(1,062)		—		—		(1,062)
Net shares reclassified to mandatorily redeemable capital stock	(19)		(1,867)		—		—		(1,867)
Comprehensive loss:
Net loss	—		—		(2)		—		(2)
Other comprehensive loss	—		—		—		(602)		(602)
Total comprehensive loss	—		—		—		—		(604)
BALANCE, MARCH 31, 2009	62	$	6,189	$	612	$	(786)	$	6,015
BALANCE, DECEMBER 31, 2009	81	$	8,124	$	873	$	(744)	$	8,253
Issuance of capital stock	—		25		—		—		25
Repurchase/redemption of capital stock	—		(4)		—		—		(4)
Net shares reclassified to mandatorily redeemable capital stock	(3)		(293)		—		—		(293)
Comprehensive income:
Net income	—		—		48		—		48
Other comprehensive income	—		—		—		75		75
Total comprehensive income	—		—		—		—		123
Cash dividends on capital stock	—		—		(5)		—		(5)
BALANCE, MARCH 31, 2010	78	$	7,852	$	916	$	(669)	$	8,099

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

3

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

	Three Months Ended March  31,
	2010		2009
OPERATING ACTIVITIES
Net income (loss)	$	48	$	(2)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		(27)		21
Loss due to change in net fair value adjustment on derivative and hedging activities		205		37
Net change in fair value adjustment on trading securities		(4)		60
Net impairment losses recognized in earnings		46		89
Net change in:
Accrued interest receivable		50		132
Other assets		(311)		(20)
Affordable Housing Program payable		2		(8)
Accrued interest payable		7		5
Payable to REFCORP		(7)		—
Other liabilities		5		—
Total adjustments		(34)		316
Net cash provided by operating activities		14		314
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits		189		849
Federal funds sold		(5,187)		(976)
Trading securities:
Proceeds from sales		—		300
Proceeds from maturities		200		128
Available-for-sale securities:
Proceeds from maturities		95		—
Held-to-maturity securities:
Net change in short-term		(355)		—
Proceeds from maturities		1,449		1,036
Purchases		(481)		(227)
Advances:
Proceeds from principal collected		19,278		37,080
Made		(10,203)		(20,678)
Mortgage loans held for portfolio:
Proceeds from principal collected		104		171
Purchase of premise, equipment and software		(3)		(1)
Net cash provided by investing activities		5,086		17,682

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

4

	Three Months Ended March 31,
	2010		2009
FINANCING ACTIVITIES
Net change in deposits
Deposits		(64)		1,324
Borrowings from other FHLBanks		35		—
Net payments from derivatives containing a financing element		(201)		(199)
Proceeds from issuance of consolidated obligations:
Discount notes		231,354		54,716
Bonds		24,696		23,034
Bonds transferred from other FHLBanks		—		351
Payments for debt issuance costs		(6)		(10)
Payments for maturing and retiring consolidated obligations:
Discount notes		(230,667)		(60,346)
Bonds		(30,724)		(36,469)
Proceeds from issuance of capital stock		25		655
Payments for repurchase/redemption of capital stock		(4)		(1,062)
Payments for repurchase/redemption of mandatorily redeemable capital stock		—		(10)
Cash dividends paid		(5)		—
Net cash used in financing activities		(5,561)		(18,016)
Net decrease in cash and cash equivalents		(461)		(20)
Cash and cash equivalents at beginning of the period		465		28
Cash and cash equivalents at end of the period	$	4	$	8
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	209	$	623
AHP assessments, net	$	3	$	8
REFCORP assessments	$	19	$	3
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	293	$	1,867
Held-to-maturity securities acquired with accrued liabilities	$	84	$	—
Transfer of held-to-maturity securities to available-for-sale securities	$	409	$	1,604
Transfers of mortgage loans to real estate owned	$	10	$	1

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

5

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 1—Basis of Presentation

The accompanying unaudited interim financial statements of the Federal Home Loan Bank of Atlanta (the “Bank”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). To prepare the financial statements in conformity with GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could be different from these estimates. The foregoing interim financial statements are unaudited; however, in the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods, have been included. The results of operations for interim periods are not necessarily indicative of results to be expected for the year ending December 31, 2010, or for other interim periods. The unaudited interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2009, which are contained in the Bank’s 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2010 (“Form 10-K”).

A description of the Bank’s significant accounting policies is included in Note 1 to the 2009 audited financial statements contained in the Bank’s Form 10-K. There have been no material changes to these policies as of March 31, 2010.

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Scope Exception Related to Embedded Credit Derivatives. In March 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to clarify that the only type of embedded credit derivative feature related to the transfer of credit risk that is exempt from derivative bifurcation requirements is one that is in the form of subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination will need to assess these embedded credit derivatives to determine if bifurcation and separate accounting as a derivative is required. This guidance is effective at the beginning of the first interim reporting period beginning after June 15, 2010 (July 1, 2010 for the Bank). Early adoption is permitted at the beginning of an entity’s first interim reporting period beginning after issuance of this guidance. Bank management does not believe that the adoption of this guidance will have a material effect on the Bank’s financial condition or results of operations.

6

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Recently Adopted Accounting Guidance

Fair Value Measurements and Disclosures. In January 2010, the FASB issued guidance that requires new disclosures related to transfers in and out of Level 1 and 2 fair value hierarchy, and activity in Level 3 fair value hierarchy, and clarifies some existing disclosure requirements about fair value measurement. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about activity in Level 3 fair value hierarchy. Those disclosures are effective for fiscal years beginning after December 15, 2010 (January 1, 2011 for the Bank), and for interim periods within those fiscal years. Except for the disclosures about activity in Level 3 fair value hierarchy, the Bank adopted this guidance, effective January 1, 2010, which resulted in enhanced fair value disclosures but had no effect on the Bank’s financial condition or results of operation. Bank management does not believe that the adoption of the new disclosures about activity in Level 3 fair value hierarchy will have a material effect on the Bank’s financial condition and results or operations.

Subsequent Events. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events. The amended disclosure requirement was effective upon issuance. The adoption of this guidance modified the Bank’s subsequent events disclosures, but had no effect on the Bank’s financial condition or results of operations.

Accounting for the Consolidation of Variable Interest Entities. In June 2009, the FASB issued guidance to improve financial reporting by enterprises involved with variable interest entities (“VIEs”) and to provide more relevant and reliable information to users of financial statements. This guidance amends the manner in which entities evaluate whether consolidation is required for VIEs. An entity must first perform a qualitative analysis in determining whether it must consolidate a VIE, and if the qualitative analysis is not determinative, the entity must perform a quantitative analysis. The guidance also requires that an entity continually evaluate VIEs for consolidation, rather than making such an assessment based upon the occurrence of triggering events. Additionally, the guidance requires enhanced disclosures about how an entity’s involvement with a VIE affects its financial statements and its exposure to risks. This guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Bank adopted this guidance effective January 1, 2010. The adoption of this guidance did not have any effect on the Bank’s financial condition or results of operations.

Accounting for Transfers of Financial Assets. In June 2009, the FASB issued guidance to change how entities account for transfers of financial assets by (1) eliminating the concept of a qualifying special-purpose entity; (2) defining the term “participating interest” to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale; (3) clarifying the isolation analysis to ensure that an entity considers all of its continuing involvements with transferred financial assets to determine whether a transfer may be accounted for as a sale; (4) eliminating an exception that currently permits an entity to derecognize certain transferred mortgage loans when that entity has not surrendered control over those loans; and (5) requiring enhanced disclosures about transfers of financial assets and a transferor’s continuing involvement with transfers of financial assets accounted for as sales. This guidance is effective as of the beginning of the first annual reporting period that begins after November 15, 2009. The Bank adopted this guidance effective January 1, 2010. The adoption of this guidance did not have any effect on the Bank’s financial condition or results of operations.

7

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 3—Trading Securities

Major Security Types. Trading securities were as follows:

	As of March 31, 2010		As of December 31, 2009
Government-sponsored enterprises debt obligations	$	3,277	$	3,470
Other FHLBank’s bond*		71		72
State or local housing agency obligations		10		11
Total	$	3,358	$	3,553

* The Federal Home Loan Bank (“FHLBank”) of Chicago is the primary obligor of this consolidated obligation bond.

Net gains (losses) on trading securities for the three-month periods ended March 31, 2010 and 2009 included net unrealized holding gains (losses) of $5 and $(31), respectively.

Note 4—Available-for-sale Securities

During the three-month periods ended March 31, 2010 and 2009, the Bank transferred certain private-label mortgage-backed securities (“MBS”) from its held-to-maturity portfolio to its available-for-sale portfolio. These securities represent private-label MBS in the Bank’s held-to-maturity portfolio for which the Bank has recorded an other-than-temporary impairment loss. The Bank believes the other-than-temporary impairment loss constitutes evidence of a significant deterioration in the issuer’s creditworthiness. The Bank has no current plans to sell these securities nor is the Bank under any requirement to sell these securities.

The following table presents information on private-label MBS transferred. The amounts below represent the values as of the transfer dates.

	2010						2009
	Amortized Cost		Other-Than- Temporary Impairment Recognized in Accumulated Other Comprehensive Loss		Estimated Fair Value		Amortized Cost		Other-Than- Temporary Impairment Recognized in Accumulated Other Comprehensive Loss		Estimated Fair  Value
Transferred at March 31,	$	467	$	58	$	409	$	2,386	$	782	$	1,604
Total	$	467	$	58	$	409	$	2,386	$	782	$	1,604

8

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Major Security Types. Available-for-sale securities were as follows:

	As of March 31, 2010
	Amortized     Cost		Other-Than-Temporary   Impairment Recognized in Accumulated Other Comprehensive Loss		Gross      Unrealized     Gains		Gross      Unrealized     Losses		Estimated      Fair Value
Mortgage-backed securities:
Private label	$	3,324	$	664	$	—	$	—	$	2,660
Total	$	3,324	$	664	$	—	$	—	$	2,660
	As of December 31, 2009
	Amortized Cost		Other-Than-Temporary Impairment Recognized in Accumulated Other Comprehensive Loss		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Mortgage-backed securities:
Private label	$	2,995	$	739	$	—	$	—	$	2,256
Total	$	2,995	$	739	$	—	$	—	$	2,256

The following table summarizes the available-for-sale securities with unrealized losses. 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 March 31, 2010
	Less than 12 Months					12 Months or More					Total
	Number of   Positions	Fair   Value		Gross   Unrealized   Losses		Number of   Positions	Fair   Value		Gross   Unrealized   Losses		Number of   Positions	Fair   Value		Gross   Unrealized   Losses
Mortgage-backed securities:
Private label	—	$	—	$	—	37	$	2,660	$	664	37	$	2,660	$	664
Total	—	$	—	$	—	37	$	2,660	$	664	37	$	2,660	$	664
	As of December 31, 2009
	Less than 12 Months					12 Months or More					Total
	Number of Positions	Fair Value		Gross Unrealized Losses		Number of Positions	Fair Value		Gross Unrealized Losses		Number of Positions	Fair Value		Gross Unrealized Losses
Mortgage-backed securities:
Private label	—	$	—	$	—	32	$	2,256		$  739	32	$	2,256		$  739
Total	—	$	—	$	—	32	$	2,256		$  739	32	$	2,256		$  739

9

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

A summary of available-for-sale MBS issued by members or affiliates of members follows:

	As of March 31, 2010
	Amortized   Cost		Other-Than-Temporary    Impairment Recognized   in Other Accumulated Comprehensive Loss		Gross   Unrealized   Gains		Gross   Unrealized   Losses		Estimated   Fair  Value
Bank of America Corporation, Charlotte, NC	$	2,205	$	505	$	—	$	—	$	1,700
Total	$	2,205	$	505	$	—	$	—	$	1,700
	As of December 31, 2009
	Amortized Cost		Other-Than-Temporary Impairment Recognized in Other Accumulated Comprehensive Loss		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Bank of America Corporation, Charlotte, NC	$	2,259	$	600	$	—	$	—	$	1,659
Total	$	2,259	$	600	$	—	$	—	$	1,659

The amortized cost of the Bank’s MBS classified as available-for-sale includes net discounts of $3 and $2 as of March 31, 2010 and December 31, 2009, respectively.

Note 5—Held-to-maturity Securities

Major Security Types. Held-to-maturity securities were as follows:

	As of March 31, 2010								As of December 31, 2009
	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	$	655	$	—	$	—	$	655	$	300	$	—	$	—	$	300
State or local housing agency obligations		111		3		—		114		115		3		—		118
Mortgage-backed securities:
U.S. agency obligations-guaranteed		739		4		—		743		777		2		1		778
Government-sponsored enterprises		6,376		233		2		6,607		6,598		226		2		6,822
Private label		8,206		16		576		7,646		9,295		9		880		8,424
Total	$	16,087	$	256	$	578	$	15,765	$	17,085	$	240	$	883	$	16,442

10

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following tables summarize the held-to-maturity securities with unrealized losses. 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 March 31, 2010
	Less than 12 Months					12 Months or More					Total
	Number of   Positions	Fair   Value		Gross   Unrealized   Losses		Number of   Positions	Fair   Value		Gross   Unrealized   Losses		Number of   Positions	Fair   Value		Gross   Unrealized   Losses
State or local housing agency obligations	1	$	17	$	—	—	$	—	$	—	1	$	17	$	—
Mortgage-backed securities:
U.S. agency obligations-guaranteed	1		144		—	—		—		—	1		144		—
Government-sponsored enterprises	4		427		2	1		18		—	5		445		2
Private label	13		448		6	140		5,756		570	153		6,204		576
Total	19	$	1,036	$	8	141	$	5,774	$	570	160	$	6,810	$	578
	As of December 31, 2009
	Less than 12 Months					12 Months or More					Total
	Number of Positions	Fair Value		Gross Unrealized Losses		Number of Positions	Fair Value		Gross Unrealized Losses		Number of Positions	Fair Value		Gross Unrealized Losses
Mortgage-backed securities:
U.S. agency obligations-guaranteed	1	$	148	$	1	1	$	1	$	—	2	$	149	$	1
Government-sponsored enterprises	3		220		2	2		145		—	5		365		2
Private label	14		492		7	166		7,154		873	180		7,646		880
Total	18	$	860	$	10	169	$	7,300	$	873	187	$	8,160	$	883

A summary of held-to-maturity MBS issued by members or affiliates of members follows:

	As of March 31, 2010								As of December 31, 2009
	Amortized     Cost		Gross     Unrealized     Gains		Gross     Unrealized     Losses		Estimated     Fair Value		Amortized     Cost		Gross     Unrealized     Gains		Gross     Unrealized     Losses		Estimated Fair Value
Bank of America Corporation, Charlotte, NC	$	2,751	$	6	$	176	$	2,581	$	2,982	$	3	$	236	$	2,749
Total	$	2,751	$	6	$	176	$	2,581	$	2,982	$	3	$	236	$	2,749

11

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

	As of March 31, 2010				As of December 31, 2009
	Amortized       Cost		Estimated        Fair Value		Amortized       Cost		Estimated        Fair Value
Year of maturity:
Due in one year or less	$	661	$	662	$	302	$	302
Due after one year through five years		103		105		96		99
Due after 10 years		2		2		17		17
		766		769		415		418
Mortgage-backed securities		15,321		14,996		16,670		16,024
Total	$	16,087	$	15,765	$	17,085	$	16,442

The amortized cost of the Bank’s MBS classified as held-to-maturity includes net discounts of $48 and $49 as of March 31, 2010 and December 31, 2009, respectively.

Note 6—Other-than-temporary Impairment

Mortgage-backed Securities. The Bank’s investments in MBS consist of U.S. 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 & 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. The ratings on a significant number of the Bank’s private-label MBS have changed since their purchase date.

Non-Private-label MBS. The unrealized losses related to U.S. agency MBS and government-sponsored enterprises MBS are caused by interest rate changes and not credit quality. These securities are guaranteed by government agencies or government-sponsored enterprises and Bank management does not expect these securities to be settled at a price less than the amortized cost basis. In addition, the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. The Bank does not consider these investments to be other-than-temporarily impaired as of March 31, 2010.

12

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Private-label MBS. The Bank evaluates its individual private-label MBS 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 assess whether the entire amortized cost bases of its private-label MBS will be recovered, the Bank performed a cash flow analysis for each of its private-label MBS. In performing the cash flow analysis for each of these securities, the Bank used two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank’s securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core based statistical areas (“CBSAs”), which are based upon an assessment of the individual housing markets. The term CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area of 10,000 or more people. The Bank’s housing price forecast assumed current-to-trough home price declines ranging from zero percent to 12 percent over the next six to 12 months (resulting in peak-to-trough home price declines of up to 65 percent). Thereafter, home prices are projected to remain flat for the first six months following the trough, increase by 0.5 percent for the following six months, increase by three percent in the second year and increase by four percent in each subsequent year.

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. The model classifies securities, as noted in the below table, based on current characteristics and performance, which may be different from the securities’ classification as determined by the originator at the time of origination.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected with respect to its private-label MBS to the amortized cost basis of the security to determine whether a credit loss exists. For the Bank’s variable rate and hybrid private-label MBS, the Bank uses a forward interest rate curve to project the future estimated cash flows. The Bank then uses the current effective interest rate for the security in determining the present value of the future estimated cash flows. For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a quarterly basis.

13

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

For those securities for which an other-than-temporary impairment was determined to have occurred during the three-month period ended March 31, 2010 (that is, a determination was made that less than all of the entire amortized cost bases will likely be recovered), the following table represents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings:

	Significant Inputs
	Prepayment Rate		Default Rates		Loss Severities		Current Credit Enhancement
	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)
Year of Securitization
Prime:
2008	9.4	9.4 to 9.4	27.7	27.7 to 27.7	43.9	43.9 to 43.9	15.8	15.8 to 15.8
2006	8.3	8.1 to 9.0	12.6	12.2 to 12.7	40.1	39.9 to 40.6	8.3	7.2 to 8.6
2005	9.9	9.9 to 9.9	14.4	14.4 to 14.4	52.1	52.1 to 52.1	8.0	8.0 to 8.0
Total prime	9.0	8.1 to 9.9	19.1	12.2 to 27.7	43.2	39.9 to 52.1	11.3	7.2 to 15.8
Alt-A:
2007	10.0	8.2 to 13.3	55.2	51.8 to 59.8	46.3	43.9 to 48.5	15.0	8.1 to 19.4
2006	9.8	8.9 to 11.7	55.6	52.9 to 58.8	48.6	46.2 to 52.1	10.8	6.7 to 13.0
2005	11.1	6.7 to 13.8	42.2	24.3 to 69.9	45.7	35.5 to 51.2	9.4	4.5 to 13.3
2004 and prior	16.0	15.1 to 19.8	27.4	9.6 to 32.5	47.9	41.6 to 49.4	13.3	11.6 to 15.5
Total Alt-A	10.7	6.7 to 19.8	49.8	9.6 to 69.9	46.7	35.5 to 52.1	12.5	4.5 to 19.4
Total	10.4	6.7 to 19.8	43.9	9.6 to 69.9	46.0	35.5 to 52.1	12.3	4.5 to 19.4

Based on the Bank’s impairment analysis for the three-month periods ended March 31, 2010 and 2009, the Bank recognized total other-than-temporary impairment losses of $64 and $698, respectively. The credit related portion of $46 and $89, respectively, of these other-than-temporary impairment losses is reported in the Statements of Income as “Net impairment losses recognized in earnings.” The noncredit related portion of $18 and $609, respectively, of the other-than-temporary impairment losses is recorded as a component of other comprehensive loss.

The following table presents a roll-forward of the cumulative credit losses recognized in earnings on the Bank’s investment securities for which a portion of the other-than-temporary loss was recognized in accumulated other comprehensive loss:

	Three Months Ended March 31,
	2010		2009
Balance of credit losses previously recognized in earnings, beginning of period	$	321	$	5
Amount related to credit loss for which an other-than-temporary impairment was not previously recognized		3		74
Amount related to credit loss for which an other-than-temporary impairment was previously recognized		43		15
Balance of cumulative credit losses recognized in earnings, end of period	$	367	$	94

14

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The remainder of the Bank’s private-label MBS 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 recover the amortized cost bases of the securities, the Bank does not intend to sell the securities and it is not more likely than not that the Bank will be required to sell the securities before the anticipated recovery of the securities’ remaining amortized cost basis, which may be at maturity. The assessment is based on the fact that the Bank has sufficient capital and liquidity to operate its business and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would require the Bank to sell these securities.

Note 7—Advances

Redemption Terms. The Bank had advances outstanding, as summarized below:

	As of March 31, 2010		As of December 31, 2009
Year of contractual maturity:
Overdrawn demand deposit accounts	$	18	$	—
Due in one year or less		28,407		32,808
Due after one year through two years		19,777		21,565
Due after two years through three years		15,192		14,665
Due after three years through four years		8,836		10,757
Due after four years through five years		5,391		5,910
Due after five years		23,132		24,108
Total par value		100,753		109,813
Discount on AHP* advances		(13)		(13)
Discount on EDGE** advances		(12)		(12)
Hedging adjustments		4,751		4,798
Deferred commitment fees		(5)		(6)
Total	$	105,474	$	114,580

* The Affordable Housing Program

** The Economic Development and Growth Enhancement program

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

	As of March 31, 2010		As of December 31, 2009
Year of contractual maturity or next conversion date:
Overdrawn demand deposit accounts	$	18	$	—
Due or convertible in one year or less		41,613		46,848
Due or convertible after one year through two years		19,015		21,999
Due or convertible after two years through three years		13,340		11,802
Due or convertible after three years through four years		8,471		10,035
Due or convertible after four years through five years		4,748		5,463
Due or convertible after five years		13,548		13,666
Total par value	$	100,753	$	109,813

15

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 was deemed necessary by management as of March 31, 2010 and December 31, 2009, respectively. No advance was past due as of March 31, 2010 or December 31, 2009.

The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions and credit unions and further concentrated in certain larger borrowing relationships. As of March 31, 2010 and December 31, 2009, the concentration of the Bank’s advances to its 10 largest borrowers was $68,709 and $75,418, respectively, representing 68.2 percent and 68.7 percent, respectively, of total advances.

Interest-rate Payment Terms. The following table details advances by interest-rate payment type:

	As of March 31, 2010		As of December 31, 2009
Fixed-rate	$	89,227	$	97,743
Variable-rate		11,526		12,070
Total par value	$	100,753	$	109,813

Note 8—Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are the joint and several obligations of the FHLBanks and are backed only by the financial resources of the FHLBanks. The FHLBanks Office of Finance (“Office of Finance”) tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of consolidated obligations for which it is the primary obligor.

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

	As of March 31, 2010		As of December 31, 2009
Fixed-rate	$	83,929	$	93,441
Simple variable-rate		18,127		16,312
Step up/down		11,927		10,334
Fixed-rate that converts to variable-rate		70		—
Variable-rate capped floater		60		60
Variable-rate that converts to fixed-rate		25		25
Total par value	$	114,138	$	120,172

16

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

	As of March 31, 2010			As of December 31, 2009
	Amount		Weighted-     average Interest Rate (%)	Amount		Weighted-     average Interest Rate (%)
Year of contractual maturity:
Due in one year or less	$	47,478	1.34	$	63,383	1.27
Due after one year through two years		24,225	1.20		17,743	1.76
Due after two years through three years		15,908	2.27		11,806	2.39
Due after three years through four years		8,837	3.51		9,726	3.60
Due after four years through five years		6,561	3.58		6,016	3.67
Due after five years		11,129	4.40		11,498	4.43
Total par value		114,138	2.04		120,172	2.05
Premiums		110			116
Discounts		(58)			(60)
Hedging adjustments		1,302			1,222
Total	$	115,492		$	121,450

The Bank’s consolidated obligation bonds outstanding included:

	As of March 31, 2010		As of December 31, 2009
Noncallable	$	79,053	$	86,905
Callable		35,085		33,267
Total par value	$	114,138	$	120,172

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

	As of  March 31, 2010
Year of contractual maturity or next call date:
Due or callable in one year or less	$	69,741
Due or callable after one year through two years		19,467
Due or callable after two years through three years		9,433
Due or callable after three years through four years		5,612
Due or callable after four years through five years		2,781
Due or callable after five years		7,104
Total par value	$	114,138

17

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Consolidated Obligation Discount Notes. The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:

	Book Value		Par Value		Weighted-average         Interest Rate (%)
As of March 31, 2010	$	17,778	$	17,780	0.16
As of December 31, 2009	$	17,127	$	17,130	0.38

Note 9—Capital and Mandatorily Redeemable Capital Stock

Capital. The Bank was in compliance with the Federal Housing Finance Agency (“Finance Agency”) regulatory capital rules and requirements, as shown in the following table:

	As of March 31,  2010				As of December  31, 2009
	Required		Actual		Required		Actual
Regulatory capital requirements:
Risk based capital	$	2,716	$	9,249	$	3,010	$	9,185
Total capital-to-assets ratio		4.00%		6.32%		4.00%		6.07%
Total regulatory capital*	$	5,851	$	9,249	$	6,052	$	9,185
Leverage ratio		5.00%		9.48%		5.00%		9.11%
Leverage capital	$	7,314	$	13,873	$	7,566	$	13,777

* Mandatorily redeemable capital stock is considered capital for regulatory purposes, and “total regulatory capital” includes the Bank’s $481 and $188 in mandatorily redeemable capital stock at March 31, 2010 and December 31, 2009, respectively.

Mandatorily Redeemable Capital Stock. The following table provides the activity in mandatorily redeemable capital stock:

	Three Months Ended March 31,
	2010		2009
Balance, beginning of period	$	188	$	44
Capital stock subject to mandatory redemption    reclassified from equity during the period due to:
Attainment of nonmember status		293		1,867
Withdrawal		—		1
Repurchase/redemption of mandatorily redeemable    capital stock		—		(10)
Capital stock no longer subject to redemption due to the   transfer of stock from a nonmember to a member		—		(1)
Balance, end of period	$	481	$	1,901

The Bank reclassified $1,848 in capital stock held by Countrywide Bank, FSB (“Countrywide”) from capital to mandatorily redeemable capital stock upon termination of its membership with the Bank during the first quarter of 2009. Bank of America Corporation converted Countrywide into a national bank and merged it into Bank of America, National Association, a member of the Bank, on April 27, 2009. Upon the merger, the mandatorily redeemable capital stock of Countrywide became capital stock of Bank of America, National Association under the Bank’s Capital Plan and was reclassified from mandatorily redeemable capital stock to capital stock.

18

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table shows the amount of mandatorily redeemable capital stock by year of redemption:

	As of March 31, 2010		As of December 31, 2009
Contractual year of redemption:
Due after one year through two years	$	11	$	—
Due after two years through three years		3		11
Due after three years through four years		18		10
Due after four years through five years		431		148
Due after five years		18		19
Total	$	481	$	188

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.

Note 10— Accumulated Other Comprehensive Loss

Components comprising other comprehensive income (loss) were as follows:

	Three Months Ended March 31,
	2010		2009
Noncredit portion of other-than-temporary losses on available-for-sale securities:
Change in unrealized losses on available-for-sale securities	$	93	$	7
Reclassification adjustment of noncredit portion of impairment losses included in net income related to available-for-sale securities		40		—
Noncredit portion of other-than-temporary impairment losses on available-for-sale securities, net		133		7
Noncredit portion of other-than-temporary impairment losses on held-to-maturity securities		(58)		(609)
Other comprehensive income (loss)	$	75	$	(602)

Components comprising accumulated other comprehensive loss were as follows:

	Benefit Plans		Available-for-sale Noncredit Other- Than-Temporary-   Impairment Losses		Held-to- maturity Noncredit Other-Than- Temporary-   Impairment   Losses		Total
Balance, beginning of the period	$	(5)	$	(739)	$	—	$	(744)
Net change during the period		—		133		(58)		75
Reclassification of noncredit portion of other-than-temporary impairment losses on held-to-maturity securities to available-for-sale securities		—		(58)		58		—
Balance, end of the period	$	(5)	$	(664)	$	—	$	(669)

The amount shown in the above table as the noncredit portion of other-than-temporary impairment losses does not directly correspond to the amount reported on the Statements of Income as “Portion of impairment losses recognized in other comprehensive loss.” The balance shown in the above table reflects all fair value changes related to available-for-sale securities for which an other-than-temporary impairment loss has been recorded, including fair value changes for available-for-sale securities impaired in previous reporting periods. The above noncredit portion of other-than-temporary impairment losses includes subsequent increases in fair value in previously impaired available-for-sale securities, which are not reflected in the amounts reported on the Statements of Income.

19

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 11—Derivatives and Hedging Activities

Nature of Business Activity

The Bank is exposed to interest-rate risk primarily from the effect of interest rate changes on its interest-earning assets and funding sources which finance these assets.

The Bank enters into derivatives to manage 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. Finance Agency regulations and the Bank’s risk management policy prohibit trading in or the speculative use of these derivative instruments and limit credit risk arising from these instruments. The Bank may use derivatives only to reduce funding costs for consolidated obligations and to manage its interest-rate risk, mortgage prepayment risk and foreign currency risk positions. Derivatives are an integral part of the Bank’s financial management strategy.

The most common ways in which the Bank uses derivatives are to:

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

• reduce funding costs by combining a derivative with a consolidated obligation as the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation bond;

• preserve a favorable interest-rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation bond used to fund the advance);

• mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., mortgage assets);

• protect the value of existing asset or liability positions;

• manage embedded options in assets and liabilities; and

• achieve its overall asset/liability management objectives.

Types of Derivatives

The Bank’s risk management policy establishes guidelines for its use of derivatives. 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 goal of the Bank’s interest rate risk management strategy is not to eliminate interest-rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the Bank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, the Bank monitors the risk to its interest income, net interest margin and average maturity of interest-earning assets and funding sources.

20

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

One strategy the Bank uses to manage interest-rate risk is to acquire and maintain a portfolio of assets and liabilities which, together with their associated interest-rate derivatives, are reasonably matched with respect to the expected maturities or repricing of the assets and liabilities. The Bank also may use interest-rate derivatives to adjust the effective maturity, repricing frequency, or option characteristics of financial instruments (such as advances, mortgage loans, MBS, and consolidated obligations) to achieve risk management objectives.

The Bank uses either derivative strategies or embedded options in its funding to minimize hedging costs. Swaps, swaptions, caps and floors are used to manage interest-rate exposure.

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

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

Interest-Rate Caps and Floors. In a cap agreement, a cash flow is generated if the price or rate of an underlying variable rises above a certain threshold (or “cap”) price. In a floor agreement, a cash flow is generated if the price or rate of an underlying variable falls below a certain threshold (or “floor”) price. Caps and floors are designed as protection against the interest rate on a variable-rate asset or liability rising above or falling below a certain level.

Foreign Currencies. At times, the Bank has issued some consolidated obligations denominated in currencies other than U.S. dollars. The Bank uses forward exchange contracts to hedge currency risk on such consolidated obligations. These contracts exchange different currencies at specified rates on specified dates in the future. These contracts effectively simulate the conversion of consolidated obligations denominated in foreign currencies into ones denominated in U.S. dollars. As of March 31, 2010 and December 31, 2009, there were no outstanding consolidated obligations denominated in foreign currencies.

Application of Derivatives

General. The Bank may use derivatives 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 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.

21

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank reevaluates its hedging strategies from time to time and may change the hedging techniques it uses or adopt new strategies.

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 qualify for hedge accounting (non-qualifying hedges).

Types of Assets and Liabilities Hedged

The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions and its method of assessing effectiveness. 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 it uses 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 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. The Bank manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation. In addition, the Bank requires collateral on derivatives at specified levels correlated to counterparty credit ratings. 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. 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-rate consolidated obligations in the capital markets.

Advances. The Bank offers a variety 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 the repricing and/or options characteristics of advances in order to more closely match 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 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. This type of hedge is treated as a fair-value hedge.

22

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 repayment 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 manages 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 (interest-rate caps, interest-rate floors and/or 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-period earnings and presented in the Statements of Income as “Net (losses) gains on derivatives and hedging activities.” 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 non-qualifying hedges against the prepayment risk of the loans, they 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.

Firm Commitment Strategies. Certain mortgage purchase commitments are considered derivatives. 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 loan 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 will then 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, MBS, and the taxable portion of state or local housing finance agency obligations. The interest-rate and prepayment risks associated with these investment securities are managed through a combination of debt issuance and derivatives. The Bank may manage the prepayment and interest-rate risks 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 trading, available-for-sale or held-to-maturity.

23

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank also may manage the risk arising from changing market prices and volatility of investment securities classified as trading by entering into derivatives (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 derivative 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 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 policies 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 March 31, 2010.

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 March 31, 2010, the Bank has not sold or repledged any such collateral.

As of March 31, 2010 and December 31, 2009, the Bank’s maximum credit risk, as defined above, was $100 and $117, respectively. These totals include $46 and $88, 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 $77 and $92 as of March 31, 2010 and December 31, 2009, 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.

Certain of the Bank’s derivative instruments contain provisions that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating. If the Bank’s credit rating is lowered by a major credit rating agency, the Bank would be required to deliver additional collateral on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position (before cash collateral and related accrued interest) at March 31, 2010 was $3,835 for which the Bank has posted collateral of $3,476 in the normal course of business. If the Bank’s credit ratings had been lowered from its current rating to the next lower rating that would have triggered additional collateral to be delivered and the Bank would have been required to deliver up to an additional $180 of collateral (at fair value) to its derivatives counterparties at March 31, 2010. However, the Bank’s credit rating has not changed during the three-month period ended March 31, 2010.

24

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 13 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 the members and other counterparties by entering into offsetting derivatives. 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; and (2) enters into derivatives to offset the economic effect of other derivatives that are no longer designated to either advances, investments or consolidated obligations.

Total notional principal of derivatives for the Bank as an intermediary was $2,226 and $2,208 at March 31, 2010 and December 31, 2009, respectively.

Financial Statement Effect and Additional Financial Information

Derivative Notional Amounts. The notional amount of derivatives serves as a factor in determining periodic interest payments or cash flows received and paid.

The following table summarizes fair value of derivative instruments without effect of netting arrangements or collateral. For purposes of this disclosure, the derivative values include fair value of derivatives and related accrued interest.

	As of March 31, 2010						As of December 31, 2009
	Notional Amount of   Derivatives		Derivative     Assets		Derivative     Liabilities		Notional Amount of     Derivatives		Derivative Assets		Derivative     Liabilities
Derivatives in hedging relationships:
Interest rate swaps	$	159,105	$	1,643	$	(4,930)	$	178,532	$	1,661	$	(5,071)
Total derivatives in hedging relationships		159,105		1,643		(4,930)		178,532		1,661		(5,071)
Derivatives not designated as hedging instruments:
Interest rate swaps		7,704		14		(492)		7,997		14		(463)
Interest rate caps or floors		7,000		62		(33)		5,500		59		(33)
Total derivatives not designated as hedging instruments		14,704		76		(525)		13,497		73		(496)
Total derivatives before netting and collateral adjustments	$	173,809		1,719		(5,455)	$	192,029		1,734		(5,567)
Netting adjustments				(1,619)		1,619				(1,603)		1,603
Cash collateral and related accrued interest				(77)		3,367				(92)		3,555
Total collateral and netting adjustments *				(1,696)		4,986				(1,695)		5,158
Derivative assets and derivative liabilities			$	23	$	(469)			$	39	$	(409)

* 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.

25

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following table presents the components of net (losses) gains on derivatives and hedging activities as presented in the Statements of Income.

	Three Months Ended March 31,
	2010		2009
	Amount of Gain (Loss) Recognized in   Net Gains  (Losses) on Derivatives and   Hedging Activities		Amount of Gain (Loss) Recognized   in Net Gains  (Losses) on Derivatives   and Hedging Activities
Derivatives and hedged items in fair value hedging relationships:
Interest rate swaps	$	46	$	100
Total net gain related to fair value hedge ineffectiveness		46		100
Derivatives not designated as hedging instruments:
Non-qualifying hedges:
Interest rate swaps		(62)		11
Interest rate caps or floors		(1)		1
Total net (loss) gain related to derivatives not designated as hedging		(63)		12
Net (losses) gains on derivatives and hedging activities	$	(17)	$	112

The following table presents, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank’s net interest income.

	Three Months Ended March 31, 2010
	Gain/(Loss)     on Derivative		Gain/(Loss) on     Hedged Item		Net Fair Value Hedge     Ineffectiveness		Effect of Derivatives on     Net Interest Income *
Hedged item type:
Advances	$	40	$	23	$	63	$	(891)
Consolidated Obligations:
Bonds		82		(96)		(14)		376
Discount notes		(7)		4		(3)		7
Total	$	115	$	(69)	$	46	$	(508)
* The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.
	Three Months Ended March 31, 2009
	Gain/(Loss)   on Derivative		Gain/(Loss) on Hedged Item		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on   Net Interest Income *
Hedged item type:
Advances	$	1,246	$	(1,162)	$	84	$	(766)
Consolidated Obligations:
Bonds		(309)		328		19		365
Discount notes		(26)		23		(3)		7
Total	$	911	$	(811)	$	100	$	(394)

* The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

26

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 12—Estimated Fair Values

The Bank records trading securities, available-for-sale 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.

A fair value hierarchy is used 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. The fair value hierarchy defines fair value in terms of a 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” 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 March 31, 2010, the Bank did not carry any financial assets or 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 March 31, 2010, 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 and reflect the entity’s own assumptions. As of March 31, 2010, the Bank carried available-for-sale securities 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.

27

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Fair Value on a Recurring Basis. The following tables present for each fair value 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:

	As of March 31, 2010
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Netting Adjustment*		Total
Assets
Trading securities:
Government-sponsored enterprises debt obligations	$	—	$	3,277	$	—	$	—	$	3,277
Other FHLBanks’ bonds		—		71		—		—		71
State or local housing agency obligations		—		10		—		—		10
Total trading securities		—		3,358		—		—		3,358
Available-for-sale:
Private-label MBS		—		—		2,660		—		2,660
Derivative assets:
Interest-rate related		—		1,719		—		(1,696)		23
Total assets at fair value	$	—	$	5,077	$	2,660	$	(1,696)	$	6,041
Liabilities
Derivative liabilities:
Interest-rate related	$	—	$	(5,455)	$	—	$	4,986	$	(469)
Total liabilities at fair value	$	—	$	(5,455)	$	—	$	4,986	$	(469)
*   Amounts represent the effect of legally enforceable master netting agreements that allow the Bank to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.
	As of December 31, 2009
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Netting Adjustment*		Total
Assets
Trading securities:
Government-sponsored enterprises debt obligations	$	—	$	3,470	$	—	$	—	$	3,470
Other FHLBanks’ bonds		—		72		—		—		72
State or local housing agency obligations		—		11		—		—		11
Total trading securities		—		3,553		—		—		3,553
Available-for-sale:
Private-label MBS		—		—		2,256		—		2,256
Derivative assets		—		1,734		—		(1,695)		39
Total assets at fair value	$	—	$	5,287	$	2,256	$	(1,695)	$	5,848
Liabilities
Derivative liabilities	$	—	$	(5,567)	$	—	$	5,158	$	(409)
Total liabilities at fair value	$	—	$	(5,567)	$	—	$	5,158	$	(409)

* Amounts represent the effect of legally enforceable master netting agreements that allow the Bank to settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

28

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 at fair value in the quarter in which the changes occur. Transfers are reported as of the beginning of the period. There were no financial instruments for which the fair value classification changed during the three-month periods ended March 31, 2010 and 2009.

The following table presents a reconciliation of available-for-sale securities that are measured at fair value using significant unobservable inputs (Level 3):

	Three Months Ended March 31,
	2010		2009
Balance, beginning of period	$	2,256	$	—
Transfer of private-label MBS from held-to-maturity to available-for-sale		409		1,604
Total gains (losses) realized and unrealized:
Included in net impairment losses recognized in earnings		(43)		—
Included in other comprehensive loss		38		—
Balance, end of period	$	2,660	$	1,604

Described below are the Bank’s fair value measurement methodologies for financial assets and liabilities measured or disclosed at fair value. For assets and liabilities measured at fair value, the disclosures below include a summary of the significant inputs used to determine fair value.

Cash and due from banks and interest-bearing deposits. The estimated fair value approximates the recorded book balance.

Investment securities. The estimated fair value of investment securities is determined based on independent market-based prices received from up to four designated third-party pricing vendors, when available. These third-party pricing vendors use methods that generally employ, but are not limited to, benchmark yields, recent trades, dealer estimates, valuation models, benchmarking of like securities, sector groupings, and/or matrix pricing. The Bank establishes a preliminary estimated fair value for each of its investment securities by calculating the median of the prices received. The median price is generally accepted as an appropriate estimate of fair value unless the median price falls outside of certain tolerance thresholds established by the Bank or evidence suggests that using the median price would not be appropriate. If only one third-party price is received or if no third-party price is available, the Bank estimates the fair value of the security using an approved internal discounted cash flow model.

Preliminary estimated fair values that are outside the tolerance thresholds established by the Bank, or those that management believes may not be appropriate based on all available information (including those limited instances in which only one price is received), are subject to further analysis. This further analysis includes, but is not limited to, a comparison of the preliminary fair value estimate to prices of similar securities, a comparison to non-binding dealer estimates, or the use of an internal model.

29

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

As of March 31, 2010, four third-party vendor prices were received for substantially all of the Bank’s investment securities and substantially all of those prices fell within the specified thresholds. The relative proximity of the prices received supports the Bank’s conclusion that the final estimated fair values are reasonable. Based on the current lack of significant market activity for private-label MBS, the fair value measurements for such securities as of March 31, 2010 and December 31, 2009 fell within Level 3 of the fair value hierarchy. The inputs to all other investment securities are classified as Level 2 in the fair value hierarchy.

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 March 31, 2010 and December 31, 2009, respectively. 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.

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 the Bank 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 on the Statements of Condition at March 31, 2010 and December 31, 2009.

30

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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.

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 March 31, 2010 and December 31, 2009. 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 table presented below does 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.

31

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The carrying values and estimated fair values of the Bank’s financial instruments were as follows:

	As of March 31, 2010				As of December 31, 2009
	Carrying          Value		Estimated          Fair Value		Carrying          Value		Estimated          Fair Value
Financial Instruments
Assets:
Cash and due from banks	$	4	$	4	$	465	$	465
Deposits with other FHLBanks		2		2		3		3
Federal funds sold		15,230		15,230		10,043		10,043
Trading securities		3,358		3,358		3,553		3,553
Available-for-sale securities		2,660		2,660		2,256		2,256
Held-to-maturity securities		16,087		15,765		17,085		16,442
Mortgage loans held for portfolio, net		2,418		2,551		2,522		2,633
Advances, net		105,474		105,292		114,580		114,572
Accrued interest receivable		465		465		515		515
Derivative assets		23		23		39		39
Liabilities:
Deposits		(2,941)		(2,941)		(2,989)		(2,989)
Loans from other FHLBanks		(35)		(35)		—		—
Consolidated obligations, net:
Discount notes		(17,778)		(17,777)		(17,127)		(17,127)
Bonds		(115,492)		(116,105)		(121,450)		(122,056)
Mandatorily redeemable capital stock		(481)		(481)		(188)		(188)
Accrued interest payable		(619)		(619)		(612)		(612)
Derivative liabilities		(469)		(469)		(409)		(409)

32

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 13—Commitments and Contingencies

As described in Note 8, 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 par value of the FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was $739,010 and $793,314 as of March 31, 2010 and December 31, 2009, respectively, exclusive of the outstanding consolidated obligations for which the Bank is the primary obligor.

The Bank’s outstanding standby letters of credit were as follows:

	As of March 31, 2010	As of December 31, 2009
Outstanding notional	$                                     19,785	$                                  18,909
Original terms	Less than three months to 19 years	Less than four months to 19 years
Final expiration year	2025	2025

The value of the guarantees related to standby letters of credit is recorded in other liabilities and amounted to $94 and $91 as of March 31, 2010 and December 31, 2009, respectively. Based on management’s credit 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.

The Bank did not have any commitments that unconditionally obligate the Bank to purchase closed mortgage loans as of March 31, 2010 and December 31, 2009. Commitments are generally for periods not to exceed 45 days. Such commitments are recorded as derivatives at their fair values.

The Bank executes derivatives with major banks and broker-dealers and generally enters into bilateral collateral agreements. As of March 31, 2010 and December 31, 2009, 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 $113 and $137, respectively, which can be sold or repledged by those counterparties.

At March 31, 2010, the Bank had committed to the issuance of $3,164 (par value) in consolidated obligation bonds, of which $2,145 were hedged with associated interest rate swaps, and $149 (par value) in consolidated obligation discount notes, none of which were hedged with associated interest rate swaps that had traded but not yet settled. At December 31, 2009, the Bank had committed to the issuance of $2,780 (par value) in consolidated obligation bonds of which $2,775 were hedged with associated interest rate swaps, and $753 (par value) in consolidated obligation discount notes, none of which were hedged with associated interest rate swaps that had traded but not yet settled.

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FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The Bank is subject to legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate, as of the date of the financial statements, 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 14—Transactions with Members and their Affiliates and with Housing Associates

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 able to receive dividends on their investments, to the extent declared by the Bank’s board of directors. All advances are issued to members and eligible “housing associates” under the Federal Home Loan Bank Act of 1932, as amended (“FHLBank Act”), and mortgage loans held for portfolio are purchased from members. The Bank also maintains demand deposit accounts primarily to facilitate settlement activities that are related directly to advances and mortgage loan purchases. All transactions with members are entered into in the ordinary course of the Bank’s business. Transactions with any member that has an officer or director who also is a director of the Bank are subject to the same Bank policies as transactions with other members.

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, Bank of America, National Association, which held 23.0 percent of the Bank’s total regulatory capital stock as of March 31, 2010, was considered a related party. Total advances outstanding to Bank of America, National Association were $37,063 and $37,363 as of March 31, 2010 and December 31, 2009, respectively. Total deposits held in the name of Bank of America, National Association were $2 and less than $1 at March 31, 2010 and December 31, 2009 respectively. No mortgage loans or MBS were acquired from Bank of America, National Association during the three-month periods ended March 31, 2010 and 2009.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Some of the statements made in this quarterly report on Form 10-Q may be “forward-looking statements,” which include statements with respect to the plans, objectives, expectations, estimates and future performance of the Bank 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. All statements other than statements of historical fact are statements that could be 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, developments, or market forecasts

• Forward-looking accounting and financial statement effects

• Those other factors identified and discussed in the Bank’s public filings with the 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 the Bank’s Form 10-K and those risk factors presented under Item 1A in Part II of this quarterly report on Form 10-Q.

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 quarterly 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.

The discussion presented below provides an analysis of the Bank’s results of operations and financial condition for the quarters ended March 31, 2010 and 2009. Management’s discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in the report, as well as the Bank’s audited financial statements for the year ended December 31, 2009.

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Executive Summary

General Overview

The Bank is a cooperative whose primary business activity is providing loans, which the Bank refers to as “advances,” to its members and eligible housing associates. The Bank also makes grants and subsidized advances under the AHP, and provides certain cash management services to members and eligible nonmembers. The consolidated obligations (“COs”) issued by the Office of Finance on behalf of the FHLBanks are the principal funding source for Bank assets. The Bank is primarily liable for repayment of COs issued on its behalf and is jointly and severally liable for the COs issued on behalf of the other FHLBanks. Deposits, other borrowings, and the issuance of capital stock provide additional funding to the Bank. The Bank delivers competitively-priced credit to help its members meet the credit needs of their communities.

Financial Condition

As of March 31, 2010, total assets were $146.3 billion, a decrease of $5.0 billion, or 3.32 percent, from December 31, 2009. This decrease was due primarily to a $9.1 billion, or 7.95 percent, decrease in advances and a $998 million, or 5.84 percent, decrease in held-to-maturity securities, partially offset by a $5.2 billion increase in federal funds sold during the period. Advances, the largest asset on the Bank’s balance sheet, decreased during the period due to maturing advances, prepayments as a result of member failures, and decreased demand for new advances resulting from members’ increased deposit balances, slower loan growth, and access to alternative sources of funding. The decrease in held-to-maturity securities during the period was due primarily to $1.4 billion in proceeds received for principal repayments and maturities, partially offset by the purchase of $481 million in securities classified as held-to-maturity. The increase in federal funds sold during the period was due to the availability of these short-term investments at attractive rates.

As of March 31, 2010, total liabilities were $138.2 billion, a decrease of $4.9 billion, or 3.41 percent, from December 31, 2009. This decrease was due primarily to a $5.3 billion, or 3.83 percent, decrease in COs during the period. The decrease in COs corresponds to the decrease in demand for advances by the Bank’s members during the first quarter of 2010.

Total capital was $8.1 billion at March 31, 2010, a decrease of $154 million, or 1.86 percent, from December 31, 2009. This decrease was due primarily to the reclassification of $293 million in capital stock to mandatorily redeemable capital stock (a liability) as a result of nine member institutions obtaining nonmember status during the period. This decrease was partially offset by a $75 million decrease in accumulated other comprehensive loss, $48 million in net income recorded in retained earnings, and the issuance of $25 million in capital stock during the period.

Results of Operations

The Bank’s net income for the first quarter of 2010 was $48 million, an increase of $50 million from a net loss of $2 million for the first quarter of 2009. The increase in net income was due primarily to a $43 million reduction in credit related other-than-temporary impairment losses recognized in earnings during the first quarter of 2010 compared to the first quarter of 2009.

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For the first quarters of 2010 and 2009, the Bank recognized total other-than-temporary impairment of $64 million and $698 million, respectively. The credit related portion of $46 million and $89 million, respectively, of these other-than-temporary impairment losses is recognized in earnings. The noncredit related portion of $18 million and $609 million, respectively, of the other-than-temporary impairment losses is recorded as a component of other comprehensive loss.

One way in which the Bank analyzes its performance is by comparing its annualized return on equity (“ROE”) to three-month average LIBOR. The Bank’s ROE was 2.36 percent for the first quarter of 2010 compared to a negative 0.08 percent for the first quarter of 2009. The increase in ROE is due primarily to an increase in net income during the period as discussed above. ROE spread to three-month average LIBOR increased to 2.10 percent for the first quarter of 2010 compared to a negative 1.32 percent for the first quarter of 2009. This increase was due primarily to an increase in ROE and a decrease in LIBOR during the period.

The Bank’s interest rate spread increased by 41 basis points for the first quarter of 2010 compared to the first quarter of 2009. This comparative increase was due primarily to lower yields on advances during the first quarter of 2009 due to the write-off of hedging-related basis adjustments on advances that were prepaid.

Business Outlook

Advance demand decreased during the first quarter of 2010, and the Bank expects this trend to continue throughout 2010. Although the decrease in credit related other-than-temporary impairment losses recognized in earnings during the first quarter of 2010 compared to the first quarter of 2009 and the Bank’s net income for the first quarter of 2010 reflect improvements in the financial markets, overall economic conditions remain uncertain. This continued uncertainty, increasing financial institution failures, and high levels of member liquidity could continue to impact negatively advance demand and the market value of the Bank’s private-label MBS portfolio, which could affect the Bank’s financial condition and results of operations.

The Bank maintained significantly higher capital ratios during the first quarter of 2010 compared to previous years. The board of directors continues to consider repurchasing excess activity-based stock on a quarterly basis. A discussion of the board of directors’ recent capital management and dividend decisions is contained in the Bank’s Form 10-K.

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Summary of Selected Financial Data

The following table presents a summary of certain financial information for the Bank for the periods indicated (dollars in millions):

	As of and for the Three Months Ended
	March 31,     2010		December 31,     2009		September 30,     2009		June 30,     2009		March 31,     2009
Statements of Condition (at period end)
Total assets	$	146,281	$	151,311	$	163,410	$	170,206	$	189,445
Investments (1)		37,337		32,940		34,165		32,016		37,368
Mortgage loans		2,419		2,523		2,645		2,834		3,081
Allowance for loan losses		(1)		(1)		(1)		(1)		(1)
Advances, net		105,474		114,580		125,823		134,503		148,090
REFCORP prepayment		—		—		—		—		17
Deposits		2,941		2,989		3,353		4,148		4,896
Consolidated obligations, net :
Discount notes		17,778		17,127		28,418		38,672		49,523
Bonds		115,492		121,450		121,777		117,756		124,780
Total consolidated obligations, net (2)		133,270		138,577		150,195		156,428		174,303
Mandatorily redeemable capital stock		481		188		130		106		1,901
Affordable Housing Program payable		128		125		123		138		132
Payable to REFCORP		14		21		1		30		—
Capital stock - putable		7,852		8,124		8,156		8,119		6,189
Retained earnings		916		873		799		804		612
Accumulated other comprehensive loss		(669)		(744)		(791)		(1,065)		(786)
Total capital		8,099		8,253		8,164		7,858		6,015
Statements of Income
Net interest income		153		162		102		105		35
Net impairment losses recognized in earnings		(46)		(52)		(129)		(46)		(89)
Net gains (losses) on trading securities		4		(52)		25		(74)		(34)
Net (losses) gains on derivatives and hedging activities		(17)		81		45		305		112
Other income (loss) (3)		—		—		1		1		1
Other expenses		29		27		29		30		27
Income (loss) before assessments		65		112		15		261		(2)
Assessments		17		30		4		69		—
Net income (loss)		48		82		11		192		(2)
Return on equity (4)		2.36%		3.95%		0.55%		10.3%		(0.08)%
Return on assets (5)		0.13%		0.20%		0.03%		0.41%		0.00%
Net interest margin (6)		0.41%		0.40%		0.24%		0.23%		0.07%
Regulatory capital ratio (at period end) (7)		6.32%		6.07%		5.56%		5.30%		4.59%
Equity to assets ratio (8)		5.43%		5.07%		4.65%		3.98%		3.82%
Dividend payout ratio (9)		11.5%		10.2%		142.1%		0.00%		0.00%

(1) Investments consist of interest-bearing deposits, federal funds sold, and securities classified as trading, available-for-sale and held-to-maturity.

(2) The amounts presented are the Bank’s primary obligations for consolidated obligations outstanding. The par value of the FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was as follows:

March 31, 2010	$	739,010
December 31, 2009		793,314
September 30, 2009		825,080
June 30, 2009		900,968
March 31, 2009		963,100

(3) Other income (loss) includes service fees and other.

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

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(5) Calculated as net income divided by average total assets.

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

(7) Regulatory capital ratio is regulatory capital stock plus retained earnings as a percentage of total assets at period end.

(8) Calculated as average equity divided by average total assets.

(9) Calculated as dividends declared divided by net income.

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 COs.

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

	As of March 31, 2010			As of December 31, 2009			Increase/(Decrease)
	Amount		Percent of         Total	Amount		Percent of         Total	Amount		Percent
Advances, net	$	105,474	72.11	$	114,580	75.72	$	(9,106)	(7.95)
Long-term investments		21,450	14.66		22,594	14.93		(1,144)	(5.06)
Short-term investments		15,887	10.86		10,346	6.84		5,541	53.56
Mortgage loans, net		2,418	1.65		2,522	1.67		(104)	(4.12)
Other assets		1,052	0.72		1,269	0.84		(217)	(17.08)
Total assets	$	146,281	100.00	$	151,311	100.00	$	(5,030)	(3.32)
Consolidated obligations, net:
Discount notes	$	17,778	12.87	$	17,127	11.97	$	651	3.80
Bonds		115,492	83.57		121,450	84.90		(5,958)	(4.91)
Loans from other FHLBanks		35	0.03		—	—		35	(NM)
Deposits		2,941	2.13		2,989	2.09		(48)	(1.62)
Other liabilities		1,936	1.40		1,492	1.04		444	29.79
Total liabilities	$	138,182	100.00	$	143,058	100.00	$	(4,876)	(3.41)
Capital stock	$	7,852	96.95	$	8,124	98.44	$	(272)	(3.34)
Retained earnings		916	11.30		873	10.58		43	4.90
Accumulated other comprehensive loss		(669)	(8.25)		(744)	(9.02)		75	10.13
Total capital	$	8,099	100.00	$	8,253	100.00	$	(154)	(1.86)

(NM)-Not meaningful

Advances

Advances were $105.5 billion at March 31, 2010, a decrease of $9.1 billion, or 7.95 percent, from December 31, 2009. This decrease was due to maturing advances, prepayments as a result of member failures and decreased demand for new advances resulting from members’ increased deposit balances, slower loan growth, and access to alternative sources of funding. At March 31, 2010, 88.6 percent of the Bank’s advances were fixed-rate. However, the Bank often simultaneously enters into derivatives with the issuance of advances to convert the rates on them, in effect, into a short-term variable interest rate, usually based on LIBOR. Of the par value of $100.8 billion of advances outstanding as of March 31, 2010, $84.2 billion, or 83.6 percent, had their terms reconfigured through the use of interest rate exchange agreements. Of the par value of $109.8 billion of advances outstanding at December 31, 2009, $91.1 billion, or 82.9 percent, had their terms reconfigured through the use of interest-rate exchange agreements. The majority of the Bank’s variable-rate advances were indexed to LIBOR. The Bank also offers variable-rate advances tied to the federal funds rate, prime rate and CMS (constant maturity swap) rates.

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The concentration of the Bank’s advances to its 10 largest borrowing institutions was as follows (dollars in millions):

	Advances to 10 largest borrowing     member institutions		Percent of total advances outstanding
March 31, 2010	$	68,709	68.2
December 31, 2009		75,418	68.7

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 Resolution Funding Corporation (“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, carried the highest rating from Moody’s or S&P, securities issued by the U.S. government or U.S. government agencies, state and local housing agency obligations, 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 (dollars in millions):

					Increase/ (Decrease)
	As of March 31, 2010		As of December 31, 2009		Amount		Percent
Short-term investments:
Deposits with other FHLBanks	$	2	$	3	$	(1)	(3.75)
Held-to-maturity-Certificates of deposit		655		300		355	118.33
Federal funds sold		15,230		10,043		5,187	51.64
Total short-term investments		15,887		10,346		5,541	53.56
Long-term investments:
State or local housing agency obligations		121		126		(5)	(3.36)
U.S. government agency securities		3,348		3,542		(194)	(5.49)
Mortgage-backed securities:
U.S. government agency securities		7,115		7,375		(260)	(3.52)
Private label		10,866		11,551		(685)	(5.93)
Total mortgage-backed securities		17,981		18,926		(945)	(4.99)
Total long-term investments		21,450		22,594		(1,144)	(5.06)
Total investments	$	37,337	$	32,940	$	4,397	13.35

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Short-term investments were $15.9 billion at March 31, 2010, an increase of $5.5 billion, or 53.6 percent, from December 31, 2009. The increase in short-term investments was due primarily to a $5.3 billion increase in overnight federal funds available at attractive rates and a $355 million increase in certificates of deposit during the period.

Long-term investments were $21.5 billion at March 31, 2010, a decrease of $1.1 billion, or 5.06 percent, from December 31, 2009. The decrease in long-term investments was due primarily to principal repayments and maturities during the period and the lack of quality MBS at attractive prices. In addition, during the first quarter of 2010, the Bank recorded total other-than-temporary impairment losses of $64 million related to its private-label MBS, of which $46 million was recognized in earnings.

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 between 250 percent and 275 percent to help maximize and stabilize earnings. These investments amounted to 210 percent and 224 percent of total capital plus mandatorily redeemable capital stock at March 31, 2010 and December 31, 2009, respectively. The Bank was below its target range at March 31, 2010 due to the lack of quality MBS at attractive prices.

As of March 31, 2010, the Bank had a total of 37 securities classified as available-for-sale in an unrealized loss position, with total gross unrealized losses of $664 million and a total of 160 securities classified as held-to-maturity in an unrealized loss position, with total gross unrealized losses of $578 million. As of December 31, 2009, the Bank had a total of 32 securities classified as available-for-sale in an unrealized loss position, with total gross unrealized losses of $739 million, and a total of 187 securities classified as held-to-maturity in an unrealized loss position, with total gross unrealized losses of $883 million.

The Bank evaluates its individual 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. The Bank recognizes an other-than-temporary impairment loss when the Bank determines it will not recover the entire amortized cost basis of a security. Securities in the Bank’s private-label MBS portfolio are evaluated by estimating the present value of cash flows the Bank expects to collect based on the structure of the security and certain economic environment assumptions, such as delinquency and default rates, loss severity, home price appreciation, interest rates, and securities prepayment speeds, while factoring in underlying collateral and credit enhancement.

Based on the impairment analysis described above, for the first quarters of 2010 and 2009, the Bank recognized total other-than-temporary impairment losses of $64 million and $698 million, respectively, related to private-label MBS in its investment securities portfolio. The total amount of other-than-temporary impairment is calculated as the difference between the security’s amortized cost basis and its fair value. The credit related portion of $46 million and $89 million, respectively, of these other-than-temporary impairment losses is reported in the Statements of Income as “Net impairment losses recognized in earnings.” The noncredit related portion of $18 million and $609 million, respectively, of the other-than-temporary impairment losses is recorded as a component of other comprehensive loss.

The remainder of the Bank’s investment 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 presently expects to collect all contractual cash flows and the Bank does not intend to sell the securities and it is not more likely than not that the Bank will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, which may be at maturity. This assessment is based on the determination that the Bank has sufficient capital and liquidity to operate its business and has no need to sell these securities, nor has the Bank entered into any contractual constraints that would require the Bank to sell these securities.

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Mortgage Loans Held for Portfolio

Mortgage loans held for portfolio were $2.4 billion at March 31, 2010, a decrease of $104 million, or 4.12 percent, from December 31, 2009. The decrease in mortgage loans held was due to the maturity of these assets during the period. In 2006, the Bank ceased purchasing assets under the Affordable Multifamily Participation Program, and in 2008 the Bank ceased purchasing assets under the Mortgage Partnership Finance Program (“MPF Program) and suspended acquisitions of mortgage loans under the Mortgage Purchase Program (“MPP”). If the Bank does not resume purchasing mortgage loans under these programs, each of the existing mortgage loans held for portfolio will mature according to the terms of its note. The Bank purchased loans with maturity dates extending out to 2038.

As of March 31, 2010 and December 31, 2009, 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. The following table provides the percentage of unpaid principal balance of MPF Program and MPP loans held for portfolio for the five largest state concentrations.

	As of March 31, 2010	As of December 31, 2009
	Percent of Total	Percent of Total
South Carolina	22.8	23.0
Florida	18.8	19.0
North Carolina	15.5	16.0
Georgia	14.8	15.0
Virginia	9.7	10.0
All other	18.4	17.0
Total	100.0	100.0

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 91.1 percent of the $146.3 billion in total assets at March 31, 2010, remaining relatively stable from the financing ratio of 91.6 percent as of December 31, 2009.

Consolidated obligation bonds were $115.5 billion at March 31, 2010, a decrease of $6.0 billion, or 4.91 percent, from December 31, 2009. Consolidated obligation discount notes were $17.8 billion at March 31, 2010, an increase of $651 million, or 3.80 percent, from December 31, 2009. The net decrease in consolidated obligations corresponds to the decrease in demand for advances by the Bank’s members during the first quarter of 2010 and the increase in liquidity from advance prepayments as a result of member failures. Consolidated obligation bonds outstanding at March 31, 2010 and December 31, 2009 were primarily fixed-rate. However, the Bank often simultaneously enters into derivatives with the issuance of consolidated obligation bonds to convert the rates on them, in effect, into short-term variable interest rates, usually based on LIBOR. Of the par value of $114.1 billion of consolidated obligation bonds outstanding at March 31, 2010, $76.8 billion, or 67.3 percent, had their terms reconfigured through the use of interest-rate exchange agreements. The comparable notional amount of such outstanding derivatives at December 31, 2009 was $85.2 billion, or 70.9 percent, of the par value of consolidated obligation bonds.

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As of March 31, 2010, callable consolidated obligation bonds constituted 30.7 percent of the total par value of consolidated obligation bonds outstanding, compared to 27.7 percent at December 31, 2009. This increase was due to market conditions that made the issuance of callable 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.

Deposits

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 $2.9 billion as of March 31, 2010, compared to $3.0 billion as of December 31, 2009.

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 March 31, 2010.

Capital

Total capital was $8.1 billion at March 31, 2010, a decrease of $154 million, or 1.86 percent, from December 31, 2009. This decrease was due primarily to the reclassification of $293 million in capital stock to mandatorily redeemable capital stock (a liability) as a result of nine member institutions obtaining nonmember status during the period. Members obtain nonmember status as a result of a merger into, or acquisition of all or substantially all of the member’s assets and liabilities by, a nonmember, or through transfer by the FDIC of a failed member’s assets and liabilities to a nonmember purchaser. This decrease was partially offset by a $75 million decrease in accumulated other comprehensive loss, $48 million in net income recorded in earnings, and the issuance of $25 million in capital stock during the period.

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The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank was in compliance with these regulatory capital rules and requirements as shown in the following table (dollars in millions):

	As of March 31, 2010				As of December 31, 2009
	Required		Actual		Required		Actual
Regulatory capital requirements:
Risk based capital	$	2,716	$	9,249	$	3,010	$	9,185
Total capital-to-assets ratio		4.00%		6.32%		4.00%		6.07%
Total regulatory capital*	$	5,851	$	9,249	$	6,052	$	9,185
Leverage ratio		5.00%		9.48%		5.00%		9.11%
Leverage capital	$	7,314	$	13,873	$	7,566	$	13,777

* Mandatorily redeemable capital stock is considered capital for regulatory purposes, and “total regulatory capital” includes the Bank’s $481 million and $188 million in mandatorily redeemable capital stock at March 31, 2010 and December 31, 2009, respectively.

On August 4, 2009, the Finance Agency issued a final rule that established criteria based on the amount and type of capital held by an 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 provides that the Director will make a capital classification for each FHLBank at least quarterly and delineates the types of prompt corrective actions the Director may order in the event an FHLBank is not adequately capitalized. On March 31, 2010, the Bank received notification from the Director that, based on December 31, 2009 data, the Bank meets the definition of “adequately capitalized.”

As of March 31, 2010, the Bank had capital stock subject to mandatory redemption from 54 members and former members, consisting of B1 membership stock and B2 activity-based stock, compared to 45 members and former members as of December 31, 2009. The Bank is not required to redeem or repurchase such 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.

As of March 31, 2010 and December 31, 2009, the Bank’s activity-based stock included $2.6 billion and $1.9 billion, respectively, of excess shares subject to repurchase by the Bank at its discretion. The Bank’s board of directors determines on a quarterly basis any discretionary repurchases of excess shares.

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Results of Operations

Net Income

The following table sets forth the Bank’s significant income items for the first quarters of 2010 and 2009, and provides information regarding the changes during the periods (dollars in millions). These items are discussed in more detail below.

	Three Months Ended March 31,				Increase/        (Decrease)		Increase/      (Decrease) %
	2010		2009
Net interest income	$	153	$	35	$	118	328.80
Other loss		(59)		(10)		(49)	(485.55)
Other expense		29		27		2	3.75
Total assessments		17		–		17	(NM)
Net income (loss)		48		(2)		50	(NM)
(NM)-Not meaningful

Net Interest Income

A 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 derivative instruments and hedging activities related adjustments.

Net interest income was $153 million for the first quarter of 2010, an increase of $118 million compared to the first quarter of 2009. The increase in net interest income was due primarily to the accelerated write-off of hedging-related basis adjustments due to the prepayment of advances as well as other hedging related adjustments that decreased net interest income during the first quarter of 2009.

The following table presents spreads between the average yield on total interest-earning assets and the average cost of interest-bearing liabilities for the first quarters of 2010 and 2009 (dollars in millions). 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 GAAP, the net interest income/expense associated with the derivative is included in net interest income and in the calculation of interest rate spread. If the derivatives do not qualify for fair-value hedge accounting under GAAP, the net interest income/expense associated with the derivatives is excluded from net interest income and the calculation of the interest rate spread. Amortization associated with hedging-related basis adjustments also are reflected in net interest income, which affect interest rate spread. As noted in the below tables, during the first quarter of 2010, compared to the first quarter of 2009, the interest rate spread increased by 41 basis points. The increase in interest rate spread during the periods is due primarily to large write-offs of basis adjustments associated with hedging on prepaid advances reducing interest income as well as other hedging-related adjustments during the first quarter of 2009.

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Spread and Yield Analysis

	Three Months Ended March 31,
	2010					2009
	Average				Yield/	Average				Yield/
	Balance		Interest		Rate (%)	Balance		Interest		Rate (%)
Assets
Federal funds sold	$	11,552	$	5	0.16	$	15,833	$	8	0.21
Interest-bearing deposits (1)		3,562		1	0.14		5,408		3	0.19
Certificates of deposit		576		—	0.22		—		—	—
Long-term investments (2)		22,488		253	4.56		26,774		329	4.99
Advances		111,170		72	0.26		155,402		435	1.13
Mortgage loans held for portfolio (3)		2,465		32	5.28		3,181		42	5.41
Loans to other FHLBanks		1		—	0.13		1		—	0.29
Total interest-earning assets		151,814		363	0.97		206,599		817	1.60
Allowance for credit losses on mortgage loans		(1)					(1)
Other assets		1,083					2,408
Total assets	$	152,896				$	209,006
Liabilities and Capital
Demand and overnight deposits	$	2,814		—	0.05	$	4,345		2	0.14
Other interest-bearing deposits (4)		90		—	0.14		66		—	0.20
Short-term borrowings		15,582		3	0.06		53,136		163	1.25
Long-term debt		120,445		207	0.70		134,060		615	1.86
Other borrowings		226		—	0.18		600		2	1.16
Total interest-bearing liabilities		139,157		210	0.61		192,207		782	1.65
Other liabilities		5,430					8,809
Total capital		8,309					7,990
Total liabilities and capital	$	152,896				$	209,006
Net interest income and net yield on interest-earning assets			$	153	0.41			$	35	0.07
Interest rate spread					0.36					(0.05)
Average interest-earning assets to interest-bearing liabilities					109.10					107.49

  Notes

  (1)     Includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.

  (2)     Includes trading securities at fair value and available-for-sale securities at amortized cost.

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

  (4)     Includes amounts recognized for the right to return cash collateral received under master netting agreements with derivative counterparties.

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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 volume changes and rate changes affected the Bank’s interest income and interest expense (in millions). As noted in the table, the overall change in net interest income during the first quarter of 2010, compared to the first quarter of 2009, was primarily rate related.

		Volume and Rate Table*
	Three Months Ended March 31,
	2010 vs. 2009
	Volume		Rate		Increase (Decrease)
Increase (decrease) in interest income:
Federal funds sold	$	(2)	$	(1)	$	(3)
Interest-bearing deposits		(1)		(1)		(2)
Long-term investments		(50)		(26)		(76)
Advances		(98)		(265)		(363)
Mortgage loans held for portfolio		(9)		(1)		(10)
Total		(160)		(294)		(454)
Increase (decrease) in interest expense:
Demand and overnight deposits		—		(2)		(2)
Short-term borrowings		(69)		(91)		(160)
Long-term debt		(57)		(351)		(408)
Other borrowings		(1)		(1)		(2)
Total		(127)		(445)		(572)
(Decrease) increase in net interest income	$	(33)	$	151	$	118

* 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.

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. The table below outlines the overall effect of derivatives and hedging activities on net interest income and other income (loss) related results (in millions). For a description regarding the individual interest components discussed below, see the Bank’s Form 10-K.

	Three Months Ended  March 31,
	2010		2009
Net interest income	$	153	$	35
Interest components of hedging activities included in net interest income:
Hedging advances	$	(891)	$	(767)
Hedging consolidated obligations		383		373
Hedging related amortization		(46)		(159)
Net decrease in net interest income	$	(554)	$	(553)
Interest components of 8rivative activity included in other income (loss):
Purchased options	$	1	$	9
Synthetic macro funding		(1)		(11)
Trading securities		(39)		(33)
Net decrease in other income (loss)	$	(39)	$	(35)

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Other Income (Loss)

The Bank’s other income (loss) is composed primarily of net impairment losses recognized in earnings, net gains (losses) on trading securities and net (losses) gains on derivatives and hedging activities. The following table presents the components of other income (loss) (in millions):

	Three Months Ended  March 31,
	2010		2009		Increase (Decrease)
Other Income (Loss):
Net impairment losses recognized in earnings	$	(46)	$	(89)	$	43
Net gains (losses) on trading securities		4		(34)		38
Net (losses) gains on derivatives and hedging activities		(17)		112		(129)
Other		—		1		(1)
Total other loss	$	(59)	$	(10)	$	(49)

The overall changes in other income (loss) for the first quarter of 2010, compared to the first quarter of 2009, 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). The Bank hedges trading securities with derivative transactions, and the income effect of the market-value change for these securities was offset by market-value changes in the related derivatives. In addition, during the first quarters of 2010 and 2009, the Bank recorded $46 million and $89 million, respectively, of net impairment losses recognized in earnings as part of other income (loss).

The Bank also records all gains or losses, comprising changes in fair value and interest paid or received, of non-qualifying hedges in the net (losses) gains on derivatives and hedging activities classification. The following tables detail each of the components of net (losses) gains on derivatives and hedging activities (in millions):

	Advances		Purchased Options, Macro      Hedging and     Synthetic Macro Funding		Investments		Consolidated         Obligations Bonds		Consolidated Obligations       Discount Notes		Total
Three Months Ended March 31, 2010
Interest-related	$	—	$	—	$	(39)	$	—	$	—	$	(39)
Qualifying fair value hedges		63		—		—		(14)		(3)		46
Non-qualifying hedges and other		—		—		(24)		—		—		(24)
Total gains (losses)	$	63	$	—	$	(63)	$	(14)	$	(3)	$	(17)
Three Months Ended March 31, 2009
Interest-related	$	—	$	(2)	$	(33)	$	—	$	—	$	(35)
Qualifying fair value hedges		84		—		—		19		(3)		100
Non-qualifying hedges and other		—		5		42		—		—		47
Total gains (losses)	$	84	$	3	$	9	$	19	$	(3)	$	112

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Non-interest Expense

Non-interest expense increased by $19 million during the first quarter of 2010, compared to the first quarter of 2009, due primarily to a $17 million increase in total assessments due to an increase in income during the period.

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 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. The Bank met this regulatory liquidity requirement during the first quarter of 2010. In light of stress and instability in domestic and international credit markets, the Finance Agency provided liquidity guidance to each FHLBank in September 2008 and March 2009, 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.

In addition, the Bank attempts to maintain sufficient liquidity to service debt obligations for at least 45 days, assuming restricted debt market access. The Bank implemented this 45-day debt service goal effective January 28, 2010; prior to that, the Bank’s goal was to maintain sufficient liquidity for 90 days. The Bank determined that changing the Bank’s liquidity goal from 90 days to 45 days would more closely align the Bank’s internal measures with those recommended by the Finance Agency and would more accurately reflect the Bank’s practice of not committing to consolidated obligation settlements beyond 30 days. The Bank has been in compliance with its internal liquidity goal during the first quarter of 2010 and as of April 30, 2010.

The Bank’s principal source of liquidity is consolidated obligation debt instruments, which 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 an extended period. 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 continuing through the first half of 2009. During that time, the Bank increased its issuance of short-term discount notes as an alternative source of funding. The Bank’s funding costs and ability to issue longer-term and structured debt generally have returned to pre-2008 levels, but continue to reflect some market volatility.

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. The FHLBank Act authorizes the Secretary of Treasury, at his or her discretion, to purchase COs up to an aggregate principal amount of $4 billion. No borrowings under this authority have been outstanding since 1977.

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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 FHLBank COs

•   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 under GAAP. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks’ COs at March 31, 2010 or December 31, 2009. As of March 31, 2010, the FHLBanks had $870.9 billion in aggregate par value of COs issued and outstanding, $131.9 billion of which was attributable to the Bank.

As of March 31, 2010, the Bank had outstanding standby letters of credit of approximately $19.8 billion with original terms of less than three months to 19 years, with the longest final expiration in 2025. As of December 31, 2009, the Bank had outstanding standby letters of credit of approximately $18.9 billion with original terms of less than four months to 19 years, with the longest final expiration in 2025. The Bank generally requires standby letters of credit to contain language permitting the Bank, upon annual renewal dates and prior notice to the beneficiary, to choose not to renew the standby letter of credit, which effectively terminates the standby letter of credit prior to its scheduled final expiration date. Outstanding standby letters of credit have increased due to increased acceptance of standby letters of credit by public unit depositors as collateral for public deposits, a decrease in the credit ratings of other standby letter of credit issuers, a decrease in the number of financial institutions providing standby letters of credit or alternative forms of credit enhancement, and provisions of the Housing Act which permitted the use of FHLBank standby letters of credit as credit enhancement for tax-exempt bonds. The Housing Act provisions apply only to tax-exempt bonds issued or refunded from July 30, 2008 through December 31, 2010. It is uncertain at this time whether the Housing Act provisions related to FHLBank standby letters of credit will be extended. The Bank expects its standby letter of credit activity to continue to grow for the near future, but improvement in the financial markets and expiration of the Housing Act authority could result in a decrease in future standby letter of credit activity.

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 may convert 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 does not deem it necessary to have an allowance for credit losses for these unfunded letters of credit as of March 31, 2010. Management regularly reviews its standby letter of credit pricing in light of several factors, including the Bank’s potential liquidity needs related to draws on its standby letters of credit.

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Contractual Obligations

As of March 31, 2010, there has been no material change outside the ordinary course of business in the Bank’s contractual obligations as reported in the Bank’s Form 10-K.

Legislative and Regulatory Developments

Director Eligibility, Elections, Compensation and Expenses

On April 5, 2010, the Finance Agency issued a final rule implementing two separate proposed rules on director elections and director compensation, respectively. Under the final rule, the redesignation of a directorship to a new state prior to the end of the term as a result of the annual designation of FHLBank directorships causes the original directorship to terminate and creates a new directorship that will be filled by an election of the members. The final rule also repeals the statutory caps on the annual compensation that can be paid to FHLBank directors and allows each FHLBank to pay its directors reasonable compensation and expenses, subject to the authority of the Director of the Finance Agency to object to, and to prohibit prospectively, compensation and/or expenses that the Director determines are not reasonable. The final rule became effective May 5, 2010.

Board of Directors of the Office of Finance

On May 3, 2010, the Finance Agency published a final rule regarding the board of directors of the Office of Finance. The final rule will expand the Office of Finance board of directors from three members to 17 members, including the president of each of the 12 FHLBanks and five independent directors. The five independent directors will serve as the Office of Finance’s audit committee and the rule gives the audit committee increased authority over the form and content of the information that the FHLBanks provide to the Office of Finance for use in the combined financial reports. The rule becomes effective June 2, 2010.

FHLBank Investments

On May 4, 2010, the Finance Agency published a notice of proposed rulemaking regarding FHLBank investments. Among other things, the proposed rule would: (1) move the existing investment regulations from 12 C.F.R. Part 956 to 12 C.F.R. Part 1267, and (2) incorporate the current limitations on the level of an FHLBank’s MBS investments that are applicable to an FHLBank as a matter of Finance Agency financial management policy and order (including without limitation the provision limiting the amount of an FHLBank’s MBS investments to no more than 300 percent of an FHLBank’s capital). The proposal also requests comment on whether additional limitations on an FHLBank’s MBS investments, including its private-label MBS investments, should be adopted as part of a final regulation and whether with respect to private-label MBS investments such limitations should be based on the amount of an FHLBank’s retained earnings. Comments on the proposed rule are due by July 6, 2010.

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Financial Reform

Financial regulatory reform legislation being considered by Congress could have substantial direct and indirect effects on the Bank. The proposed legislation provides for the identification of systemically significant institutions and subjects the identified financial institutions to heightened supervision and regulatory requirements. If the legislation were to become law and the Bank were so identified, the Bank might become subject to new capital requirements, liquidity requirements, assessment obligations, and concentration limits, as well as a new resolution framework. Possible concentration limits may include limiting the Bank from lending an amount that exceeds 25 percent of capital stock and surplus to a member financial institution, which could have a negative effect on the Bank’s aggregate amount of advances. The proposed legislation also may impose significant changes on the Bank’s use of over-the-counter derivatives products. Depending on whether the proposed legislation is approved by Congress and signed into law and on the final content of any such legislation, the Bank’s business operations, funding costs, rights, obligations, and the manner in which the Bank carries out its housing-finance mission may be impacted. Since final passage and the scope of the legislation’s application are undetermined, it is impossible to predict the actual effects of this proposed legislation on the Bank at this time.

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

• 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.

A detailed discussion of the Bank’s management of these risks is contained in the Bank’s Form 10-K and under “Item 3. Quantitative and Qualitative Disclosure About Market Risk” below.

Credit Risk

The Bank faces credit risk primarily with respect to its advances, investments, derivatives and mortgage loans.

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 the quality and value of the assets members pledge as eligible collateral.

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The Bank utilizes 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 nine and 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 amount of advances outstanding to borrowers with the specified ratings as of the specified dates (dollars in millions).

	As of March 31, 2010		As of December 31, 2009
Rating	Number of                          Borrowers	Outstanding         Advances	Number of           Borrowers	Outstanding Advances
1-4	85	$                    4,364	93	$                    3,969
5-7	219	27,221	255	31,059
8	149	50,731	151	56,880
9	207	12,078	212	12,358
10	163	5,484	134	4,788

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. However, the Bank’s board of directors, or a relevant committee thereof, may approve a higher limit at its discretion. As of March 31, 2010, no borrowers have been approved for a credit limit higher than 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 balances. 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 (dollars in millions):

	Total Par Value       of Outstanding Advances		LCV of Collateral         Pledged by          Members		First Mortgage         Collateral (%)	Securities          Collateral (%)	Other Real Estate        Related Collateral       (%)
As of March 31, 2010	$	100,753	$	203,388	65.6	10.6	23.8
As of December 31, 2009		109,813		216,032	63.0	11.5	25.5

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As of February 1, 2010, for purposes of determining each member’s LCV, the Bank estimates the current market value of all residential first mortgage loans pledged as collateral based on information provided by the member on individual loans or its loan portfolio through the regular collateral reporting process. The estimated market value is discounted to account for the price volatility of loans as well as estimated liquidation and servicing costs in the event of the member’s default.

According to the FDIC, during the first quarter of 2010, 41 FDIC-insured institutions were closed and the FDIC was named receiver, compared to 21 FDIC-institutions that were closed during the first quarter of 2009. Of the 41 FDIC-insured institutions that were closed during the first quarter of 2010, 13 were members of the Bank. All outstanding advances to those institutions placed into FDIC receivership were either paid in full or assumed by another member institution under purchase and assumption agreements between the assuming institution and the FDIC.

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.

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 an allowance for credit losses on advances as of March 31, 2010 and December 31, 2009.

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 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

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• 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, collateralized mortgage obligations (“CMOs”), collateralized debt obligations (“CDOs”), and real estate mortgage-investment conduits (“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 Risk Management Policy (“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.

The Bank experienced an increase 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 $10.8 billion at December 31, 2009 to $16.4 billion as of March 31, 2010. As of March 31, 2010, the Bank had unsecured credit exposure to three non-U.S. government counterparties that was greater than 10 percent of total unsecured credit exposure. Additionally, the Bank had unsecured credit exposure to one non-U.S. 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 U.S. agency (Fannie Mae, Freddie Mac and Ginnie Mae) obligations, including CMOs and 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 long-term investment portfolio as of March 31, 2010 included $10.9 billion of private-label MBS, which represented a substantial portion, or 50.7 percent of the carrying value, of the Bank’s long-term investment portfolio.

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The tables below provide information on the credit ratings of the Bank’s private-label MBS held at March 31, 2010, based on their credit ratings as of March 31, 2010 and April 30, 2010 (in millions). The credit ratings reflect the lowest rating as reported by an NRSRO.

	As of March 31, 2010
Investment Ratings:	Amortized Cost		Estimated Fair Value
AAA	$	4,069	$	3,960
AA		621		589
A		1,945		1,740
BBB		351		321
BB		814		718
B		930		797
CCC		2,495		1,927
CC		141		121
C		164		133
Total	$	11,530	$	10,306
	As of April 30, 2010
Investment Ratings:	Amortized Cost		Estimated Fair Value
AAA	$	4,069	$	3,960
AA		539		512
A		1,802		1,620
BBB		336		308
BB		798		706
B		680		604
CCC		2,983		2,327
CC		159		136
C		164		133
Total	$	11,530	$	10,306

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The table below provides information on the credit ratings of the Bank’s private-label MBS held at December 31, 2009 (in millions). The credit ratings reflect the lowest rating as reported by an NRSRO.

	As of December 31, 2009
Investment Rating:	Amortized Cost		Estimated Fair Value
AAA	$	4,477	$	4,291
AA		741		684
A		2,070		1,781
BBB		302		268
BB		889		757
B		1,247		1,004
CCC		2,240		1,635
CC		148		123
C		176		137
Total	$	12,290	$	10,680

A portion of the Bank’s private-label MBS, or 35.3 percent, was rated AAA as of April 30, 2010 and 23.2 percent were rated AA to BBB as of April 30, 2010. Subsequent to March 31, 2010, $2.6 billion or 22.4 percent, of the Bank’s private-label MBS has been downgraded or placed on negative watch as of April 30, 2010 as outlined in the below table (in millions):

	Rating Agency Actions as of April 30, 2010
	Downgraded and Stable			Negative Watch/No Downgrade
		To Below Investment     Grade		Rated Triple     A		Rated     Double A		Rated     Single A		Rated Triple   B		To Below     Investment     Grade
Private-label MBS		$	240	$	1,344	$	266	$	667	$	40	$	23
Total amortized cost		$	240	$	1,344	$	266	$	667	$	40	$	23

For disclosure purposes, 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 universally 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 March 31, 2010, based on the classification by the originator at the time of origination, approximately 88.9 percent of the underlying mortgages 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.

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The tables below provide additional information on the credit rating of the Bank’s private-label MBS backed by prime and Alt-A loans (dollars in millions).

	Credit Ratings of Private-label MBS Backed by Prime Loans
	As of March 31, 2010
	Unpaid Principal         Balance		Amortized       Cost		Gross Unrealized   Losses		Collateral       Delinquency       (%)
Investment Rating:
AAA	$	3,431	$	3,406	$	(80)	1.70
AA		509		504		(27)	3.88
A		1,887		1,884		(200)	8.64
BBB		356		351		(30)	9.85
Below investment grade		4,437		4,103		(684)	17.90
Total	$	10,620	$	10,248	$	(1,021)	10.08
	Credit Ratings of Private-label MBS Backed by Alt-A Loans
	As of March 31, 2010
	Unpaid Principal         Balance		Amortized Cost		Gross Unrealized Losses		Collateral       Delinquency       (%)
Investment Rating:
AAA	$	661	$	663	$	(45)	5.43
AA		117		117		(6)	4.64
A		61		61		(5)	6.53
Below investment grade		487		441		(163)	34.62
Total	$	1,326	$	1,282	$	(219)	16.13

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

	As of March 31, 2010
	AAA				AA				A				BBB
	Unpaid     Principal     Balance		Gross     Unrealized     Losses		Unpaid     Principal     Balance		Gross     Unrealized     Losses		Unpaid     Principal     Balance		Gross     Unrealized     Losses		Unpaid Principal     Balance		Gross     Unrealized     Losses
Prime - Year of Issuance:
2004 and prior	$	3,140	$	(66)	$	264	$	(14)	$	842	$	(93)	$	190	$	(22)
2005		122		(10)		172		(12)		962		(93)		35		(4)
2006		—		—		18		—		—		—		33		(4)
2007		169		(4)		55		(1)		—		—		98		—
2008		—		—		—		—		83		(14)		—		—
Total prime		3,431		(80)		509		(27)		1,887		(200)		356		(30)
Alt-A- Year of Issuance:
2004 and prior		661		(45)		117		(6)		61		(5)		—		—
2005		—		—		—		—		—		—		—		—
2007		—		—		—		—		—		—		—		—
Total Alt-A		661		(45)		117		(6)		61		(5)		—		—
Total	$	4,092	$	(125)	$	626	$	(33)	$	1,948	$	(205)	$	356	$	(30)

	As of March 31, 2010
	Below Investment Grade					Total
	Unpaid     Principal     Balance		Gross     Unrealized     Losses			Unpaid     Principal     Balance		Gross     Unrealized     Losses			Original Credit    Enhancement    (%)	Weighted Average Credit    Support (%)
Prime - Year of Issuance:
2004 and prior	$	53	$	(8	)	$	4,489	$	(203	)	3.0	6.6
2005		1,295		(189	)		2,586		(308	)	6.4	8.5
2006		1,260		(199	)		1,311		(203	)	9.5	8.7
2007		1,630		(273	)		1,952		(278	)	12.3	11.1
2008		199		(15	)		282		(29	)	15.7	15.8
Total prime		4,437		(684	)		10,620		(1,021	)	6.7	8.4
Alt-A- Year of Issuance:
2004 and prior		13		(1	)		852		(57	)	6.8	10.7
2005		395		(149	)		395		(149	)	26.7	26.2
2007		79		(13	)		79		(13	)	12.3	8.1
Total Alt-A		487		(163	)		1,326		(219	)	13.0	15.2
Total	$	4,924	$	(847	)	$	11,946	$	(1,240	)	7.4	9.2

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	Fair Value as a Percentage of Unpaid Principal Balance
	By Year of Issuance
	March 31,     2010	December 31,     2009	September 30,     2009	June 30,     2009	March 31,     2009
Private-label MBS by Year of Issuance:
Prime:
2008	89	82	74	77	54
2007	77	75	73	64	73
2006	77	74	71	63	57
2005	85	82	81	74	66
2004 and earlier	95	94	93	89	86
Weighted-average of all prime	87	85	83	78	75
Alt-A:
2007	69	72	73	63	72
2005	54	53	49	44	44
2004 and earlier	94	92	91	88	89
Weighted-average of all Alt-A	80	79	78	74	76
Weighted-average of all private-label MBS	86	84	83	77	75

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

	As of March 31, 2010						As of December 31, 2009
	Fixed-Rate		Variable-Rate		Total		Fixed-Rate		Variable-Rate		Total
Private-label MBS:
Prime	$	2,318	$	8,302	$	10,620	$	2,517	$	8,765	$	11,282
Alt-A		683		643		1,326		723		658		1,381
Total unpaid principal balance	$	3,001	$	8,945	$	11,946	$	3,240	$	9,423	$	12,663

To assess whether the entire amortized cost bases of its private-label MBS will be recovered, the Bank performed a cash flow analysis for each of its private-label MBS. In performing the cash flow analysis for each of these securities, the Bank used two third party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank’s securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core based statistical areas (“CBSAs”), which are based upon an assessment of the individual housing markets. (The term CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget; as currently defined, a CBSA must contain at least one urban area of 10,000 or more people.) The Bank’s housing price forecast assumed current-to-trough home price declines ranging from zero percent to 12 percent over the next six to 12 months (resulting in peak-to-trough home price declines of up to 65 percent). Thereafter, home prices are projected to remain flat for the first six months following the trough, increase by 0.5 percent for the following six months, increase by three percent in the second year and increase by four percent in each subsequent year.

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The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in the securitization structure in accordance with its prescribed cash flow and loss allocation rules. The model classifies securities, as noted in the below table, based on current characteristics and performance, which may be different from the securities’ classification as determined by the originator at the time of origination. For those securities for which an other-than-temporary impairment was determined to have occurred during the first quarter of 2010 (that is, a determination was made that the entire amortized cost bases will not likely be recovered), the following table represents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings:

	Significant Inputs
	Prepayment Rate		Default Rates		Loss Severities		Current Credit Enhancement
	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)	Weighted     Average (%)	Range (%)
Year of Securitization
Prime:
2008	9.4	9.4 to 9.4	27.7	27.7 to 27.7	43.9	43.9 to 43.9	15.8	15.8 to 15.8
2006	8.3	8.1 to 9.0	12.6	12.2 to 12.7	40.1	39.9 to 40.6	8.3	7.2 to 8.6
2005	9.9	9.9 to 9.9	14.4	14.4 to 14.4	52.1	52.1 to 52.1	8.0	8.0 to 8.0
Total prime	9.0	8.1 to 9.9	19.1	12.2 to 27.7	43.2	39.9 to 52.1	11.3	7.2 to 15.8
Alt-A:
2007	10.0	8.2 to 13.3	55.2	51.8 to 59.8	46.3	43.9 to 48.5	15.0	8.1 to 19.4
2006	9.8	8.9 to 11.7	55.6	52.9 to 58.8	48.6	46.2 to 52.1	10.8	6.7 to 13.0
2005	11.1	6.7 to 13.8	42.2	24.3 to 69.9	45.7	35.5 to 51.2	9.4	4.5 to 13.3
2004 and prior	16.0	15.1 to 19.8	27.4	9.6 to 32.5	47.9	41.6 to 49.4	13.3	11.6 to 15.5
Total Alt-A	10.7	6.7 to 19.8	49.8	9.6 to 69.9	46.7	35.5 to 52.1	12.5	4.5 to 19.4
Total	10.4	6.7 to 19.8	43.9	9.6 to 69.9	46.0	35.5 to 52.1	12.3	4.5 to 19.4

In addition to the cash flow analysis of the Bank’s private-label MBS under a base case (best estimate) housing price scenario, a cash flow analysis also was performed based on a housing price scenario that is more adverse than the base case (adverse case housing price scenario). The adverse case housing price scenario was based on a projection of housing prices that was five percentage points lower at the trough compared to the base case scenario, had a flatter recovery path, and had housing prices increase at a long-term annual rate of three percent compared to four percent in the base case. Under the adverse case housing price scenario, current-to-trough housing price declines were projected to range from 5 percent to 17 percent over the next six to 12 months. Thereafter, home prices were projected to increase zero percent in the first year, one percent in the second year, two percent in the third and fourth years, and three percent in each subsequent year.

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The following table shows the base case scenario and what the impact on other-than-temporary impairment would have been under the more stressful housing price scenario (in millions):

	Three Months Ended March 31, 2010
	Housing Price Scenario
	Base Case						Adverse Case
	Unpaid     Principal     Balance		Other-Than- Temporary     Impairment     Related to Credit Loss		Other-Than- Temporary     Impairment     Related to All Other Factors		Unpaid     Principal     Balance		Other-Than- Temporary     Impairment     Related to Credit Loss		Other-Than- Temporary     Impairment     Related to All Other Factors
Other-than-temporary impaired private-label MBS model classification:
Prime	$	1,482	$	24	$	23	$	2,763	$	93	$	43
Alt-A		1,024		22		(5)		1,409		89		(53)
Total	$	2,506	$	46	$	18	$	4,172	$	182	$	(10)

As previously discussed, based on the Bank’s impairment analysis for the first quarters of 2010 and 2009, the Bank recognized total other-than-temporary impairment losses of $64 million and $698 million, respectively. The credit related portion of $46 million and $89 million, respectively, of these other-than-temporary impairment losses is reported in the Statements of Income as “Net impairment losses recognized in earnings.” The noncredit related portion of $18 million and $609 million, respectively, of the other-than-temporary impairment losses is recorded as a component of other comprehensive loss.

The table below summarizes the total other-than-temporary impairment loss recorded during the periods by classification and by the duration of the unrealized loss prior to impairment (in millions):

	As of March 31, 2010
	Gross Unrealized Loss Position
	Less than 12 Months		12 Months or more		Total
Private-label MBS backed by:
Prime loans	$	—	$	62	$	62
Alt-A		—		2		2
Total	$	—	$	64	$	64
	As of March 31, 2009
	Gross Unrealized Loss Position
	Less than 12 Months		12 Months or more		Total
Private-label MBS backed by:
Prime loans	$	—	$	698	$	698
Total	$	—	$	698	$	698

The remainder of the Bank’s private-label MBS that has not been designated as other-than-temporarily impaired 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 expects to recover the amortized cost basis of these securities, the Bank does not intend to sell the securities, and it is not more likely than not that the Bank will be required to sell the securities before the anticipated recovery of the securities’ remaining amortized cost basis, which may be at maturity.

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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 financial condition and results of operations.

Non-Private-label MBS. The unrealized losses related to U.S. agency MBS are caused by interest rate changes. Because these securities are guaranteed by government agencies or government-sponsored enterprises, it is expected that these securities would not be settled at a price less than the amortized cost basis. The Bank does not consider these investments to be other-than-temporarily impaired as of March 31, 2010 because the decline in fair value is attributable to changes in interest rates and not credit quality, the Bank does not intend to sell the investments and it is not more likely than not that the Bank will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity.

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 through 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, an NRSRO, 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 March 31, 2010, the Bank had $173.8 billion in total notional amount of derivatives outstanding compared to $192.0 billion at December 31, 2009. 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.

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As of March 31, 2010, 98.9 percent of the total notional amount of outstanding derivatives was represented by 20 counterparties with a credit rating of A or better. Of these counterparties, there were three, Barclays Bank Plc, Deutsche Bank AG and Goldman Sachs Group, Inc., that represented more than 10 percent of the Bank’s total notional amount, and three counterparties, Rabobank Nederland, Royal Bank of Canada, and Bank of America, National Association, that represented more than 10 percent of the Bank’s net exposure. As of December 31, 2009, 99.4 percent of the total notional amount of outstanding derivatives was represented by 20 counterparties with a credit rating of A or better. Of these counterparties, there were three, JP Morgan Chase Bank, N.A., Deutsche Bank AG, and Goldman Sachs Group, Inc., that represented more than 10 percent of the Bank’s total notional amount, and four counterparties, Bank of America, National Association, BNP Paribas, Rabobank Nederland and Royal Bank of Canada, that represented more than 10 percent of the Bank’s net exposure.

The following tables represent the credit ratings of the Bank’s derivative counterparties (in millions):

	Derivative Counterparty Credit Exposure As of March 31, 2010
	Notional                 Amount		Total Net Exposure         at Fair Value		Collateral              Held		Net Exposure          After Collateral
Credit Rating:
AAA	$	2,630	$	—	$	—	$	—
AA		55,074		12		—		12
A		114,131		84		77		7
BBB		861		—		—		—
Member institutions*		1,113		4		—		—
Total derivatives	$	173,809	$	100	$	77	$	19

* 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.

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	Derivative Counterparty Credit Exposure As of December 31, 2009
	Notional                 Amount		Total Net Exposure         at Fair Value		Collateral              Held		Net Exposure          After Collateral
Credit Rating:
AAA	$	3,002	$	—	$	—	$	—
AA		55,489		16		—		16
A		132,409		97		92		5
BBB		25		—		—		—
Member institutions*		1,104		4		—		—
Total derivatives	$	192,029	$	117	$	92	$	21

* 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 pledged to the Bank, 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 the 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

In 2008, the Bank suspended new acquisitions of mortgage loans under the MPP and ceased purchasing assets under the MPF Program.

The Bank seeks to manage the credit risk associated with MPP and the MPF Program by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institution. These risk management practices are described in detail in the Bank’s Form 10-K. In some cases, a portion of the credit support for MPP and MPF loans is provided under a primary and/or supplemental mortgage insurance policy. 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 31, 2010, all of the Bank’s mortgage insurance providers have been rated below AA by one or more NRSROs for their claims paying ability or insurer financial strength. 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 March 31, 2010.

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Critical Accounting Policies and Estimates

A description of the Bank’s critical accounting policies and estimates is contained in detail in the Bank’s Form 10-K. There have been no material changes to these policies and estimates during the period reported.

Recently Issued and Adopted Accounting Guidance

See Note 2 to the interim financial statements for a discussion of recently issued and adopted accounting guidance.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following quantitative and qualitative disclosures about market risk should be read in conjunction with the quantitative and qualitative disclosures about market risk that are included in the Bank’s Form 10-K. The information provided herein is intended to update the disclosures made in the Bank’s Form 10-K.

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. A description of the Bank’s management of interest-rate risk is contained in the Bank’s Form 10-K.

The Bank uses derivative financial instruments to reduce the interest-rate risk exposure inherent in otherwise unhedged assets and funding positions. These derivatives are used to adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve risk management objectives.

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The following table summarizes the fair-value amounts of derivative financial instruments, excluding accrued interest, by product type (in millions). The category “Fair value hedges” represents hedge strategies for which hedge accounting is achieved. The category “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.

	Derivative Financial Instruments Excluding Accrued Interest/By Product
	As of March 31, 2010				As of December 31, 2009
	Total              Notional		Estimated Fair Value Gain /(Loss) (excludes accrued                  interest)		Total              Notional		Estimated Fair Value Gain /(Loss) (excludes accrued                  interest)
Advances:
Fair value hedges	$	82,581	$	(4,622)	$	89,316	$	(4,677)
Firm commitments		3		—		—		—
Non-qualifying hedges		1,644		(85)		1,763		(72)
Total		84,228		(4,707)		91,079		(4,749)
Investments:
Non-qualifying hedges		3,000		(312)		3,218		(289)
Total		3,000		(312)		3,218		(289)
Consolidated obligation bonds:
Fair value hedges		74,232		1,217		82,706		1,133
Non-qualifying hedges		2,537		5		2,512		6
Total		76,769		1,222		85,218		1,139
Consolidated obligation discount notes:
Fair value hedges		2,289		1		6,510		8
Total		2,289		1		6,510		8
Balance sheet:
Non-qualifying hedges		5,297		16		3,796		10
Total		5,297		16		3,796		10
Intermediary positions:
Intermediaries		2,226		—		2,208		—
Total		2,226		—		2,208		—
Total notional and fair value	$	173,809	$	(3,780)	$	192,029	$	(3,881)
Total derivatives excluding accrued interest			$	(3,780)			$	(3,881)
Accrued interest				44				48
Cash collateral held by counterparty -assets				3,367				3,555
Cash collateral held from counterparty - liabilities				(77)				(92)
Net derivative balance			$	(446)			$	(370)
Net derivative assets balance			$	23			$	39
Net derivative liabilities balance				(469)				(409)
Net derivative balance			$	(446)			$	(370)

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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-earning assets and interest-bearing 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.

Bank policy requires the Bank to maintain its effective duration of equity within a range of +5 years to –5 years, assuming current interest rates, and within a range of +7 years to –7 years, assuming an instantaneous parallel increase or decrease in market interest rates of 200 basis points. The table below reflects the Bank’s effective duration exposure measurements as calculated in accordance with Bank policy.

	Effective Duration Exposure (In years)
	As of March 31, 2010			As of December 31, 2009
	Up 200 Basis          Points	Current	Down 200 Basis     Points*	Up 200 Basis             Points	Current	Down 200         Basis Points*
Assets	0.65	0.45	0.25	0.68	0.50	0.27
Liabilities	0.53	0.57	0.29	0.52	0.56	0.51
Equity	2.26	(1.30)	(0.32)	3.05	(0.31)	(3.57)
Effective duration gap	0.12	(0.12)	(0.04)	0.16	(0.06)	(0.24)

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

Management also considers interest-rate movements of a lesser magnitude than +/-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 March 31, 2010.

	Additional Duration Exposure Scenarios (In years)
	As of March 31, 2010
	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	0.62	0.58	0.52	0.45	0.24	0.04	0.05
Liabilities	0.55	0.56	0.56	0.57	0.42	0.38	0.31
Equity	1.65	0.87	(0.07)	(1.30)	(2.39)	(4.89)	(3.88)
Effective duration gap	0.07	0.02	(0.04)	(0.12)	(0.18)	(0.34)	(0.26)

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

The Bank also analyzes its interest-rate risk and market exposure 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. 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 decreased by $154 million from December 31, 2009 to March 31, 2010, the market value of equity increased by $299 million during this same period due primarily to an increase in MBS prices relative to other fixed-income securities.

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	Market Value of Equity (In millions)
	As of March 31, 2010						As of December 31, 2009
	Up 200     Basis Points		Current		Down 200       Basis Points*		Up 200 Basis     Points		Current		Down 200       Basis Points*
Assets	$	138,891	$	140,771	$	141,916	$	143,481	$	145,582	$	146,820
Liabilities		131,715		133,181		134,216		136,815		138,291		139,221
Equity		7,176		7,590		7,700		6,666		7,291		7,599
* The “down 200 basis points” scenarios shown above are considered to be “constrained shocks”, intended; to prevent the possibility of negative interest rates when a designated low rate environment exists.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Bank’s senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Bank’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Management of the Bank has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the participation of the interim president and chief executive officer and chief financial officer as of the end of the period covered by this report. Based on that evaluation, the Bank’s interim president and chief executive officer and chief financial officer have concluded that the Bank’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the fiscal quarter covered by this report.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2010, 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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Bank may be subject to various legal proceedings arising in the normal course of business. After consultation with legal counsel, management is not aware of any such proceedings that might result in the Bank’s ultimate liability in an amount that will have a material effect on the Bank’s financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Bank’s Form 10-K, which could materially affect the Bank’s business, financial condition or future results. The risks described in the Bank’s Form 10-K are not the only risks facing the Bank. Additional risks and uncertainties not currently known to the Bank or that the Bank currently deems to be immaterial also may materially adversely affect the Bank’s business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information

None.

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Item 6. Exhibits

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 (3)
31.1	Certification of the Interim 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 Interim President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +

(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 March 25, 2010 with the Securities and Exchange Commission in the Bank’s Form 10-K and incorporated herein by reference.

(3) Filed on March 30, 2009 with the Securities and Exchange Commission in the Bank’s Form 10-K and incorporated herein by reference.

(+) Furnished herewith.

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SIGNATURES

Pursuant to the requirements of Section 12 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: May 11, 2010	By: /s/ Jill Spencer
	Name:   Jill Spencer
	Title: Interim President and             Chief Executive Officer
	By: /s/ Steven J. Goldstein
	Name: Steven J. Goldstein
	Title: Executive Vice President and           Chief Financial Officer

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