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, 2012

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	(I.R.S. Employer
incorporation or organization)	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).     x  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, 2012, was 57,424,334.

Table of Contents

PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	STATEMENTS OF CONDITION	1
	STATEMENTS OF INCOME	2
	STATEMENTS OF COMPREHENSIVE INCOME	3
	STATEMENTS OF CAPITAL	4
	STATEMENTS OF CASH FLOWS	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	68
PART II. OTHER INFORMATION		68
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosure	70
Item 5.	Other Information	70
Item 6.	Exhibits	70
SIGNATURES		71

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, 2012		December 31, 2011
Assets
Cash and due from banks	$	5	$	6
Interest-bearing deposits (including deposits with other FHLBank of $2 as of March 31, 2012 and December 31, 2011)		1,203		1,203
Federal funds sold		10,361		12,630
Trading securities (includes other FHLBank’s bond of $79 and $82 as of March 31, 2012 and December 31, 2011, respectively)		2,402		3,120
Available-for-sale securities		2,918		2,942
Held-to-maturity securities (fair value of $17,717 and $16,242 as of March 31, 2012 and December 31, 2011, respectively)		17,652		16,243
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $9 and $6 as of March 31, 2012 and December 31, 2011, respectively		1,525		1,633
Advances		72,441		86,971
Accrued interest receivable		259		314
Premises and equipment, net		34		35
Derivative assets		199		18
Other assets		138		155
Total assets	$	109,137	$	125,270
Liabilities
Interest-bearing deposits	$	3,078	$	2,655
Consolidated obligations, net:
Discount notes		16,178		24,330
Bonds		81,719		90,662
Total consolidated obligations, net		97,897		114,992
Mandatorily redeemable capital stock		328		286
Accrued interest payable		315		286
Affordable Housing Program payable		109		109
Derivative liabilities		315		241
Other liabilities		175		140
Total liabilities		102,217		118,709
Commitments and contingencies (Note 13)
Capital
Capital stock Class B putable ($100 par value) issued and outstanding shares:
Subclass B1 issued and outstanding shares: 13 and 12 as of March 31, 2012 and December 31, 2011, respectively		1,257		1,250
Subclass B2 issued and outstanding shares: 46 and 45 as of March 31, 2012 and December 31, 2011, respectively		4,642		4,468
Total capital stock Class B putable		5,899		5,718
Retained earnings:
Restricted		33		19
Unrestricted		1,273		1,235
Total retained earnings		1,306		1,254
Accumulated other comprehensive loss		(285)		(411)
Total capital		6,920		6,561
Total liabilities and capital	$	109,137	$	125,270

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,
	2012		2011
Interest income
Advances	$	66	$	69
Prepayment fees on advances, net		2		2
Interest-bearing deposits		1		1
Federal funds sold		5		8
Trading securities		35		41
Available-for-sale securities		41		45
Held-to-maturity securities		83		113
Mortgage loans held for portfolio		21		26
Total interest income		254		305
Interest expense
Consolidated obligations:
Discount notes		3		7
Bonds		165		169
Deposits		—		1
Mandatorily redeemable capital stock		1		1
Total interest expense		169		178
Net interest income		85		127
Provision for credit losses		3		—
Net interest income after provision for credit losses		82		127
Noninterest income (loss)
Total other-than-temporary impairment losses		—		(25)
Net amount of impairment losses reclassified from other comprehensive loss		(7)		(27)
Net impairment losses recognized in earnings		(7)		(52)
Net losses on trading securities		(29)		(34)
Net gains on derivatives and hedging activities		54		46
Letters of credit fees		5		4
Other		—		1
Total noninterest income (loss)		23		(35)
Noninterest expense
Compensation and benefits		15		17
Other operating expenses		8		9
Finance Agency		3		3
Office of Finance		1		2
Other		—		(9)
Total noninterest expense		27		22
Income before assessments		78		70
Assessments:
Affordable Housing Program		8		6
REFCORP		—		13
Total assessments		8		19
Net income	$	70	$	51

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

2

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

	Three Months Ended March 31,
	2012		2011
Net income	$	70	$	51
Other comprehensive income:
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities:
Noncredit losses transferred from held-to-maturity securities		—		(20)
Net change in fair value on other-than-temporary impairment available-for-sale securities		119		52
Reclassification of noncredit portion of impairment losses included in net income		7		47
Net noncredit portion of other-than-temporary impairment losses on available-for-sale securities		126		79
Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities:
Noncredit losses on held-to-maturity securities		—		(20)
Reclassification of noncredit portion from held-to-maturity securities to available-for-sale securities		—		20
Net noncredit portion of other-than-temporary impairment losses on held-to-maturity securities		—		—
Total other comprehensive income		126		79
Total comprehensive income	$	196	$	130

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

3

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Unaudited)

(In millions)

											Accumulated
											Other
	Capital Stock Class B Putable				Retained Earnings						Comprehensive
	Shares		Par Value		Restricted		Unrestricted		Total		Loss		Total Capital
Balance, December 31, 2010		72	$	7,224	$	—	$	1,124	$	1,124	$	(402)	$	7,946
Issuance of capital stock		1		41		—		—		—		—		41
Net shares reclassified to mandatorily redeemable capital stock		—		(2)		—		—		—		—		(2)
Comprehensive income		—		—		—		51		51		79		130
Cash dividends on capital stock		—		—		—		(15)		(15)		—		(15)
Balance, March 31, 2011		73	$	7,263	$	—	$	1,160	$	1,160	$	(323)	$	8,100
Balance, December 31, 2011		57	$	5,718	$	19	$	1,235	$	1,254	$	(411)	$	6,561
Issuance of capital stock		2		233		—		—		—		—		233
Net shares reclassified to mandatorily redeemable capital stock		—		(52)		—		—		—		—		(52)
Comprehensive income		—		—		14		56		70		126		196
Cash dividends on capital stock		—		—		—		(18)		(18)		—		(18)
Balance, March 31, 2012		59	$	5,899	$	33	$	1,273	$	1,306	$	(285)	$	6,920

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

4

FEDERAL HOME LOAN BANK OF ATLANTA

STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

	Three Months Ended March 31,
	2012		2011
Operating activities
Net income	$	70	$	51
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		(10)		(4)
Provision for credit losses		3		—
Loss due to change in net fair value adjustment on derivative and hedging activities		33		44
Net change in fair value adjustment on trading securities		29		34
Net impairment losses recognized in earnings		7		52
Net change in:
Accrued interest receivable		55		31
Other assets		12		15
Affordable Housing Program payable		(1)		—
Accrued interest payable		29		37
Payable to REFCORP		—		(7)
Other liabilities		(15)		(25)
Total adjustments		142		177
Net cash provided by operating activities		212		228
Investing activities
Net change in:
Interest-bearing deposits		377		515
Federal funds sold		2,269		(962)
Trading securities:
Proceeds from maturities		690		50
Available-for-sale securities:
Proceeds from maturities		147		204
Held-to-maturity securities:
Net change in short-term		(200)		495
Proceeds from maturities of long-term		852		1,458
Purchases of long-term		(2,017)		(819)
Advances:
Proceeds from principal collected		52,060		19,070
Made		(38,029)		(11,733)
Mortgage loans held for portfolio:
Proceeds from principal collected		102		124
Proceeds from sale of foreclosed assets		5		—
Purchase of premise, equipment and software		(1)		—
Net cash provided by investing activities		16,255		8,402

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

5

	Three Months Ended March 31,
	2012		2011
Financing activities
Net change in deposits		489		(158)
Net payments on derivatives containing a financing element		(115)		(137)
Proceeds from issuance of consolidated obligations:
Discount notes		84,231		258,901
Bonds		17,402		15,045
Payments for debt issuance costs		(1)		(4)
Payments for maturing and retiring consolidated obligations:
Discount notes		(92,383)		(267,115)
Bonds		(26,296)		(15,179)
Proceeds from issuance of capital stock		233		41
Payments for repurchase/redemption of mandatorily redeemable capital stock		(10)		—
Cash dividends paid		(18)		(15)
Net cash used in financing activities		(16,468)		(8,621)
Net (decrease) increase in cash and due from banks		(1)		9
Cash and due from banks at beginning of the period		6		5
Cash and due from banks at end of the period	$	5	$	14
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	147	$	148
AHP assessments, net	$	8	$	5
REFCORP assessments	$	—	$	20
Noncash investing and financing activities:
Net shares reclassified to mandatorily redeemable capital stock	$	52	$	2
Held-to-maturity securities acquired with accrued liabilities	$	50	$	433
Transfer of held-to-maturity securities to available-for-sale securities	$	6	$	302
Transfers of mortgage loans to real estate owned	$	3	$	4

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

6

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 (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, 2012, 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, 2011, which are contained in the Bank’s 2011 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 23, 2012 (Form 10-K).

A description of the Bank’s significant accounting policies is included in Note 2—Summary of Significant Accounting Policies to the 2011 audited financial statements contained in the Bank’s Form 10-K. There have been no material changes to these policies as of March 31, 2012.

Note 2—Recently Issued and Adopted Accounting Guidance

Recently Issued Accounting Guidance

Disclosures about Offsetting Assets and Liabilities. In December 2011, the Financial Accounting Standards Board (FASB) issued disclosure requirements that are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on an entity’s financial position. Entities are required to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In addition, entities are required to disclose collateral received and posted in connection with master netting agreements or similar arrangements. This guidance is effective for interim and annual periods beginning on or after January 1, 2013 and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will result in increased disclosures, but will have no effect on the Bank’s financial condition or results of operations.

Recently Adopted Accounting Guidance

Presentation of Comprehensive Income. In June 2011, the FASB issued amended guidance that eliminates the option to report other comprehensive income and its components in the statement of change in equity. The main provisions of this amended guidance provide that an entity that reports items of other comprehensive income present comprehensive income in either: (1) a single financial statement that

7

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

presents the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and total comprehensive income; or (2) a two-statement approach, where the components of net income and total net income are presented in the first statement, immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and total comprehensive income. For public entities, this amended guidance is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Bank adopted this guidance effective January 1, 2012. The adoption of this guidance did not have any effect on the Bank’s financial condition or results of operations.

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May 2011, the FASB issued amended guidance to converge fair value measurement and disclosure guidance in GAAP with the fair value measurement guidance concurrently issued by the International Accounting Standards Board for International Financial Reporting Standards (IFRS). The amended guidance does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required or permitted under GAAP. While many of the changes are clarifications of existing guidance or wording changes to align with IFRS, the amended guidance changes some fair value measurement principles and disclosure requirements. For public entities, this guidance is effective prospectively for interim and annual periods beginning on or after December 15, 2011. The Bank adopted this guidance effective January 1, 2012. The adoption of this guidance did not have any effect on the Bank’s financial condition or results of operations.

Reconsideration of Effective Control for Repurchase Agreements. In April 2011, the FASB issued guidance to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The new guidance removes certain criteria from the assessment of effective control. This guidance is effective for the first interim or annual periods beginning on or after December 15, 2011. This guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. The Bank adopted this guidance effective January 1, 2012. The adoption of this guidance did not have any effect on the Bank’s financial condition or results of operations.

Note 3—Trading Securities

Major Security Types. Trading securities were as follows:

		000000000000000000		000000000000000000
	As of March 31, 2012		As of December 31, 2011
Government-sponsored enterprises debt obligations	$	2,321	$	3,035
Other FHLBank’s bond (1)		79		82
State or local housing agency debt obligations		2		3
Total	$	2,402	$	3,120

⁽¹⁾ The Federal Home Loan Bank of Chicago is the primary obligor of this consolidated obligation bond.

8

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Net unrealized and realized losses on trading securities were as follows:

	Three Months Ended March 31,
	2012		2011
Net unrealized losses on trading securities held at period end		$            (22)		$            (33)
Net unrealized and realized losses on trading securities sold/matured during the period		(7)		(1)
Net losses on trading securities		$            (29)		$            (34)

As of March 31, 2012 and December 31, 2011, 99.9 percent of the Bank’s fixed-rate trading securities were swapped and all of the Bank’s variable-rate trading securities were swapped.

Note 4—Available-for-sale Securities

During the three-month periods ended March 31, 2012 and 2011, 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 date.

	2012						2011
	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 as of March 31,		$    6		$            —		$    6		$    322		$            20		$    302

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

	As of March 31, 2012
	Amortized Cost		Other-Than-Temporary Impairment Recognized in Accumulated Other Comprehensive Loss		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Private-label MBS		$        3,190		$        287		$        19		$        4		$        2,918

	As of December 31, 2011
	Amortized Cost		Other-Than-Temporary Impairment Recognized in Accumulated Other Comprehensive Loss		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Private-label MBS		$        3,340		$        392		$        12		$      18		$        2,942

9

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following tables summarize 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, 2012

Less than 12 Months

12 Months or More

Total

Number of   Positions

Estimated Fair  Value

Gross Unrealized Losses

Number of   Positions

Estimated Fair  Value

Gross Unrealized Losses

Number of   Positions

Estimated Fair  Value

Gross Unrealized Losses

Private-label MBS

6

$        332

$        9

41

$  1,952

$  282

47

$  2,284

$  291

As of December 31, 2011

Less than 12 Months

12 Months or More

Total

Number of Positions

Estimated   Fair  Value

Gross Unrealized Losses

Number of Positions

Estimated   Fair  Value

Gross Unrealized Losses

Number of Positions

Estimated   Fair  Value

Gross Unrealized Losses

Private-label MBS

10

$        635

$      26

42

$  2,053

$  384

52

$  2,688

$  410

The amortized cost of the Bank’s MBS classified as available-for-sale includes net discounts of $14 as of March 31, 2012 and December 31, 2011.

The Bank did not swap any of its available-for-sale securities as of March 31, 2012 and December 31, 2011.

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

		Other-Than-Temp		Other-Than-Temp		Other-Than-Temp		Other-Than-Temp		Other-Than-Temp
	As of March 31, 2012
	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	$	1,957	$	219	$	6	$	2	$	1,742
	As of December 31, 2011
	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	$	2,027	$	287	$	1	$	12	$	1,729

10

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Note 5—Held-to-maturity Securities

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

	As of March 31, 2012								As of December 31, 2011
	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	$	850	$	—	$	—	$	850	$	650	$	—	$	—	$	650
State or local housing agency debt obligations		94		1		—		95		100		1		—		101
Government-sponsored enterprises debt obligations		1,708		1		—		1,709		1,111		1		—		1,112
Mortgage-backed securities:
U.S. agency obligations-guaranteed		762		8		—		770		803		8		—		811
Government-sponsored enterprises		10,806		177		4		10,979		9,886		185		5		10,066
Private label		3,432		28		146		3,314		3,693		28		219		3,502
Total	$	17,652	$	215	$	150	$	17,717	$	16,243	$	223	$	224	$	16,242

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, 2012
	Less than 12 Months						12 Months or More						Total
	Number of Positions		Estimated Fair  Value		Gross Unrealized Losses		Number of Positions		Estimated Fair  Value		Gross Unrealized Losses		Number of Positions		Estimated Fair  Value		Gross Unrealized Losses
Certificates of deposit		1	$	100	$	—		—	$	—	$	—		1	$	100	$	—
Government-sponsored enterprises debt obligations		4		344		—		—		—		—		4		344		—
Mortgage-backed securities:
Government-sponsored enterprises		11		1,159		2		7		562		2		18		1,721		4
Private label		17		284		2		58		1,642		144		75		1,926		146
Total		33	$	1,887	$	4		65	$	2,204	$	146		98	$	4,091	$	150
	As of December 31, 2011
	Less than 12 Months						12 Months or More						Total
	Number of Positions		Estimated Fair Value		Gross Unrealized Losses		Number of Positions		Estimated Fair Value		Gross Unrealized Losses		Number of Positions		Estimated Fair Value		Gross Unrealized Losses
Certificates of deposit		3	$	350	$	—		—	$	—	$	—		3	$	350	$	—
Government-sponsored enterprises debt obligations		3		194		—		—		—		—		3		194		—
Mortgage-backed securities:
Government-sponsored enterprises		9		1,104		3		10		804		2		19		1,908		5
Private label		23		437		8		59		1,656		211		82		2,093		219
Total		38	$	2,085	$	11		69	$	2,460	$	213		107	$	4,545	$	224

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.

11

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

	As of March 31, 2012				As of December 31, 2011
	Amortized Cost		Estimated Fair  Value		Amortized Cost		Estimated Fair  Value
Non-mortgage-backed securities:
Due in one year or less	$	904	$	904	$	703	$	702
Due after one year through five years		1,748		1,750		1,158		1,161
Total non-mortgage-backed securities		2,652		2,654		1,861		1,863
Mortgage-backed securities		15,000		15,063		14,382		14,379
Total	$	17,652	$	17,717	$	16,243	$	16,242

The amortized cost of the Bank’s MBS classified as held-to-maturity includes net discounts of $13 as of March 31, 2012 and December 31, 2011.

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

	As of March 31, 2012								As of December 31, 2011
	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	$	1,137	$	9	$	36	$	1,110	$	1,226	$	10	$	56	$	1,180

Note 6—Other-than-temporary Impairment

The Bank evaluates its individual available-for-sale and held-to-maturity securities holdings in an unrealized loss position for other-than-temporary impairment on a quarterly basis. As part of this process, the Bank considers its intent to sell each debt security and whether it is more likely than not the Bank will be required to sell the security before its anticipated recovery. If either of these conditions is met, the Bank recognizes the maximum impairment loss in earnings which is equal to the entire difference between the security’s amortized cost basis and its fair value at the Statements of Condition date. For securities in an unrealized loss position that meet neither of these conditions, the Bank evaluates whether there is other-than-temporary impairment by performing an analysis to determine if any of these securities will incur a credit loss, which could be up to the difference between the security’s amortized cost basis and its fair value.

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 and Poor’s Ratings Services (S&P), at purchase date. The “AAA”-rated securities achieved their

12

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 these investments and it is not more likely than not that the Bank will be required to sell these 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, 2012.

Private-label MBS. To assess whether the entire amortized cost basis of its private-label MBS will be recovered, the Bank performs a cash flow analysis for each of its private-label MBS. In performing the cash flow analysis for each of these securities, the Bank uses 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 as of March 31, 2012 assumed current-to-trough home price declines ranging from zero percent (for those housing markets that are believed to have reached their trough) to 8.00 percent. For those markets for which further home price declines are anticipated, such declines were projected to occur over the three- to nine-month period beginning January 1, 2012.

From the trough, home prices were projected to recover using one of five different recovery paths that vary by housing market. The following table presents projected home price recovery ranges by months as of March 31, 2012:

Months	Annualized Rates (%)
1 to 6	0.00 to 2.80
7 to 18	0.00 to 3.00
19 to 24	1.00 to 4.00
25 to 30	2.00 to 4.00
31 to 42	2.00 to 5.00
43 to 66	2.00 to 6.00
Thereafter	2.30 to 5.60

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults and loss severities, were 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

13

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 (discounted at the securities effective yield) 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 effective interest rate for the security prior to impairment for 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.

The following table represents a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings for those securities for which an other-than-temporary impairment was determined to have occurred during the three-month period ended March 31, 2012 as well as related current credit enhancement:

		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000
	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:
2007		9.71		9.47 to 9.74		22.75		21.05 to 22.99		41.35		38.44 to 41.75		2.17		1.87 to 4.36
2006		8.58		6.09 to 9.20		21.06		18.37 to 25.07		47.36		41.53 to 54.79		3.85		0.26 to 6.28
2005		10.94		10.94 to 10.94		23.65		23.65 to 23.65		37.92		37.92 to 37.92		5.73		5.73 to 5.73
2004		9.14		9.14 to 9.14		12.60		12.60 to 12.60		33.26		33.26 to 33.26		4.81		4.81 to 4.81
Total		9.14		6.09 to 10.94		21.74		12.60 to 25.07		44.46		33.26 to 54.79		3.39		0.26 to 6.28

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

	Three Months Ended March 31,
	2012		2011
Balance of credit losses previously recognized in earnings, beginning of period	$	582	$	464
Amount related to credit loss for which an other-than-temporary impairment was not previously recognized		—		6
Amount related to credit loss for which an other-than-temporary impairment was previously recognized		7		46
Balance of cumulative credit losses recognized in earnings, end of period	$	589	$	516

14

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

Certain other private-label MBS that have not been designated as other-than-temporarily impaired have 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. These declines in fair value are considered temporary as the Bank expects to recover the amortized cost basis of the securities, the Bank does not intend to sell these securities and it is not more likely than not that the Bank will be required to sell these 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.

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Overdrawn demand deposit accounts	$	—	$	3
Due in one year or less		26,125		36,542
Due after one year through two years		9,522		11,173
Due after two years through three years		7,011		7,851
Due after three years through four years		3,335		3,881
Due after four years through five years		5,799		5,836
Due after five years		16,761		17,283
Total par value		68,553		82,569
Discount on AHP (1) advances		(12)		(12)
Discount on EDGE (2) advances		(9)		(10)
Hedging adjustments		3,915		4,431
Deferred commitment fees		(6)		(7)
Total	$	72,441	$	86,971
(1) The Affordable Housing Program
(2) The Economic Development and Growth Enhancement program

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

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Overdrawn demand deposit accounts	$	—	$	3
Due or convertible in one year or less		31,692		42,376
Due or convertible after one year through two years		10,102		11,946
Due or convertible after two years through three years		6,820		7,716
Due or convertible after three years through four years		3,174		3,464
Due or convertible after four years through five years		4,743		5,021
Due or convertible after five years		12,022		12,043
Total par value	$	68,553	$	82,569

15

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Fixed-rate:
Due in one year or less	$	22,963	$	32,389
Due after one year		36,452		38,811
Total fixed-rate		59,415		71,200
Variable-rate:
Due in one year or less		3,162		4,156
Due after one year		5,976		7,213
Total variable-rate		9,138		11,369
Total par value	$	68,553	$	82,569

As of March 31, 2012 and December 31, 2011, 72.8 percent and 65.7 percent, respectively, of the Bank’s fixed-rate advances were swapped and 12.0 percent and 9.79 percent, respectively, of the Bank’s variable-rate advances were swapped.

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, 2012 and December 31, 2011. No advance was past due as of March 31, 2012 and December 31, 2011.

The Bank’s potential credit risk from advances is concentrated in commercial banks, savings institutions and credit unions and further is concentrated in certain larger borrowing relationships. As of March 31, 2012 and December 31, 2011, the concentration of the Bank’s advances was $46,060 and $56,991, respectively, to 10 member institutions, and representing 67.2 percent and 69.0 percent, respectively, of total advances outstanding.

Note 8—Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are the joint and several obligations of the 12 Federal Home Loan Banks (FHLBanks) and are backed only by the financial resources of the FHLBanks. The Federal Home Loan Banks 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 the Bank’s consolidated obligation bonds by interest-rate payment type:

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Fixed-rate	$	77,735	$	84,571
Step up/down		2,662		2,978
Simple variable-rate		100		1,850
Variable-rate capped floater		20		20
Total par value	$	80,517	$	89,419

16

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

As of March 31, 2012 and December 31, 2011, 81.3 percent and 81.9 percent, respectively, of the Bank’s fixed-rate consolidated obligation bonds were swapped and 16.7 percent and 6.42 percent, respectively, of the Bank’s variable-rate consolidated obligation bonds were swapped.

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

		00000000000		00000000000		00000000000		00000000000
	As of March 31, 2012				As of December 31, 2011
	Amount		Weighted- average Interest Rate (%)				Weighted- average Interest Rate (%)
					Amount
Due in one year or less	$	43,322		0.75	$	48,163		0.57
Due after one year through two years		18,642		1.55		20,987		1.83
Due after two years through three years		6,832		2.65		7,927		2.40
Due after three years through four years		1,628		2.72		2,083		2.65
Due after four years through five years		4,034		3.81		4,005		3.79
Due after five years		6,059		3.96		6,254		3.97
Total par value		80,517		1.52		89,419		1.46
Premiums		97				101
Discounts		(35)				(38)
Hedging adjustments		1,140				1,180
Total	$	81,719			$	90,662

The Bank’s consolidated obligation bonds outstanding by call feature:

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Noncallable	$	62,272	$	60,794
Callable		18,245		28,625
Total par value	$	80,517	$	89,419

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

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Due or callable in one year or less	$	50,925	$	60,321
Due or callable after one year through two years		17,852		17,467
Due or callable after two years through three years		3,674		3,284
Due or callable after three years through four years		975		1,110
Due or callable after four years through five years		2,949		2,870
Due or callable after five years		4,142		4,367
Total par value	$	80,517	$	89,419

17

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

The Bank’s participation in consolidated obligation discount notes was as follows:

		00000000000000000		00000000000000000		00000000000000000
	Book Value		Par Value		Weighted-average Interest Rate (%)
As of March 31, 2012	$	16,178	$	16,182		0.10
As of December 31, 2011	$	24,330	$	24,331		0.03

As of March 31, 2012 and December 31, 2011, 0.62 percent and 4.64 percent, respectively, of the Bank’s fixed-rate consolidated obligation discount notes were swapped to a variable rate.

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:

		000000000000		000000000000		000000000000		000000000000
	As of March 31, 2012				As of December 31, 2011
	Required		Actual		Required		Actual
Risk based capital	$	1,939	$	7,533	$	1,951	$	7,258
Total capital-to-assets ratio		4.00%		6.90%		4.00%		5.79%
Total regulatory capital (1)	$	4,365	$	7,533	$	5,011	$	7,258
Leverage ratio		5.00%		10.35%		5.00%		8.69%
Leverage capital	$	5,457	$	11,300	$	6,264	$	10,887

⁽¹⁾  Mandatorily redeemable capital stock is considered capital for regulatory purposes, and “total regulatory capital” includes the Bank’s $328 and $286 in mandatorily redeemable capital stock as of March 31, 2012 and December 31, 2011, respectively.

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

		000000		000000
	Three Months Ended March 31,
	2012		2011
Balance, beginning of period	$	286	$	529
Capital stock subject to mandatory redemption reclassified from capital during the period due to:
Attainment of nonmember status		80		4
Withdrawal		1		—
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		(29)		(2)
Balance, end of period	$	328	$	531

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. The year of redemption in the table is the later of the end of the five-year redemption period, or with respect to activity-based stock, the later of the expiration of the five-year redemption period or the activity’s maturity date.

		00000000000000000000		00000000000000000000
	As of March 31, 2012		As of December 31, 2011
Due in one year or less	$	2	$	4
Due after one year through two years		7		8
Due after two years through three years		123		52
Due after three years through four years		47		122
Due after four years through five years		148		99
Due after five years		1		1
Total	$	328	$	286

Note 10—Accumulated Other Comprehensive Loss

Components comprising accumulated other comprehensive loss were as follows:

		0000000000000000		0000000000000000		0000000000000000
	Pension and Postretirement Benefits		Noncredit Portion of  Other- than-temporary Impairment Losses on Available-for-sale Securities		Total Accumulated Other Comprehensive Loss
Balance, December 31, 2010	$	(10)	$	(392)	$	(402)
Current period other comprehensive income		—		79		79
Balance, March 31, 2011	$	(10)	$	(313)	$	(323)
Balance, December 31, 2011	$	(13)	$	(398)	$	(411)
Current period other comprehensive income		—		126		126
Balance, March 31, 2012	$	(13)	$	(272)	$	(285)

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 its 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 use of derivatives is an integral part of the Bank’s financial management strategy.

19

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 because 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 overall asset/liability management objectives.

Application of Derivatives

General. The Bank may use derivatives to, in effect, adjust the term, repricing frequency, or option characteristics of financial instruments to achieve its risk management and funding 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 or 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.

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 Derivatives

The Bank may use the following derivatives to reduce funding costs and to manage its exposure to interest-rate risks inherent in the normal course of business.

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 for the same period of time. The

20

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

variable rate received by the Bank in most interest-rate swap agreements is London Interbank Offered Rate (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 Cap and Floor Agreements. In an interest-rate 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 an interest-rate 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 may be used in conjunction with liabilities and floors may be used in conjunction with assets. 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.

Types of Hedged Items

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 in conjunction with associated interest-rate risk on advances. 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. 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 typically 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.

21

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 typically treated as a fair-value hedge.

Mortgage Assets. The Bank has invested in 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. 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 noncallable 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 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. These derivatives are marked-to-market through earnings.

Firm Commitments. 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 MBS, U.S. agency obligations, certificates of deposit, 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.

22

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.

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. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the derivatives, the item being hedged and any offsets between the two.

The following table summarizes the fair value of derivative instruments. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest.

		Derivatives		Derivatives		Derivatives		Derivatives		Derivatives		Derivatives
	As of March 31, 2012						As of December 31, 2011
	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities		Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives in hedging relationships:
Interest rate swaps	$	107,943	$	1,281	$	(3,906)	$	120,999	$	1,344	$	(4,467)
Total derivatives in hedging relationships		107,943		1,281		(3,906)		120,999		1,344		(4,467)
Derivatives not designated as hedging instruments:
Interest rate swaps		5,392		16		(521)		6,221		14		(567)
Interest rate caps or floors		12,500		63		(46)		12,500		64		(53)
Total derivatives not designated as hedging instruments		17,892		79		(567)		18,721		78		(620)
Total derivatives before netting and collateral adjustments	$	125,835		1,360		(4,473)	$	139,720		1,422		(5,087)
Netting adjustments				(1,067)		1,067				(1,377)		1,377
Cash collateral and related accrued interest				(94)		3,091				(27)		3,469
Total collateral and netting adjustments (1)				(1,161)		4,158				(1,404)		4,846
Derivative assets and derivative liabilities			$	199	$	(315)			$	18	$	(241)

⁽¹⁾ 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.

23

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

The following tables present the components of net gains on derivatives and hedging activities as presented in the Statements of Income:

		00000000000000		00000000000000
	Three Months Ended March 31,
	2012		2011
Derivatives and hedged items in fair value hedging relationships:
Interest rate swaps	$	51	$	38
Total net gains related to fair value hedge ineffectiveness		51		38
Derivatives not designated as hedging instruments:
Interest rate swaps		27		42
Interest rate caps or floors		6		3
Net interest settlements		(30)		(37)
Total net gains related to derivatives not designate as hedging instruments		3		8
Net gains on derivatives and hedging activities	$	54	$	46

The following tables present, 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:

		Derivatives on Net Interest		Derivatives on Net Interest		Derivatives on Net Interest		Derivatives on Net Interest
	Three Months Ended March 31, 2012
Hedged Item Type	Gains (Losses) on     Derivative		Gains (Losses) on     Hedged Item		Net Fair Value     Hedge Ineffectiveness		Effect of   Derivatives on Net Interest   Income (1)
Advances	$	497	$	(431)	$	66	$	(386)
Consolidated obligations:
Bonds		(50)		35		(15)		143
Total	$	447	$	(396)	$	51	$	(243)
(1)      The net interest on derivatives in fair value hedge relationships is presented in the interest income or expense line item of the respective hedged item.
	Three Months Ended March 31, 2011
Hedged Item Type	Gains (Losses) on Derivative		Gains (Losses) on Hedged Item		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income (1)
Advances	$	652	$	(605)	$	47	$	(590)
Consolidated obligations:
Bonds		(200)		191		(9)		216
Discount notes		(1)		1		—		1
Total	$	451	$	(413)	$	38	$	(373)

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

24

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 Finance Agency 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, 2012.

The following table presents credit risk exposure on derivative instruments, excluding circumstances where a counterparty’s pledged collateral to the Bank exceeds the Bank’s net position.

		As of December 31, 2011 00		As of December 31, 2011 00
	As of March 31, 2012		As of December 31, 2011
Total net exposure at fair value (1)	$	292	$	45
Cash collateral held		93		27
Net positive exposure after cash collateral		199		18
Other collateral		4		5
Net exposure after collateral	$	195	$	13

⁽¹⁾  Includes net accrued interest receivable of $30 and $1 as of March 31, 2012 and December 31, 2011, respectively.

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) as of March 31, 2012 was $3,211 for which the Bank has posted collateral of $3,091 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, the Bank would have been required to deliver up to an additional $127 of collateral (at fair value) to its derivative counterparties as of March 31, 2012.

The Bank transacts most of its derivatives with large banks and major broker-dealers and generally enters into bilateral collateral agreements. Some of these banks and broker-dealers or their affiliates buy, sell and distribute consolidated obligations. The Bank is not a derivatives dealer and thus does not trade derivatives for short-term profit.

Note 12—Estimated Fair Values

The Bank records trading securities, available-for-sale securities and derivative assets and liabilities at fair value. A fair value hierarchy is used to prioritize the inputs of valuation techniques used to measure fair value. A description of the application of the fair value hierarchy, valuation techniques, and significant inputs is disclosed in Note 19 — Estimated Fair Values to the 2011 audited financial statements contained in the Bank’s Form 10- K. There have been no changes in the fair value hierarchy classification of financial assets and liabilities, valuation techniques or significant inputs during the three-month period ended March 31, 2012.

25

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 liabilities that are measured at fair value on a recurring basis on its Statements of Condition:

		000000000000		000000000000		000000000000		000000000000		000000000000
	As of March 31, 2012
	Fair Value Measurements Using						Netting
	Level 1		Level 2		Level 3		Adjustment  (1)		Total
Assets
Trading securities:
Government-sponsored enterprises debt obligations	$	—	$	2,321	$	—	$	—	$	2,321
Other FHLBank’s bond		—		79		—		—		79
State or local housing agency debt obligations		—		2		—		—		2
Total trading securities		—		2,402		—		—		2,402
Available-for-sale securities:
Private-label MBS		—		—		2,918		—		2,918
Derivative assets:
Interest-rate related		—		1,360		—		(1,161)		199
Total assets at fair value	$	—	$	3,762	$	2,918	$	(1,161)	$	5,519
Liabilities
Derivative liabilities:
Interest-rate related	$	—	$	(4,473)	$	—	$	4,158	$	(315)
Total liabilities at fair value	$	—	$	(4,473)	$	—	$	4,158	$	(315)

⁽¹⁾  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.

		000000000000		000000000000		000000000000		000000000000		000000000000
	As of December 31, 2011
	Fair Value Measurements Using						Netting
	Level 1		Level 2		Level 3		Adjustment  (1)		Total
Assets
Trading securities:
Government-sponsored enterprises debt obligations	$	—	$	3,035	$	—	$	—	$	3,035
Other FHLBank’s bond		—		82		—		—		82
State or local housing agency debt obligations		—		3		—		—		3
Total trading securities		—		3,120		—		—		3,120
Available-for-sale securities:
Private-label MBS		—		—		2,942		—		2,942
Derivative assets:
Interest-rate related		—		1,422		—		(1,404)		18
Total assets at fair value	$	—	$	4,542	$	2,942	$	(1,404)	$	6,080
Liabilities
Derivative liabilities:
Interest-rate related	$	—	$	(5,087)	$	—	$	4,846	$	(241)
Total liabilities at fair value	$	—	$	(5,087)	$	—	$	4,846	$	(241)

⁽¹⁾  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.

26

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

		0000000000		0000000000
	Three Months Ended March 31,
	2012		2011
Balance, beginning of period	$	2,942	$	3,319
Transfer of private-label MBS from held-to-maturity to available-for-sale		6		302
Total (losses) gains realized and unrealized: (1)
Included in net impairment losses recognized in earnings		(7)		(47)
Included in other comprehensive loss (2)		126		99
Included in interest income		(2)		(3)
Settlements		(147)		(204)
Balance, end of period	$	2,918	$	3,466

⁽¹⁾  Related to available-for-sale securities held at period end.

⁽²⁾  This amount is included in other comprehensive loss within the net change in fair value on other-than-temporary impairment available-for-sale securities and reclassification of noncredit portion of impairment losses included in net income.

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 as of March 31, 2012 and December 31, 2011. 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.

27

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:

		00000000000		00000000000		00000000000		00000000000		00000000000		00000000000
	As of March 31, 2012
			Fair Value
	Carrying Value		Total		Level 1		Level 2		Level 3		Netting Adjustment
Assets:
Cash and due from banks	$	5	$	5	$	5	$	—	$	—	$	—
Interest bearing-deposits		1,203		1,203		—		1,203		—		—
Federal funds sold		10,361		10,360		—		10,360		—		—
Trading securities		2,402		2,402		—		2,402		—		—
Available-for-sale securities		2,918		2,918		—		—		2,918		—
Held-to-maturity securities		17,652		17,717		—		14,403		3,314		—
Mortgage loans held for portfolio, net		1,525		1,678		—		1,678		—		—
Advances		72,441		72,957		—		72,957		—		—
Accrued interest receivable		259		259		—		259		—		—
Derivative assets		199		199		—		1,360		—		(1,161)
Liabilities:
Interest-bearing deposits		(3,078)		(3,078)		—		(3,078)		—		—
Consolidated obligations, net:
Discount notes		(16,178)		(16,178)		—		(16,178)		—		—
Bonds		(81,719)		(82,672)		—		(82,672)		—		—
Mandatorily redeemable capital stock		(328)		(328)		(328)		—		—		—
Accrued interest payable		(315)		(315)		—		(315)		—		—
Derivative liabilities		(315)		(315)		—		(4,473)		—		4,158

28

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

		000000000000		000000000000
	As of December 31, 2011
	Carrying		Estimated
	Value		Fair Value
Assets:
Cash and due from banks	$	6	$	6
Interest-bearing deposits		1,203		1,203
Federal funds sold		12,630		12,629
Trading securities		3,120		3,120
Available-for-sale securities		2,942		2,942
Held-to-maturity securities		16,243		16,242
Mortgage loans held for portfolio, net		1,633		1,796
Advances		86,971		87,655
Accrued interest receivable		314		314
Derivative assets		18		18
Liabilities:
Interest-bearing deposits		(2,655)		(2,655)
Consolidated obligations, net:
Discount notes		(24,330)		(24,330)
Bonds		(90,662)		(91,839)
Mandatorily redeemable capital stock		(286)		(286)
Accrued interest payable		(286)		(286)
Derivative liabilities		(241)		(241)

Note 13—Commitments and Contingencies

As described in Note 8–Consolidated Obligations, consolidated obligations are backed only by the financial resources of the FHLBanks. The Finance Agency 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 ever 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 $561,317 and $578,118 as of March 31, 2012 and December 31, 2011, respectively, exclusive of the Bank’s own outstanding consolidated obligations.

29

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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

	As of March 31, 2012		As of December 31, 2011
Outstanding notional		$         20,171		$         21,510
Original terms (1)		Less than four months to 20 years		Less than 12 months to 20 years
Final expiration year		2030		2030

⁽¹⁾  The bank had two standby letters of credit for a total of $3 as of March 31, 2012 and no standby letters of credit as of December 31, 2011, that have no stated maturity date and are subject to renewal on an annual basis.

The carrying value of the guarantees related to standby letters of credit is recorded in other liabilities and amounted to $71 and $80 as of March 31, 2012 and December 31, 2011, 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 member. 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 highest risk rating category 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, 2012 and December 31, 2011. Such commitments would be recorded as derivatives at their fair values.

As of March 31, 2012, the Bank had committed to the issuance of $1,285 (par value) in consolidated obligation bonds, all of which were hedged with associated interest rate swaps that had traded but not yet settled. At December 31, 2011, the Bank had committed to the issuance of $3,492 (par value) in consolidated obligation bonds, of which $3,475 were hedged with associated interest rate swaps that had traded but not yet settled.

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.

30

FEDERAL HOME LOAN BANK OF ATLANTA

NOTES TO FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions)

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 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, 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, N.A., which held 17.1 percent of the Bank’s total regulatory capital stock as of March 31, 2012, was considered a related party. Total advances outstanding to Bank of America, N.A. were $12,889 and $16,039 as of March 31, 2012 and December 31, 2011, respectively. Total deposits held in the name of Bank of America, N.A. were less than $1 as of March 31, 2012 and December 31, 2011. No mortgage loans or mortgage-backed securities were acquired from Bank of America, N.A. during the three-month periods ended March 31, 2012 and 2011.

Note 15—Subsequent Events

On April 9, 2012, the Bank repurchased $700 of subclass B1 membership and B2 activity-based excess capital stock based on the shareholders’ total capital stock as of March 30, 2012.

31

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; and

• 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, 2012 and 2011. Management’s discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in this report, as well as the Bank’s audited financial statements for the year ended December 31, 2011.

32

Executive Summary

General Overview

The Bank is a cooperative whose primary business activity is providing competitively-priced loans, which the Bank refers to as “advances,” to its members and eligible housing associates to help them meet the credit needs of their communities. The Bank also makes grants and subsidized advances under the Affordable Housing Program, 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 also maintains a portfolio of investments for liquidity purposes, to provide available funds to meet member credit needs, and to provide additional earnings.

Financial Condition

As of March 31, 2012, total assets were $109.1 billion, a decrease of $16.1 billion, or 12.9 percent, from December 31, 2011. This decrease was primarily due to a $14.5 billion, or 16.7 percent, decrease in advances. Advances, the largest asset on the Bank’s balance sheet, decreased as a result of scheduled maturities, prepayments, and members’ significant liquidity.

As of March 31, 2012, total liabilities were $102.2 billion, a decrease of $16.5 billion, or 13.9 percent, from December 31, 2011. This decrease was primarily due to a $17.1 billion, or 14.9 percent, decrease in COs. The decrease in COs corresponds to the decrease in demand for advances by the Bank’s members during the period.

As of March 31, 2012, total capital was $6.9 billion, an increase of $359 million, or 5.49 percent, from December 31, 2011. This increase was primarily due to the issuance of $207 million in activity-based capital stock and $26 million of membership capital stock, the time lag between fluctuations in advances and repurchases of excess capital stock, and a $126 million decrease in accumulated other comprehensive loss. The decrease in accumulated other comprehensive loss was primarily due to improvements in the fair value of the Bank’s available-for-sale securities.

Results of Operations

The Bank recorded net income of $70 million for the first quarter of 2012, an increase of $19 million, or 38.8 percent, from net income of $51 million for the first quarter of 2011. The increase in net income was primarily due to a $45 million decrease in net impairment losses recognized in earnings and an $11 million decrease in total assessments, partially offset by a $42 million decrease in net interest income. These items are discussed in more detail in Management’s Discussion and Analysis–Results of Operations below.

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 4.18 percent for the first quarter of 2012, compared to 2.56 percent for the first quarter of 2011. ROE increased in the first quarter of 2012, compared to the first quarter of 2011, primarily as a result of an increase in net income, as discussed above, and a decrease in average total capital during the period. ROE spread to three-month average

33

LIBOR increased in the first quarter of 2012, compared to the first quarter of 2011, equaling 367 basis points for the first quarter of 2012 as compared to 225 basis points for the first quarter of 2011. The increase in the spread to LIBOR was primarily due to the increase in ROE as previously discussed.

The Bank’s interest rate spread was 23 basis points for the first quarter of 2012 compared to 34 basis points for the first quarter of 2011. The 11 basis points decrease in the Bank’s interest rate spread was primarily due to a decrease in yield on the Bank’s long-term investment portfolio during the first quarter of 2012 compared to the first quarter of 2011, as well as advance restructures and prepayments that created accelerated amortization that reduced advance interest income.

Business Outlook

The Bank’s business outlook remains largely unchanged from the outlook discussion in the Bank’s Form 10-K. As expected, advances declined during the first quarter of 2012 primarily due to scheduled maturities. However, the Bank saw moderate demand for new advances among previously less active borrowers and signs of improving financial health throughout the Bank’s membership. The Bank expects overall advances to decline over the course of the year.

The Bank has recently seen recovery in fair market values for some of its private-label MBS and the credit related portion of other-than-temporary impairment losses recognized in earnings was lower for the first quarter of 2012 compared to the first quarter of 2011. However, other-than-temporary impairment losses have been highly volatile. If the loans underlying the Bank’s securities further deteriorate or if certain assumptions related to forecasts of home prices, prepayments, defaults, or loss severities continue to decline, the Bank could record additional other-than-temporary impairment losses.

The Bank continues to face challenges to net income as advances and investments decline in a low interest rate environment with few attractive reinvestment opportunities.

34

Selected Financial Data

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

		000000000000		000000000000		000000000000		000000000000		000000000000
	As of and for the Three Months Ended
	March 31, 2012		December 31, 2011		September 30, 2011		June 30, 2011		March 31, 2011
Statements of Condition (at period end)
Total assets	$	109,137	$	125,270	$	118,852	$	116,817	$	123,633
Investments (1)		34,536		36,138		41,204		36,979		39,876
Mortgage loans held for portfolio		1,534		1,639		1,743		1,828		1,916
Allowance for credit losses on mortgage loans		(9)		(6)		(1)		(1)		(1)
Advances		72,441		86,971		75,363		77,427		81,257
Interest-bearing deposits		3,078		2,655		3,170		3,008		2,955
Consolidated obligations, net:
Discount notes		16,178		24,330		16,057		20,573		15,700
Bonds		81,719		90,662		91,720		84,640		94,854
Total consolidated obligations, net (2)		97,897		114,992		107,777		105,213		110,554
Mandatorily redeemable capital stock		328		286		319		385		531
Affordable Housing Program payable		109		109		115		121		127
Payable to REFCORP		—		—		—		10		13
Capital stock - putable		5,899		5,718		5,910		6,333		7,263
Retained earnings		1,306		1,254		1,203		1,184		1,160
Accumulated other comprehensive loss		(285)		(411)		(317)		(296)		(323)
Total capital		6,920		6,561		6,796		7,221		8,100
Statements of Income (for the period ended)
Net interest income		85		108		109		115		127
Provision for credit losses		3		5		—		—		—
Net impairment losses recognized in earnings		(7)		(10)		(19)		(37)		(52)
Net (losses) gains on trading securities		(29)		(20)		36		20		(34)
Net gains (losses) on derivatives and hedging activities		54		32		(67)		(20)		46
Letters of credit fees		5		5		6		4		4
Other income (3)		—		—		—		1		1
Noninterest expense		27		40		29		32		22
Income before assessments		78		70		36		51		70
Assessments (4)		8		7		4		13		19
Net income		70		63		32		38		51
Performance Ratios (%)
Return on equity (5)		4.18		3.85		1.78		2.01		2.56
Return on assets (6)		0.23		0.21		0.10		0.13		0.16
Net interest margin (7)		0.28		0.35		0.36		0.38		0.40
Regulatory capital ratio (at year end) (8)		6.90		5.79		6.25		6.76		7.24
Equity to assets ratio (9)		5.43		5.39		5.77		6.27		6.21
Dividend payout ratio (10)		24.94		19.70		40.09		37.89		28.74

35

  ⁽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 on consolidated obligations outstanding. The par value of the FHLBanks’ outstanding consolidated obligations for which the Bank is jointly and severally liable was as follows (in millions):

March 31, 2012	$	561,317
December 31, 2011		578,118
September 30, 2011		590,231
June 30, 2011		623,513
March 31, 2011		656,491

  ⁽³⁾ Other income includes service fees and other.

  ⁽⁴⁾ On August 5, 2011, the Finance Agency certified that the FHLBanks have satisfied their REFCORP obligation.

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

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

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

  ⁽⁸⁾ Regulatory capital ratio is regulatory capital stock plus retained earnings as a percentage of total assets at period end.

  ⁽⁹⁾ Calculated as average equity divided by average total assets.

⁽¹⁰⁾  Calculated as dividends declared during the period divided by net income during the period.

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 of debt securities in the form of COs by the Office of Finance on the Bank’s behalf.

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.

		00000000000		00000000000		00000000000		00000000000		00000000000		00000000000
	As of March 31, 2012				As of December 31, 2011				Increase (Decrease)
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent
Advances	$	72,441		66.38	$	86,971		69.43	$	(14,530)		(16.71)
Long-term investments		22,122		20.27		21,655		17.29		467		2.16
Short-term investments		12,414		11.37		14,483		11.56		(2,069)		(14.28)
Mortgage loans, net		1,525		1.40		1,633		1.30		(108)		(6.60)
Other assets		635		0.58		528		0.42		107		20.04
Total assets	$	109,137		100.00	$	125,270		100.00	$	(16,133)		(12.88)
Consolidated obligations, net:
Discount notes	$	16,178		15.83	$	24,330		20.50	$	(8,152)		(33.51)
Bonds		81,719		79.95		90,662		76.37		(8,943)		(9.86)
Deposits		3,078		3.01		2,655		2.24		423		15.92
Other liabilities		1,242		1.21		1,062		0.89		180		16.87
Total liabilities	$	102,217		100.00	$	118,709		100.00	$	(16,492)		(13.89)
Capital stock	$	5,899		85.24	$	5,718		87.15	$	181		3.17
Retained earnings		1,306		18.88		1,254		19.11		52		4.21
Accumulated other comprehensive loss		(285)		(4.12)		(411)		(6.26)		126		30.70
Total capital	$	6,920		100.00	$	6,561		100.00	$	359		5.49

36

Advances

The decrease in advances from December 31, 2011 to March 31, 2012 was due to maturing advances, prepayments, and decreased demand for new advances. The Bank has not seen a discernible impact on either the volume of advances or the distribution of advances outstanding by year of maturity as a result of the Federal Reserve Board’s (Federal Reserve) recent announcements that it expects to maintain short-term interest rates near zero through 2014. As of March 31, 2012, 86.7 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. As of March 31, 2012 and December 31, 2011, 72.8 percent and 65.7 percent, respectively, of the Bank’s fixed-rate advances were swapped and 12.0 percent and 9.79 percent, respectively, of the Bank’s variable-rate advances were swapped. 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 constant maturity swap rates.

The following table sets forth the par value of outstanding advances by product characteristics (dollars in millions):

		000000000000		000000000000		000000000000		000000000000
	As of March 31, 2012				As of December 31, 2011
	Amount		Percent of Total		Amount		Percent of Total
Adjustable or variable rate indexed	$	8,767		12.79	$	10,977		13.29
Fixed rate (1)		23,493		34.27		37,038		44.86
Hybrid		27,867		40.65		25,082		30.38
Convertible		7,222		10.53		8,276		10.02
Amortizing (2)		1,204		1.76		1,196		1.45
Total par value	$	68,553		100.00	$	82,569		100.00

⁽¹⁾  Includes convertible advances whose conversion options have expired.

⁽²⁾  The Bank offers a fixed-rate advance that may be structured with principal amortization in either equal increments or similar to a mortgage.

Refer to Note 7–Advances to the Bank’s interim financial statements for the concentration of the Bank’s advances to its 10 largest borrowing institutions.

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, and to cover operating expenses.

The Bank’s short-term investments consist of overnight and term federal funds sold, 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.

37

The following table sets forth more detailed information regarding short- and long-term investments held by the Bank (dollars in millions):

		000000000000		000000000000		000000000000		000000000000
					Increase (Decrease)
	As of March 31, 2012		As of December 31, 2011		Amount		Percent
Short-term investments:
Interest-bearing deposits (1)	$	1,203	$	1,203	$	—		0.06
Certificates of deposit		850		650		200		30.77
Federal funds sold		10,361		12,630		(2,269)		(17.97)
Total short-term investments		12,414		14,483		(2,069)		(14.28)
Long-term investments:
State or local housing agency debt obligations		96		103		(7)		(7.31)
U.S. government agency debt obligations		4,108		4,228		(120)		(2.81)
Mortgage-backed securities:
U.S. government agency securities		11,568		10,689		879		8.22
Private label		6,350		6,635		(285)		(4.29)
Total mortgage-backed securities		17,918		17,324		594		3.43
Total long-term investments		22,122		21,655		467		2.16
Total investments	$	34,536	$	36,138	$	(1,602)		(4.43)

¹⁾  As of March 31, 2012 and December 31, 2011, interest-bearing deposits includes a $1.2 billion business money market account with Branch Banking and Trust Company, one of the Bank’s ten largest borrowers. One of the Bank’s member directors is a senior executive vice president of Branch Banking and Trust Company. Pursuant to Finance Agency regulation, the Bank’s member directors serve as officers or directors of a Bank member, and the Bank may enter into business transactions with such members from time to time in the ordinary course of business.

The decrease in short-term investments from December 31, 2011 to March 31, 2012 was primarily due to a decrease in federal funds sold. The amount held in federal funds sold will vary each day based on the federal funds rates, the Bank’s liquidity requirements, and the availability of high quality counterparties in the federal funds market. In addition, during the first quarter of 2012, the Federal Reserve paid interest on required and excess reserves held by depository institutions at a rate of 0.25 percent. A significant and sustained increase in bank reserves during the period combined with the rate of interest paid on those reserves at the Federal Reserve has contributed to a decline in the volume of transactions taking place in the overnight federal funds market.

The Finance Agency limits an FHLBank’s investment in MBS and asset-backed securities by requiring that the total amortized historical costs for securities classified as held-to-maturity or available-for-sale, and fair value for MBS securities classified as trading owned by the FHLBank generally may not exceed 300 percent of the FHLBank’s previous month-end total capital, as defined by regulation, plus its mandatorily redeemable capital stock on the day it purchases the securities. These investments amounted to 241 percent and 244 percent of total capital plus mandatorily redeemable capital stock as of March 31, 2012 and December 31, 2011, respectively. The Bank was below its target range of 250 percent to 275 percent as of March 31, 2012 and December 31, 2011 due to a lack of quality MBS at attractive prices during recent market conditions and due to the Bank’s high level of excess capital stock. The Bank suspended new purchases of private-label MBS beginning in the first quarter of 2008, resulting in a greater percentage of U.S. government agency MBS as of March 31, 2012 compared to December 31, 2011. In addition, private-label MBS are experiencing faster prepayments than U.S. government agency MBS, further increasing the proportion of U.S. government agency MBS in the Bank’s MBS portfolio.

38

Refer to Note 4–Available-for-sale Securities and Note 5–Held-to-maturity Securities to the Bank’s interim financial statements for information on securities with unrealized losses as of March 31, 2012 and December 31, 2011.

The Bank evaluates its individual investment securities for other-than-temporary impairment on at least a quarterly basis, as described in Note 6–Other-than-temporary Impairment to the Bank’s interim financial statements. For a discussion regarding impairment losses recognized in earnings during the reported periods see Management’s Discussion and Analysis–Results of Operations–Noninterest Income (Loss) below.

Mortgage Loans Held for Portfolio

The decrease in mortgage loans held for portfolio from December 31, 2011 to March 31, 2012 was due to the Bank ceasing to purchase these assets and the maturity of these assets during the period.

As of March 31, 2012 and December 31, 2011, the Bank’s conventional 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 conventional single-family residential mortgage loans held for portfolio for the five largest state concentrations.

		0000000000000000000		0000000000000000000
	As of March 31, 2012		As of December 31, 2011
	Percent of Total		Percent of Total
South Carolina		24.54		24.61
Florida		23.93		23.17
Georgia		14.53		14.45
North Carolina		12.57		12.99
Virginia		8.75		8.90
All other		15.68		15.88
Total		100.00		100.00

Consolidated Obligations

The Bank funds its assets primarily through the issuance of consolidated obligation bonds and, to a lesser extent, consolidated obligation discount notes. As of March 31, 2012, CO issuances financed 89.7 percent of the $109.1 billion in total assets, remaining relatively stable from the financing ratio of 91.8 percent as of December 31, 2011.

The decrease in COs from December 31, 2011 to March 31, 2012 corresponds to the decrease in demand for advances by the Bank’s members and the increase in liquidity from maturing and prepaid advances during the period. As of March 31, 2012 and December 31, 2011, COs outstanding were primarily fixed-rate. However, the Bank often simultaneously enters into derivatives with the issuance of CO bonds to convert the interest rates, in effect, into short-term variable interest rates, usually based on LIBOR. As of March 31, 2012 and December 31, 2011, 81.3 percent and 81.9 percent, respectively, of the Bank’s fixed-rate CO bonds were swapped and 16.7 percent and 6.42 percent, respectively, of the Bank’s variable-rate CO bonds were swapped. As of March 31, 2012 and December 31, 2011, 0.62 percent and 4.64 percent, respectively, of the Bank’s fixed-rate CO discount notes were swapped to a variable rate.

39

As of March 31, 2012, callable CO bonds constituted 22.7 percent of the total par value of CO bonds outstanding, compared to 32.0 percent at December 31, 2011. This decrease was due to market conditions during the first quarter of 2012 that made the issuance of swapped callable fixed maturity debt less attractive to the Bank. The derivatives that the Bank may employ to hedge against the interest-rate risk associated with the Bank’s callable CO bonds are callable by the counterparty. The Bank generally will call a hedged CO bond if the call feature of the derivative is 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 CO 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. Total deposits were relatively stable as of March 31, 2012 compared to December 31, 2011.

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, 2012.

Capital

The increase in total capital from December 31, 2011 to March 31, 2012 was primarily due to the issuance of $207 million in activity-based capital stock and $26 million of membership capital stock, the time lag between fluctuations in advances and repurchases of excess capital stock, and a $126 million decrease in accumulated other comprehensive loss. The decrease in accumulated other comprehensive loss was primarily due to improvements in the fair value of the Bank’s available-for-sale securities.

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 Note 9–Capital and Mandatorily Redeemable Capital Stock to the Bank’s interim financial statements.

Finance Agency regulations establish 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;

40

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

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

Under the regulations, the Director of the Finance Agency (Director) will make a capital classification for each FHLBank at least quarterly and notify the FHLBank in writing of any proposed action and provide an opportunity for the FHLBank to submit information relevant to such action. The Director is permitted to make discretionary classifications. An FHLBank must provide written notice to the Finance Agency within 10 days of any event or development that has caused or is likely to cause its permanent or total capital to fall below the level required to maintain its most recent capital classification or reclassification. The regulations delineate the types of prompt corrective actions the Director may order in the event an FHLBank is not adequately capitalized, including submission of a capital restoration plan by the FHLBank and restrictions on its dividends, stock redemptions, executive compensation, new business activities, or any other actions the Director determines will ensure safe and sound operations and capital compliance by the FHLBank. On March 28, 2012, the Bank received notification from the Director that, based on December 31, 2011 data, the Bank meets the definition of “adequately capitalized.”

As of March 31, 2012, the Bank had capital stock subject to mandatory redemption from 51 members and former members, consisting of B1 membership stock and B2 activity-based capital stock, compared to 68 members and former members as of December 31, 2011, consisting of B1 membership capital stock and B2 activity-based capital stock. The Bank is not required to redeem or repurchase such capital stock until the expiration of the five-year redemption period or, with respect to activity-based capital stock, until the later of the expiration of the five-year redemption period or the activity no longer remains outstanding. The Bank makes its determination regarding the repurchase of excess capital stock on a quarterly basis, after financial results are known for the preceding quarter.

As of March 31, 2012 and December 31, 2011, the Bank’s outstanding stock included $2.0 billion and $1.1 billion, respectively, of excess shares subject to repurchase by the Bank at its discretion. The increase in excess shares was due to maturing and prepaid advances during the first quarter of 2012 and the time lag between advances fluctuations and repurchases of excess capital stock. On April 9, 2012, the Bank repurchased $700 million of excess stock; the amount of excess stock repurchased from each shareholder was based on the shareholder’s total excess capital stock as of March 30, 2012. The Bank paid $18 million in dividends during the first quarter of 2012.

In 2011, the FHLBanks entered into a Joint Capital Enhancement Agreement (Joint Capital Agreement) which is intended to enhance the capital position of each FHLBank and the safety and soundness of the FHLBank System. The intent of the Joint Capital Agreement is to allocate that portion of each FHLBank’s earnings historically paid to satisfy its REFCORP obligation to a restricted retained earnings account at that FHLBank. These restricted retained earnings are not available to pay dividends. Each FHLBank subsequently amended its capital plan to implement the provisions of the Joint Capital Agreement. The Finance Agency approved the capital plan amendments and certified satisfaction of the REFCORP obligation on August 5, 2011. In accordance with the Joint Capital Agreement, starting in the third quarter of 2011, each FHLBank contributes 20 percent of its net income to a restricted retained earnings account.

41

Results of Operations

Net Income

The following table sets forth the Bank’s significant income items for the first quarters of 2012 and 2011, and provides information regarding the changes during the periods (dollars in millions). These items are discussed in more detail below.

		000000000000000		000000000000000		000000000000000		000000000000000
	Three Months Ended March 31,				Increase (Decrease)
	2012		2011		Amount		Percent
Net interest income	$	85	$	127	$	(42)		(32.35)
Provision for credit losses		3		—		3		*
Noninterest income (loss)		23		(35)		58		165.15
Noninterest expense		27		22		5		25.84
Total assessments		8		19		(11)		(56.93)
Net income	$	70	$	51	$	19		38.84

* 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 liabilities (including COs, 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 certain derivative instruments and hedging activities related adjustments.

The decrease in net interest income during the first quarter of 2012, compared to the first quarter of 2011, was primarily due to a 70 basis points decrease in yield on the Bank’s long-term investments portfolio. The yield on the Bank’s long-term investment portfolio continued to decline primarily due to the maturity or prepayment of higher yielding investments and the purchase of lower yielding instruments.

As discussed above, net interest income also includes components of hedging activity. When a hedging relationship is discontinued, the cumulative fair value adjustment on the hedged item will be amortized into interest income or expense over the remaining life of the asset or liability. Also, when hedging relationships qualify for hedge accounting, the interest components of the hedging derivatives will be reflected in interest income or expense. As shown in the table summarizing the net effect of derivatives and hedging activity on the Bank’s results of operations, the impact of hedging on interest income was a decrease of $307 million and $410 million for the first quarters of 2012 and 2011, respectively.

42

The following table presents spreads between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities for the first quarters of 2012 and 2011 (dollars in millions).

	Three Months Ended March 31,
	2012						2011
	Average          Balance		Interest		Yield/   Rate (%)		Average         Balance		Interest		Yield/   Rate (%)
Assets
Federal funds sold	$	13,015	$	5		0.15	$	14,850	$	8		0.21
Interest-bearing deposits (1)		4,473		1		0.14		2,786		1		0.16
Certificates of deposit		843		1		0.33		800		1		0.26
Long-term investments (2)		22,245		158		2.87		22,653		198		3.57
Advances		81,876		68		0.33		85,323		71		0.33
Mortgage loans held for portfolio (3)		1,582		21		5.34		1,971		26		5.30
Loans to other FHLBanks		4		—		0.11		4		—		0.18
Total interest-earning assets		124,038		254		0.83		128,387		305		0.96
Allowance for credit losses on mortgage loans		(7)						(1)
Other assets		704						952
Total assets	$	124,735					$	129,338
Liabilities and Capital
Deposits (4)	$	2,883		—		0.02	$	2,849		1		0.09
Short-term borrowings		22,015		3		0.06		19,220		7		0.15
Long-term debt		88,359		165		0.75		94,465		169		0.73
Other borrowings		294		1		1.73		531		1		1.21
Total interest-bearing liabilities		113,551		169		0.60		117,065		178		0.62
Other liabilities		4,408						4,235
Total capital		6,776						8,038
Total liabilities and capital	$	124,735					$	129,338
Net interest income and net yield on interest-earning assets			$	85		0.28			$	127		0.40
Interest rate spread						0.23						0.34
Average interest-earning assets to interest-bearing liabilities						109.24						109.67

⁽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.

The Bank’s interest rate spread decreased by 11 basis points during the first quarter of 2012, compared to the first quarter of 2011, primarily due to a decrease in yield on the Bank’s long-term investments portfolio as previously discussed.

43

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 2012, compared to the first quarter in 2011, was primarily rate related.

		00000000000		00000000000		00000000000
	Three Month Ended March 31,
	2012 vs. 2011
	Volume (1)		Rate (1)		Increase (Decrease)
Increase (decrease) in interest income:
Federal funds sold	$	(1)	$	(2)	$	(3)
Interest-bearing deposits		1		(1)		—
Long-term investments		(3)		(37)		(40)
Advances		(3)		—		(3)
Mortgage loans held for portfolio		(5)		—		(5)
Total		(11)		(40)		(51)
Increase (decrease) in interest expense:
Deposits		—		(1)		(1)
Short-term borrowings		1		(5)		(4)
Long-term debt		(11)		7		(4)
Other borrowings		(1)		1		—
Total		(11)		2		(9)
Decrease in net interest income	$	—	$	(42)	$	(42)

⁽¹⁾  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.

Noninterest Income (Loss)

The following table presents the components of noninterest income (loss) (dollars in millions):

		0000000000000		0000000000000		0000000000000		0000000000000
	Three Months Ended March 31,				Increase (Decrease)
	2012		2011		Amount		Percentage
Net impairment losses recognized in earnings	$	(7)	$	(52)	$	45		86.10
Net losses on trading securities		(29)		(34)		5		14.53
Net gains on derivatives and hedging activities		54		46		8		17.59
Letters of credit fees		5		4		1		9.98
Other		—		1		(1)		(3.95)
Total noninterest income (loss)	$	23	$	(35)	$	58		165.15

The increase in total noninterest income (loss) noted in the above table was primarily due to a decrease in net impairment losses recognized in earnings. The Bank recognized $7 million of credit-related other-than-temporary impairment losses during the first quarter of 2012, which reflected the impact of additional projected losses on loan collateral underlying certain private-label MBS. Each quarter, the Bank updates its other-than-temporary impairment analysis to reflect current housing market conditions, changes in anticipated housing market conditions, observed and anticipated borrower behavior, and updated information on the loans supporting the Bank’s private-label MBS. Factors that adversely affected projected borrower default rates and projected loan loss severity included the impact of large inventories

44

of unsold homes on current and forecasted housing prices, continued weakness in the economy and in employment, and increased foreclosure costs and delays, resulting in continued credit losses.

The following tables summarize the net effect of derivatives and hedging activity on the Bank’s results of operations (in millions):

		0000000000		0000000000		0000000000		0000000000		0000000000		0000000000
	Three Months Ended March 31, 2012
	Advances		Investments		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes		Balance Sheet		Total
Net interest income:
Amortization or accretion of hedging activities in net interest income (1)	$	(69)	$	—	$	5	$	—	$	—	$	(64)
Net interest settlements included in net interest income (2)		(386)		—		143		—		—		(243)
Total net interest (expense) income		(455)		—		148		—		—		(307)
Net gains (losses) on derivatives and hedging activities:
Gains (losses) on fair value hedges		66		—		(15)		—		—		51
Gains (losses) on derivatives not receiving hedge accounting		1		(7)		2		—		7		3
Total net gains (losses) on derivatives and hedging activities		67		(7)		(13)		—		7		54
Total net interest (expense) income and net gains (losses) on derivatives and hedging activities		(388)		(7)		135		—		7		(253)
Net losses on trading securities (3)		—		(29)		—		—		—		(29)
Total net effect of derivatives and hedging activities	$	(388)	$	(36)	$	135	$	—	$	7	$	(282)

⁽¹⁾ Represents the amortization or accretion of hedging fair value adjustments for both open and closed hedge positions.

⁽²⁾  Represents interest income or expense on derivatives included in net interest income.

⁽³⁾ Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative “assigned,” therefore, this line item may not agree to the income statement.

		0000000000		0000000000		0000000000		0000000000		0000000000		0000000000
	Three Months Ended March 31, 2011
	Advances		Investments		Consolidated Obligation Bonds		Consolidated Obligation Discount Notes		Balance Sheet		Total
Net interest income:
Amortization or accretion of hedging activities in net interest income (1)	$	(48)	$	—	$	11	$	—	$	—	$	(37)
Net interest settlements included in net interest income (2)		(590)		—		216		1		—		(373)
Total net interest (expense) income		(638)		—		227		1		—		(410)
Net gains (losses) on derivatives and hedging activities:
Gains (losses) on fair value hedges		47		—		(9)		—		—		38
Gains on derivatives not receiving hedge accounting		1		4		—		—		3		8
Total net gains (losses) on derivatives and hedging activities		48		4		(9)		—		3		46
Total net interest (expense) income and net gains (losses) on derivatives and hedging activities		(590)		4		218		1		3		(364)
Net losses on trading securities (3)		—		(34)		—		—		—		(34)
Total net effect of derivatives and hedging activities	$	(590)	$	(30)	$	218	$	1	$	3	$	(398)

⁽¹⁾ Represents the amortization or accretion of hedging fair value adjustments for both open and closed hedge positions.

⁽²⁾  Represents interest income or expense on derivatives included in net interest income.

⁽³⁾ Includes only those gains or losses on trading securities or financial instruments held at fair value that have an economic derivative “assigned,” therefore, this line item may not agree to the income statement.

45

Noninterest Expense and Assessments

Noninterest expense was $27 million and $22 million for the first quarters of 2012 and 2011, respectively. The $5 million increase was primarily due to the discontinuation of the Bank’s Economic Development and Growth Enhancement Program (EDGE) during the first quarter of 2011. The EDGE was a selective program that provided subsidized advances to member financial institutions for specific community economic development projects; however, EDGE experienced low utilization by members. The Bank had a $9 million liability related to uncommitted funds as of the date the EDGE was discontinued, which was reduced to zero with a corresponding reduction to other expense during the period. Compensation and benefits and other operating expenses together were $23 million and $26 million for the first quarters of 2012 and 2011, respectively. The $3 million decrease reflects the Bank’s efforts during the past year to control operating expenses.

Total assessments were $8 million and $19 million for the first quarters of 2012 and 2011, respectively. The $11 million decrease was primarily due to the satisfaction of the Bank’s REFCORP obligation during the second quarter of 2011 as previously discussed.

Liquidity and Capital Resources

Liquidity is necessary to satisfy members’ borrowing needs on a timely basis, repay maturing and called COs, 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. The Bank maintains contingent liquidity, 45-day liquidity, and operational liquidity.

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 2012. During the recent financial crisis, the Finance Agency provided liquidity guidance to the FHLBanks 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 strives to maintain sufficient liquidity to service debt obligations for at least 45 days, assuming restricted debt market access. The Bank’s 45-day debt service goal is closely aligned with those recommended by the Finance Agency and reflects the Bank’s practice of not committing to consolidated obligation settlements beyond 30 days. The Bank met its internal liquidity goal during the first quarter of 2012.

The Bank’s principal source of liquidity is CO debt instruments. 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

46

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 prioritizes the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance, as well as systemic Federal Reserve wire transfer system disruptions. Under the FHLBank Act, the Secretary of Treasury has the authority, at his or her discretion, to purchase COs up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.

Off-balance Sheet Commitments

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

• the Bank’s joint and several liability for all FHLBank COs; and

• the Bank’s outstanding commitments arising from standby letters of credit.

Should an FHLBank be unable to satisfy its payment obligation under a CO 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 liabilities to be a related-party guarantee. These related-party guarantees meet the scope exception under GAAP. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks’ COs as of March 31, 2012 and December 31, 2011. As of March 31, 2012, the FHLBanks had $658.0 billion in aggregate par value of COs issued and outstanding, $96.7 billion of which was attributable to the Bank. No FHLBank has ever defaulted on its principal or interest payments under any CO, and the Bank has never been required to make payments under any CO as a result of the failure of another FHLBank to meet its obligations.

Refer to Note 13 – Commitments and Contingencies in the Bank’s interim financial statements for the amount of outstanding standby letters of credit as of March 31, 2012 and December 31, 2011. The Bank expects its overall standby letter of credit activity to remain relatively stable for the near future.

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. The Bank may issue standby letters of credit for terms of longer than one year without annual renewals or for open-ended terms with annual renewals (commonly known as evergreen letters of credit) based on the creditworthiness of the member applicant and appropriate additional fees.

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. Standby letters of credit are not subject to activity-based capital stock purchase requirements. If the Bank is required to make a payment for a beneficiary’s draw, the Bank in its discretion may convert such paid amount to an advance to the member and will require a corresponding activity-based capital stock purchase. The Bank’s underwriting and collateral requirements for standby letters of credit are the same as

47

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 standby letters of credit as of March 31, 2012. 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.

Contractual Obligations

As of March 31, 2012, 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

The legislative and regulatory environment in which the Bank operates continues to undergo rapid change driven principally by reforms under the Housing and Economic Recovery Act of 2008 (Housing Act ) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The Bank expects the Housing Act and the Dodd-Frank Act as well as plans for housing finance and GSE reform to result in still further changes to this environment. The Bank’s business operations, funding costs, rights, obligations, and/or the environment in which the Bank carries out its housing finance mission are likely to continue to be significantly impacted by these changes. Significant regulatory actions and developments for the period covered by this report are summarized below, to the extent not previously discussed in the Bank’s Form 10-K.

Dodd-Frank Act Developments

Derivatives. The Dodd-Frank Act provides for new statutory and regulatory requirements for derivative transactions, including those utilized by the Bank to hedge its interest rate and other risks. As a result of these requirements, certain derivative transactions will be required to be cleared through a third-party central clearinghouse and traded on regulated exchanges or new swap execution facilities. As further discussed in the Bank’s Form 10-K, cleared swaps will be subject to new requirements including mandatory reporting, recordkeeping and documentation requirements established by applicable regulators and initial and variation margin requirements established by the clearinghouse and its clearing members. At this time, the Bank does not expect that any of its swaps will be subject to these new clearing and trading requirements until the beginning of 2013, at the earliest.

The Dodd-Frank Act will also change the regulatory landscape for derivative transactions that are not subject to mandatory clearing requirements (uncleared trades). While the Bank expects to continue to enter into uncleared trades on a bilateral basis, such trades will be subject to new requirements, including mandatory reporting, recordkeeping, documentation, and minimum margin and capital requirements established by applicable regulators. These requirements are discussed in the Bank’s Form 10-K. At this time, the Bank does not expect to have to comply with such requirements until the beginning of 2013, at the earliest.

The U.S. Commodity Futures Trading Commission (CFTC), the SEC, the Finance Agency and other bank regulators are expected to continue to issue final rulemakings implementing the foregoing requirements between now and the end of 2012. The FHLBanks continue to monitor these rulemakings and the overall regulatory process to implement the derivatives reform under the Dodd-Frank Act. The FHLBanks are

48

working together to implement the processes and documentation necessary to comply with the Dodd-Frank Act’s new requirements for derivatives.

The Dodd-Frank Act will require swap dealers and certain other large users of derivatives to register as “swap dealers” or “major swap participants,” as the case may be, with the CFTC and/or the SEC. Based on the definitions in the final rules jointly issued by the CFTC and SEC in April 2012, the Bank will not be required to register as either a major swap participant or as a swap dealer based on the derivative transactions that the Bank enters into for the purposes of hedging and managing its interest rate risk or for the derivative transactions that the Bank intermediates for its member institutions.

The CFTC and the SEC have not finalized their rules further defining “swap.” See the Bank’s Form 10-K for a discussion of how such final rules could impact call and put optionality in certain advances from the Bank to its borrowers.

Oversight Council Final Rule on SIFI Designation. On April 11, 2012, the Financial Stability Oversight Council (Oversight Council) issued a final rule effective May 11, 2012 and guidance on the standards and procedures the Oversight Council will follow in determining whether to designate a nonbank financial company for supervision by the Federal Reserve and subject to certain heightened prudential standards (commonly referred to as a “systemically important financial institution” or “SIFI”). The Oversight Council will analyze a nonbank financial company for possible SIFI designation under a three stage process:

• a first stage that will identify those nonbank financial companies that have $50 billion or more of total consolidated assets (as of March 31, 2012, the Bank had $109.1 billion in total assets) and exceed any one of five threshold indicators of interconnectedness or susceptibility to material financial distress, including whether a company has $20 billion or more in total debt outstanding (as of March 31, 2012, the Bank had $97.9 billion in total outstanding COs, the Bank’s principal form of outstanding debt);

• a second stage analyzing the potential threat that the subject nonbank financial company could pose to U.S. financial stability based on additional quantitative and qualitative factors that are both industry and company specific; and

• a third stage analyzing the subject nonbank financial company using information collected directly from the company.

Although the final rule declines to provide any industry-specific or categorical exemptions from SIFI designation, the final rule does provide that the Oversight Council will consider as one factor whether the nonbank financial company is subject to oversight by a primary financial regulatory agency in making its determinations. A nonbank financial company that the Oversight Council proposes to designate as a SIFI under this rule has the opportunity to contest the designation. To date, the Bank has not received any request for information or communication from the Oversight Council pursuant to the final rule and guidance.

Federal Reserve Proposed Rule on Prudential Standards. On January 5, 2012, the Federal Reserve issued a proposed rule that would implement the enhanced prudential and early remediation standards required by the Dodd-Frank Act for bank holding companies and nonbank financial companies identified by the Oversight Council as SIFIs. The proposed prudential standards include: risk-based capital leverage and overall risk management requirements; liquidity standards; single-counterparty credit limits; stress test

49

requirements; and a debt-to-equity limit. The capital and liquidity requirements would be implemented in phases and would be based on or exceed the Basel international capital and liquidity framework (as discussed in further detail in the Bank’s Form 10-K).

The Oversight Council final rule and the Federal Reserve proposed rule are broad enough to potentially include the Bank as a SIFI, unless the final Federal Reserve rule exempts the FHLBanks. If the Bank is designated by the Oversight Council as a SIFI, the Bank’s operations and business could be adversely impacted by additional costs and business activity restrictions resulting from the additional regulatory oversight. Comments on the proposed rule were due April 30, 2012.

Finance Agency Developments

Finance Agency Advisory Bulletin on Asset Classification. On April 9, 2012, the Finance Agency issued Advisory Bulletin 2012-02, Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention (AB 2012-02), effective the date of issuance. AB 2012-02 establishes a standard and uniform methodology for adverse classification and identification of special mention assets and off-balance sheet credit exposures at the FHLBanks, excluding investment securities. The Bank is still evaluating the impact, if any, the guidance may have on its financial condition and results of operations.

Risk Management and Risk Appetite

The Bank’s lending, investment, and funding activities and the use of derivative hedge instruments expose the Bank to a number of risks. A robust risk management framework aligns risk-taking activities with the Bank’s strategies and risk appetite. A risk management framework also balances risks and rewards. The Bank’s risk management framework consists of risk governance, risk appetite, and risk management policies.

The Bank’s board of directors and management recognize that risks are inherent to the Bank’s business model and that the process of establishing a risk appetite does not imply that the Bank seeks to mitigate or eliminate all risk. By defining and managing to a specific risk appetite, the board of directors and management ensure that there is a common understanding of the Bank’s desired risk profile which enhances their ability to make improved strategic and tactical decisions. Additionally, the Bank aspires to achieve and exceed best practices in governance, ethics, and compliance, and to sustain a corporate culture that fosters transparency, integrity, and adherence to legal and ethical obligations.

The Bank’s board of directors and management have established this risk appetite statement and risk metrics for controlling and escalating actions based on the nine continuing objectives that represent the foundation of the Bank’s strategic and tactical planning, as described in the Bank’s Form 10-K.

Discussion of the Bank’s management of its credit risk and market risk is provided below. Further discussion of these risks, as well as the Bank’s management of its liquidity, operational and business risks, is contained in the Bank’s Form 10-K.

50

Credit Risk

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

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.

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 category 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 further 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, 2012		As of December 31, 2011
Rating	Number of Borrowers	Outstanding Advances	Number of Borrowers	Outstanding Advances
1-9	523	$                        64,695	536	$                        78,355
10	108	2,634	117	3,033

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 generally 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 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, 2012, 11 borrowers have been approved for a credit limit higher than 30 percent.

51

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. 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 Bank regularly reevaluates the appropriate level of discounting. 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, 2012	$	68,553	$	189,319		66.18		10.13		23.69
As of December 31, 2011		82,569		188,597		64.36		10.93		24.71

For purposes of determining each member’s LCV, the Bank generally estimates the current market value of all residential first mortgage loans, home equity loans and lines of credit 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. Market values, and thus LCVs, change monthly. The Bank believes a market-based valuation methodology allows the Bank to establish its collateral discounts with greater precision and greater transparency with respect to the valuation of collateral pledged for advances and other credit products offered by the Bank.

The following table provides information on FDIC-insured institutions that were placed into receivership during the periods indicated.

		00000000000000000		00000000000000000
	Three Months Ended March 31,
	2012		2011
FHLBank Atlanta members		6		10
Non-FHLBank Atlanta members		10		16
Total FDIC-insured		16		26

All outstanding advances to those member institutions placed into FDIC receivership were either paid in full or assumed by another member or non-member institution under purchase and assumption agreements between the assuming institution and the FDIC. The Bank expects more member institution failures during 2012, but at a lower rate than during 2011 as capital levels, asset quality, and the overall financial condition of member institutions slowly improve.

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 of a party that (1) would be entitled to priority under otherwise applicable law; and (2) is an actual bona fide purchaser for value or is an actual secured party whose security interest is perfected in accordance with applicable state law.

52

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, 2012 and December 31, 2011.

Investments

The Bank is subject to credit risk on certain unsecured investments, including interest-bearing deposits, certificates of deposit and federal funds sold.

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 a 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;

• interest-only or principal-only stripped MBS, collateralized mortgage obligations (CMOs), collateralized debt obligations, 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; and

• non-U.S. dollar denominated securities.

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. On a regular basis, management produces financial monitoring reports detailing the financial condition of the Bank’s counterparties. These reports are reviewed by the Bank’s board of directors. In light of significant European sovereign credit concerns which triggered falling equity prices

53

and higher credit default swap spreads during the third quarter of 2011, the Bank suspended overnight and term trading with its French counterparties, and the Bank has limited term trades and capped overnight trades with certain European counterparties based on their financial condition. The Bank may further limit or suspend overnight and term trading in addition to RMP and regulatory requirements. Limiting or suspending counterparties limits the pool of available counterparties, shifts the geographical concentration of counterparty exposure, and may reduce the Bank’s overall short-term investment opportunities. As noted above, Finance Agency regulations prohibit the Bank from investing in non-U.S. sovereign debt.

The Bank enters into investments only with U.S. counterparties or U.S. branches and agency offices of foreign commercial banks that have been approved by the Bank through its internal approval process, but may have exposure to foreign entities if a counterparty’s parent entity is located in another country. The table below represents the Bank’s gross exposure, by instrument type, according to the location of the parent company of the counterparty (in millions):

		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000
	As of March 31, 2012
	Federal Funds Sold		Interest-bearing Deposits		Certificates of Deposit		Net Derivative Exposure (1)		Total
Australia	$	645	$	—	$	—	$	—	$	645
Canada		660		—		100		—		760
France		—		—		—		1		1
Germany		—		—		—		93		93
Japan		301		—		650		—		951
Netherlands		780		—		—		—		780
Norway		1,345		—		—		—		1,345
Spain		—		—		—		3		3
Sweden		2,885		—		—		—		2,885
United Kingdom		2,005		—		—		93		2,098
United States of America		1,740		1,203		100		102		3,145
Total	$	10,361	$	1,203	$	850	$	292	$	12,706

⁽¹⁾  Amounts do not reflect collateral; see the table under Prudent Risk Management and Appetite – Credit Risk – Derivatives below for a breakdown of the credit ratings of and the Bank’s credit exposure to derivative counterparties, including net exposure after collateral.

54

		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000
	As of December 31, 2011
	Federal Funds Sold		Interest-bearing Deposits		Certificates of Deposit		Net Derivative Exposure (1)		Total
Australia	$	1,335	$	—	$	—	$	—	$	1,335
Canada		2,050		—		—		—		2,050
France		—		—		—		3		3
Germany		1,225		—		—		37		1,262
Japan		—		—		650		—		650
Norway		950		—		—		—		950
Spain		575		—		—		5		580
Sweden		3,090		—		—		—		3,090
Switzerland		400		—		—		—		400
United Kingdom		1,700		—		—		—		1,700
United States of America		1,305		1,203		—		—		2,508
Total	$	12,630	$	1,203	$	650	$	45	$	14,528

⁽¹⁾  Amounts do not reflect collateral; see the table under Prudent Risk Management and Appetite – Credit Risk – Derivatives below for a breakdown of the credit ratings of and the Bank’s credit exposure to derivative counterparties, including net exposure after collateral.

The Bank experienced a decrease in unsecured credit exposure in its investment portfolio related to non-U.S. government or non-U.S. government agency counterparties from $14.5 billion as of December 31, 2011 to $12.4 billion as of March 31, 2012. There were five such counterparties that represented 50.4 percent, and four such counterparties, Svenska Handelsbanken, Nordea Bank Finland PLC, Barclays Bank PLC and Branch Banking and Trust Company (one of the Bank’s ten largest borrowers as of March 31, 2012), that each represented greater than 10 percent, of the total unsecured credit exposure to non-U.S. government or non-U.S. government agencies counterparties. The Bank’s unsecured credit exposure is comprised primarily of federal funds sold.

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.

55

The tables below provide information on the credit ratings of the Bank’s investments held as of March 31, 2012 and December 31, 2011, based on their credit ratings as of March 31, 2012 and December 31, 2011 (in millions). The credit ratings reflect the lowest long-term credit rating as reported by an NRSRO.

As of March 31, 2012            

Carrying Value ⁽¹⁾            

	Investment Grade								Below Investment Grade
	AAA		AA		A		BBB		BB		B		CCC		CC		C		D
Short-term investments:
Interest-bearing deposits	$	—	$	2	$	1,201	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Certificates of deposit		—		—		850		—		—		—		—		—		—		—
Federal funds sold		—		5,150		5,211		—		—		—		—		—		—		—
Total short-term investments		—		5,152		7,262		—		—		—		—		—		—		—
Long-term investments:
State or local housing agency debt obligations		—		96		—		—		—		—		—		—		—		—
U.S. government agency debt obligations		—		4,108		—		—		—		—		—		—		—		—
Mortgage-backed securities:
U.S. government agency securities		—		11,568		—		—		—		—		—		—		—		—
Private label		562		240		777		527		630		871		1,392		662		673		16
Total mortgage-backed securities		562		11,808		777		527		630		871		1,392		662		673		16
Total long-term investments		562		16,012		777		527		630		871		1,392		662		673		16
Total investments	$	562	$	21,164	$	8,039	$	527	$	630	$	871	$	1,392	$	662	$	673	$	16

⁽¹⁾  Investment amounts noted in the above table represent the carrying value and do not include related accrued interest receivable of $74 million as of March 31, 2012.

As of December 31, 2011            

Carrying Value ⁽¹⁾            

	Investment Grade								Below Investment Grade
	AAA		AA		A		BBB		BB		B		CCC		CC		C		D
Short-term investments:
Interest-bearing deposits	$	—	$	2	$	1,201	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Certificates of deposit		—		—		650		—		—		—		—		—		—		—
Federal funds sold		—		5,825		6,805		—		—		—		—		—		—		—
Total short-term investments		—		5,827		8,656		—		—		—		—		—		—		—
Long-term investments:
State or local housing agency debt obligations		—		103		—		—		—		—		—		—		—		—
U.S. government agency debt obligations		—		4,228		—		—		—		—		—		—		—		—
Mortgage-backed securities:
U.S. government agency securities		—		10,689		—		—		—		—		—		—		—		—
Private label		664		314		757		559		689		891		1,394		663		689		15
Total mortgage-backed securities		664		11,003		757		559		689		891		1,394		663		689		15
Total long-term investments		664		15,334		757		559		689		891		1,394		663		689		15
Total investments	$	664	$	21,161	$	9,413	$	559	$	689	$	891	$	1,394	$	663	$	689	$	15

⁽¹⁾  Investment amounts noted in the above table represent the carrying value and do not include related accrued interest receivable of $83 million as of December 31, 2011.

56

Subsequent to March 31, 2012, $444 million, or 1.29 percent, of the Bank’s investments have been downgraded as of April 30, 2012 as outlined in the table below (in millions):

Investment Ratings		Downgrades - Balances Based on Carrying Values at March 31, 2012
As of March 31, 2012	As of April 30, 2012	Private-label MBS
From	To	Carrying Value		Fair Value
AAA	AA	$	5	$	5
AA	A		8		9
A	BBB		62		61
A	BB		113		108
BBB	BB		88		89
BB	B		46		38
C	D		122		123
Total		$	444	$	433

The following table presents all investments, excluding overnight investments, held on March 31, 2012 and on negative watch as of April 30, 2012 (in millions):

		000000000000000		000000000000000		000000000000000		000000000000000
	On Negative Watch - Balances Based on  Carrying Values as of March 31, 2012
	Private-label MBS				Non-MBS Investments
Investment Ratings	Carrying Value		Fair Value		Carrying Value		Fair Value
AAA	$	7	$	8	$	—	$	—
AA		7		7		710		710
A		21		21		200		200
BBB		25		22		—		—
Total	$	60	$	58	$	910	$	910

Private-label MBS

As of March 31, 2012, the Bank’s long-term investment portfolio included $6.4 billion of private-label MBS, which represented 28.7 percent of the carrying value of the Bank’s long-term investment portfolio. 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. As of March 31, 2012, based on the classification by the originator at the time of origination, approximately 87.1 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.

57

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

		000000000000		000000000000		000000000000		000000000000		000000000000		000000000000
	As of March 31, 2012						As of December 31, 2011
	Fixed-Rate		Variable-Rate		Total		Fixed-Rate		Variable-Rate		Total
Prime	$	801	$	5,525	$	6,326	$	933	$	5,751	$	6,684
Alt-A		420		513		933		451		529		980
Total unpaid principal balance	$	1,221	$	6,038	$	7,259	$	1,384	$	6,280	$	7,664

The tables below provide additional information, including changes in ratings since the original purchase date, on the Bank’s private-label MBS by year of securitization as of March 31, 2012 (dollars in millions).

		00000000		00000000		00000000		00000000		00000000		00000000
	Year of Securitization - Prime
	2008		2007		2006		2005		2004 and Prior		Total
Investment Ratings:
AAA	$	—	$	—	$	—	$	21	$	536	$	557
AA		—		—		—		—		234		234
A		—		—		—		178		429		607
BBB		—		24		—		20		218		262
BB		—		66		8		307		251		632
B		—		—		—		303		540		843
CCC		49		756		130		674		30		1,639
CC		124		121		246		247		—		738
C		—		287		486		15		—		788
D		—		26		—		—		—		26
Total unpaid principal balance	$	173	$	1,280	$	870	$	1,765	$	2,238	$	6,326
Amortized cost	$	155	$	1,034	$	717	$	1,644	$	2,218	$	5,768
Gross unrealized losses	$	(8)	$	(50)	$	(41)	$	(145)	$	(108)	$	(352)
Fair value	$	147	$	993	$	686	$	1,501	$	2,129	$	5,456
Other-than-temporary impairment (Year-to-date):
Credit-related losses	$	—	$	(4)	$	(3)	$	—	$	—	$	(7)
Non-credit-related losses		—		(4)		(3)		—		—		(7)
Total other-than-temporary impairment losses	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average percentage of fair value to unpaid principal balance		85.24%		77.61%		78.93%		84.99%		95.13%		86.26%
Original weighted average credit support		15.72%		13.57%		10.12%		6.71%		3.29%		7.60%
Weighted average credit support		11.85%		5.66%		2.78%		6.88%		8.18%		6.66%
Weighted average collateral delinquency		18.72%		24.39%		21.52%		13.22%		7.95%		14.91%

58

		00000000		00000000		00000000		00000000		00000000		00000000
	Year of Securitization – Alt-A
	2008		2007		2006		2005		2004 and Prior		Total
Investment Ratings:
AAA	$	—	$	—	$	—	$	—	$	10	$	10
AA		—		—		—		—		8		8
A		—		—		—		—		173		173
BBB		—		—		—		—		265		265
B		—		—		—		—		71		71
CCC		—		—		—		179		—		179
CC		—		—		—		168		—		168
C		—		59		—		—		—		59
Total unpaid principal balance	$	—	$	59	$	—	$	347	$	527	$	933
Amortized cost	$	—	$	43	$	—	$	283	$	528	$	854
Gross unrealized losses	$	—	$	(5)	$	—	$	(77)	$	(3)	$	(85)
Fair value	$	—	$	38	$	—	$	206	$	532	$	776
Other-than-temporary impairment (Year-to-date):
Credit-related losses	$	—	$	—	$	—	$	—	$	—	$	—
Non-credit-related losses		—		—		—		—		—		—
Total other-than-temporary impairment losses	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average percentage of fair value to unpaid principal balance		0.00%		65.15%		0.00%		59.21%		100.73%		83.06%
Original weighted average credit support		0.00%		12.29%		0.00%		26.20%		7.20%		14.59%
Weighted average credit support		0.00%		(0.56)%		0.00%		20.10%		11.62%		14.01%
Weighted average collateral delinquency		0.00%		35.08%		0.00%		39.89%		7.00%		20.99%

The following table represents a summary of the significant inputs used to evaluate each of the Bank’s private-label MBS for other-than-temporary impairment:

		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000		0000000000000
	Significant Inputs
	Prepayment Rate				Default Rates				Loss Severities				Current Credit Enhancement
Year of Securitization	Weighted Average (%)		Range (%)		Weighted Average (%)		Range (%)		Weighted Average (%)		Range (%)		Weighted Average (%)		Range (%)
Prime:
2008		7.59		7.59 to 7.59		33.24		33.24 to 33.24		45.27		45.27 to 45.27		11.85		11.40 to 12.98
2007		13.06		7.71 to 38.54		18.79		2.13 to 24.45		40.53		21.88 to 49.13		4.73		1.87 to 8.51
2006		8.53		3.58 to 30.25		22.77		5.20 to 31.56		46.59		31.86 to 54.79		3.59		0.26 to 6.80
2005		11.24		4.51 to 15.08		13.78		1.94 to 30.59		31.14		19.67 to 42.97		7.12		4.27 to 13.89
2004 and prior		17.71		6.39 to 52.69		8.35		0.00 to 25.14		25.27		0.00 to 52.52		7.82		2.44 to 42.82
Total Prime		14.05		3.58 to 52.69		13.33		0.00 to 33.24		31.32		0.00 to 54.79		7.06		0.26 to 42.82
Alt-A:
2007		5.67		4.25 to 7.25		56.69		45.64 to 65.44		48.82		45.47 to 51.34		5.67		(0.56) to 11.61
2006		6.42		5.38 to 8.00		54.55		46.37 to 62.20		51.17		43.05 to 54.94		1.94		0.00 to 5.09
2005		5.86		2.31 to 7.67		50.68		29.67 to 78.97		50.18		36.48 to 54.96		12.26		0.13 to 37.89
2004 and prior		11.00		6.04 to 15.76		13.46		1.11 to 44.97		28.28		16.72 to 55.50		12.06		3.60 to 39.27
Total Alt-A		7.10		2.31 to 15.76		44.48		1.11 to 78.97		44.72		16.72 to 55.50		8.47		(0.56) to 39.27
Total		11.35		2.31 to 52.69		25.42		0.00 to 78.97		36.52		0.00 to 55.50		7.61		(0.56) to 42.82

59

For those securities for which an other-than-temporary impairment was determined to have occurred during the first quarter of 2012, a summary of the significant inputs used to measure the amount of the credit loss recognized in earnings is contained in Note 6–Other-than-temporary Impairment to the Bank’s interim financial statements.

The table below summarizes the total other-than-temporary impairment losses by newly impaired and previously impaired securities (in millions):

		0000000000		0000000000		0000000000		0000000000		0000000000		0000000000
	Three Months Ended March 31,
	2012						2011
	Credit Losses		Net Noncredit Losses		Total Losses		Credit Losses		Net Noncredit Losses		Total Losses
Securities newly impaired during the period	$	—	$	—	$	—	$	(6)	$	19	$	(25)
Securities previously impaired prior to current period (1)		(7)		(7)		—		(46)		(46)		—
Total	$	(7)	$	(7)	$	—	$	(52)	$	(27)	$	(25)

⁽¹⁾  For the three months ended March 31, 2012 and 2011, “Securities previously impaired prior to current period” represents all securities that were also previously impaired prior to January 1, 2012 and 2011, respectively.

In addition to the cash flow analysis of the Bank’s private-label MBS under a base case (best estimate) housing price scenario as described in Note 6–Other-than-temporary Impairment to the Bank’s interim financial statements, 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 housing price forecast that was five percentage points lower at the trough than the base case scenario, followed by a flatter recovery path. Under this scenario, current-to-trough home price declines were projected to range from 5.00 percent to 13.00 percent over the three- to nine-month period beginning January 1, 2012. From the trough, home prices were projected to recover using one of five different recovery paths that vary by housing market. The following table presents projected home price recovery ranges by months under the adverse case scenario:

Months	Annualized Rates (%)
1 to 6	0.00 to 1.90
7 to 18	0.00 to 2.00
19 to 24	0.70 to 2.70
25 to 30	1.30 to 2.70
31 to 42	1.30 to 3.40
43 to 66	1.30 to 4.00
Thereafter	1.50 to 3.80

The adverse case housing price scenario and associated results do not represent the Bank’s current expectations, and therefore should not be construed as a prediction of the Bank’s future results, market conditions or the actual performance of these securities. Rather, the results from this hypothetical adverse case housing price scenario provide a measure of the credit losses the Bank might incur if home price declines (and subsequent recoveries) are more adverse than those projected in the Bank’s base case assessment.

60

The following table shows the base case scenario and what the impact on other-than-temporary impairment would have been under the more stressful adverse case housing price scenario (dollars in millions). Under the adverse case housing price scenario, the Bank may recognize a credit loss in excess of the maximum credit loss, the difference between the security’s amortized cost basis and fair value, because the Bank believes fair value would decrease in the adverse case housing price scenario.

	Three Months Ended March 31, 2012
	Housing Price Scenario
	Base Case (2)						Adverse Case
	Number of     Securities		Unpaid Principal     balance		Other-Than- Temporary Impairment Related to Credit Loss		Number of     Securities		Unpaid Principal     balance		Other-Than- Temporary Impairment Related to Credit Loss
Prime loans (1)		9	$	517	$	(7)		34	$	2,121	$	(32)
Alt-A (1)		—		—		—		6		312		(4)
Total		9	$	517	$	(7)		40	$	2,433	$	(36)

⁽¹⁾  Based on the originator’s classification of collateral at the time of origination or based on classification of collateral by an NRSRO upon issuance of the MBS.

⁽²⁾  Represents securities and related other-than-temporary-impairment credit losses for the three months ended March 31, 2012.

The Bank continues to actively monitor the credit quality of its private-label MBS investments. It is not possible to predict the magnitude of additional other-than temporary impairment losses in future periods because that prediction depends on the actual performance of the underlying loan collateral as well as the Bank’s future modeling assumptions. Many factors could influence the Bank’s future modeling assumptions, including economic, financial market and housing market conditions. If performance of the underlying loan collateral deteriorates and/or the Bank’s modeling assumptions become more pessimistic, the Bank could experience further losses on its investment portfolio.

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, 2012 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

Derivatives transactions may subject the Bank to credit risk due to potential nonperformance by counterparties to the agreements. The Bank seeks to limit counterparty risk by collateral requirements and netting procedures that establish collateral requirement thresholds. The Bank also manages counterparty credit risk through credit analysis, collateral management, and other credit enhancements. Additionally, the Bank follows applicable regulatory requirements, which set forth the eligibility criteria for counterparties (i.e., minimum capital requirements, NRSRO ratings, dollar and term limits, etc.). The Bank requires collateral agreements with counterparties that establish maximum allowable net unsecured credit exposure before collateral requirements are triggered. Limits are based on the credit rating of the counterparty. Uncollateralized exposures result when credit exposures to specific counterparties fall below collateralization trigger levels. In light of significant European sovereign credit concerns, beginning in the third quarter of 2011, the Bank suspended new derivative transactions with French counterparties. The

61

Bank may further limit or suspend derivative transactions for other European counterparties in addition to RMP and regulatory requirements.

As of March 31, 2012, the Bank had $125.8 billion in total notional amount of derivatives outstanding compared to $139.7 billion at December 31, 2011. The notional amount serves as a factor in determining periodic interest payments or cash flows received and paid. It does not represent actual amounts exchanged or the Bank’s exposure to credit and market risk. The amount potentially subject to credit loss is based upon the counterparty’s net payment obligations. The credit risk of derivatives is measured on a portfolio basis by netting the market values of all outstanding transactions for each counterparty.

As of March 31, 2012, 96.4 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 two, Deutsche Bank AG and Goldman Sachs Group, Inc., that each represented more than 10 percent of the Bank’s total notional amount, and there were two counterparties, Citi Swapco Inc. and Barclays Bank PLC, that represented more than 10 percent of the Bank’s net exposure. As of December 31, 2011, 95.6 percent of the total notional amount of outstanding derivatives was represented by 18 counterparties with a credit rating of A or better. Of these counterparties, there were three, BNP Paribas, Deutsche Bank AG, and Goldman Sachs Group, Inc., that each represented more than 10 percent of the Bank’s total notional amount, and there were two counterparties, Deutsche Bank AG and Natixis Financial Products, that represented more than 10 percent of the Bank’s net exposure. None of the foregoing named counterparties is a member, or advances borrower, of the Bank.

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

		00000000000000		00000000000000		00000000000000		00000000000000
	As of March 31, 2012
	Notional      Amount		Total Net Exposure     at Fair Value		Total Net Exposure Collateralized		Net Exposure After Collateral
AA	$	3,142	$	93	$	—	$	93
A		118,121		195		93		102
BBB		4,543		—		—		—
Member institutions (1)		29		4		4		—
Total derivatives	$	125,835	$	292	$	97	$	195

⁽¹⁾  Collateral held with respect to intermediated 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.

		00000000000000		00000000000000		00000000000000		00000000000000
	As of December 31, 2011
	Notional      Amount		Total Net Exposure     at Fair Value		Total Net Exposure Collateralized		Net Exposure After Collateral
AA	$	3,751	$	—	$	—	$	—
A		129,805		40		27		13
BBB		6,125		—		—		—
Member institutions (1)		39		5		5		—
Total derivatives	$	139,720	$	45	$	32	$	13

⁽¹⁾  Collateral held with respect to intermediated 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.

62

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 any related collateral pledged to the Bank is of no value to the Bank.

In the foregoing tables, “Net exposure after collateral” includes uncollateralized exposures that result when credit exposures to specific counterparties fall below collateralization trigger levels. The Bank experienced an increase in the number of counterparties that were below collateralization trigger levels as of March 31, 2012 compared to December 31, 2011. Any 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. Under the Bank’s RMP, certain term restrictions may apply to a counterparty rated A or lower. If the counterparty does not have an NRSRO rating, the Bank requires collateral for the full amount of the exposure.

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, the Bank would have been required to deliver up to an additional $127 million of collateral (at fair value) to its derivative counterparties as of March 31, 2012.

Mortgage Loan Programs

The Bank seeks to manage the credit risk associated with the Mortgage Purchase Program (MPP) and the Mortgage Partnership Finance^® Program^* (MPF^® Program or MPF) by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institution (PFI). 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, 2012, 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. The Bank holds additional risk-based capital to mitigate the incremental risk, if any, that results from the supplemental mortgage insurance providers.

As of March 31, 2012 and 2011, the allowance for credit losses on MPF loans was $8 million and $0, respectively. The primary driver for the increased loan loss reserve was the increase in the Bank’s severity estimates. The loss severity rate used in the loan loss reserve methodology for MPF loans increased from 19.33 percent at March 31, 2011 to 41.06 percent at March 31, 2012. The increase was based on weakening performance of the Bank’s portfolio of MPF loans. The Bank uses actual loss claim data from its MPF loans to estimate future losses and experienced a significant increase in the severity amount for claims settled during the period. The severity rate does not reflect the application of any credit enhancement that may be available on a given pool. Another factor contributing to the increased loan loss reserve was an increased percentage of seriously delinquent loans. The Bank’s seriously delinquent rate for conventional single-family residential mortgages increased from 4.92 percent as of March 31, 2011 to 6.20 percent as of March 31, 2012.

^*  “Mortgage Partnership Finance” and “MPF” are registered trademarks of FHLBank Chicago.

63

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–Recently Issued and Adopted Accounting Guidance to the Bank’s 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.

64

The following table summarizes the notional amounts of derivative financial instruments (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.

			As of March 31, 2012		As of December 31, 2011
Hedged Item / Hedging Instrument	Hedging Objective	Hedge Accounting Designation	Notional Amount		Notional Amount
Advances
Pay fixed, receive variable interest rate swap (without options)	Converts the advance’s fixed rate to a variable rate index.	Fair value hedges	$	7,976	$	13,160
		Non-qualifying hedges		100		100
Pay fixed, receive variable interest rate swap (with options)	Converts the advance’s fixed rate to a variable rate index and offsets option risk in the advance.	Fair value hedges		34,461		32,749
		Non-qualifying hedges		741		741
Pay variable with embedded features, receive variable interest rate swap (non-callable)	Reduces interest rate sensitivity and repricing gaps by converting the advance’s variable rate to a different variable rate index and/or offsets embedded option risk in the advance.	Fair value hedges		864		864
Pay variable, receive variable basis swap	Reduces interest rate sensitivity and repricing gaps by converting the advance’s variable rate to a different variable rate index	Non-qualifying hedges		228		248
		Total		44,370		47,862
Investments
Pay fixed, receive variable interest rate swap	Converts the investment’s fixed rate to a variable rate index.	Non-qualifying hedges		1,990		2,678
Pay variable, receive variable interest rate swap	Converts the investment’s variable rate to a different variable rate index.	Non-qualifying hedges		50		50
		Total		2,040		2,728
Consolidated Obligation Bonds
Receive fixed, pay variable interest rate swap (without options)	Converts the bond’s fixed rate to a variable rate index.	Fair value hedges		48,214		46,674
		Non-qualifying hedges		850		1,100
Receive fixed, pay variable interest rate swap (with options)	Converts the bond’s fixed rate to a variable rate index and offsets option risk in the bond.	Fair value hedges		16,308		26,403
		Non-qualifying hedges		1,250		1,000
Receive variable with embedded features, pay variable interest rate swap (callable)	Reduces interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or offsets embedded option risk in the bond.	Fair value hedges		20		20
Receive variable, pay variable basis swap	Reduces interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index.	Non-qualifying hedges		—		100
		Total		66,642		75,297

65

			As of March 31, 2012		As of December 31, 2011
Hedged Item / Hedging Instrument	Hedging Objective	Hedge Accounting Designation	Notional Amount		Notional Amount
Consolidated Obligation Discount Notes
Receive fixed, pay variable interest rate swap	Converts the discount note’s fixed rate to a variable rate index.	Fair value hedges		100		1,129
		Total		100		1,129
Balance Sheet
Pay fixed, receive variable interest rate swap	Converts the asset or liability fixed rate to a variable rate index.	Non-qualifying hedges		125		125
Interest rate cap or floor	Protects against changes in income of certain assets due to changes in interest rates.	Non-qualifying hedges		12,500		12,500
		Total		12,625		12,625
Intermediary Positions and Other
Pay fixed, receive variable interest rate swap, and receive-fixed, pay variable interest rate swap	To offset interest rate swaps executed with members by executing interest rate swaps with derivatives counterparties.	Non-qualifying hedges		58		79
		Total		58		79
Total notional amount			$	125,835	$	139,720

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

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.

Under normal circumstances, effective duration is computed by calculating an option adjusted spread based on market price. This method works well if the market price is dependent on interest rates instead of credit or liquidity. In light of the ongoing credit concerns and lack of liquidity in the private-label MBS market, however, market prices are influenced more by credit and liquidity than interest rates, resulting in very low prices and very high option adjusted spreads which distort the effective duration impact. Thus, in the third quarter of 2009, management changed its method of calculating effective duration to use the option adjusted spread at a date prior to the recent market disruptions. To capture interest-rate changes, management further adjusted its option adjusted spread by adding a spread to reflect option adjusted spread changes in callable debt instruments with like effective duration characteristics. This approach provides effective duration values that more accurately reflect the Bank’s interest-rate risk but may still result in modest differences due to volatility and uncertainty in the capital markets (such as changing credit standards, variable mortgage refinancing capacity, the spread between MBS rates and Treasury rates, and uncertainty regarding future MBS actions by the Federal Reserve; factors such as these are difficult to reduce to quantitative model inputs). Given this limitation, management views its current effective duration gap exposure calculations as approximate, rather than absolute, values.

66

The table below reflects the Bank’s effective duration exposure measurements as calculated in accordance with Bank policy (in years).

		000000000000000		000000000000000		000000000000000		000000000000000		000000000000000		000000000000000
	As of March 31, 2012						As of December 31, 2011
	Up 200 Basis  Points		Current		Down 200 Basis Points (1)		Up 200 Basis Points		Current		Down 200 Basis Points (1)
Assets		0.63		0.40		(0.03)		0.56		0.37		(0.03)
Liabilities		0.47		0.52		0.06		0.45		0.43		0.06
Equity		2.63		(1.11)		(1.14)		2.27		(0.53)		(1.33)
Effective duration gap		0.16		(0.12)		(0.09)		0.11		(0.06)		(0.09)

⁽¹⁾  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.

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 Bank determines the theoretical market value of assets and liabilities utilizing a Level 3 pricing approach as more fully described in Note 12–Estimated Fair Values to the Bank’s interim financial statements. 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. During the first quarter of 2012, the Bank’s total capital and market value of equity increased by $359 million and $463 million, respectively.

The table below reflects the Bank’s market value of equity measurements as calculated in accordance with Bank policy (in millions).

		0000000000000000		0000000000000000		0000000000000000		0000000000000000		0000000000000000		0000000000000000
	As of March 31, 2012						As of December 31, 2011
	Up 200 Basis Points		Current		Down 200 Basis Points (1)		Up 200 Basis Points		Current		Down 200 Basis Points (1)
Assets	$	104,175	$	105,401	$	105,944	$	120,027	$	121,356	$	121,878
Liabilities		97,285		98,258		98,575		113,610		114,676		114,904
Equity		6,890		7,143		7,369		6,417		6,680		6,974

⁽¹⁾  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.

67

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Bank’s President and Chief Executive Officer and the Bank’s Executive Vice President and Chief Financial Officer (Certifying Officers) are responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

As of March 31, 2012, the Bank’s Certifying Officers have evaluated the effectiveness of the design and operation of its disclosure controls and procedures. Based on that evaluation, they have concluded that the Bank’s disclosure controls and procedures (as defined in Rules 13a-15(a) and 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that information required to be disclosed by the Bank in the reports that it files or submits under the Exchange Act (1) is accumulated and communicated to the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure; and (2) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.

In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s Certifying Officers recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2012, 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

MBS Litigation

On January 18, 2011, the Bank filed a complaint in the State Court of Fulton County, Georgia against Countrywide Financial Corporation (n/k/a/ Bank of America Home Loans), Countywide Securities Corporation, Countrywide Home Loans, Inc., Bank of America Corporation (as successor to the Countrywide defendants), J.P. Morgan Securities, LLC (f/k/a J.P. Morgan Securities, Inc. and Bear Stearns & Co., Inc.) and UBS Securities, LLC, et al. The Bank’s claims arise from material misrepresentations in the offering documents of thirty private-label MBS sold to the Bank. The Bank’s complaint alleges that the Countrywide Defendants (Countrywide Financial Corporation, Countrywide Securities Corporation, and Countrywide Home Loans, Inc.) and J.P. Morgan Securities, LLC violated the Georgia RICO (Racketeer Influenced and Corrupt Organizations) Act. The complaint further alleges that those defendants, as well as UBS Securities, LLC committed fraud and negligent misrepresentation in violation of Georgia law, and that Bank of America Corporation is liable to the Bank as a successor to the

68

Countrywide Defendants. The Bank is seeking monetary damages and other relief as compensation for losses it has incurred in connection with the purchase of these private-label MBS.

On January 5, 2012, the State Court of Fulton County, Georgia entered into a scheduling order that requires the parties to complete fact discovery by December 15, 2012 and expert discovery by March 1, 2013, requires the parties to file pretrial dispositive motions by May 1, 2013 and responses by June 1, 2013, establishes September 15, 2013 as the date for the consolidated pretrial order, and sets trial for October 2013. On March 1, 2012, the court granted a motion to sever the Bank’s claims against the J.P. Morgan entities so that these claims will proceed in a separate action. For further discussion of this litigation, see the Bank’s Form 10-K.

MBS Proposed Settlement

In a separate matter, on January 21, 2011, the Bank (together with certain other private-label MBS holders collectively comprising greater than 25 percent of the voting rights with respect to certain private-label MBS) instructed BNY Mellon, in its capacity as indenture trustee, to pursue enforcement of seller representations and warranties concerning the eligibility of mortgages for securitization in certain Countrywide-issued private-label MBS. On June 29, 2011, a proposed settlement was announced between the trustee and certain Countrywide affiliates with respect to nearly all trust-related claims arising out of these private-label MBS, and the Bank and other investors (Institutional Investors) filed a Notice of Petition to intervene with the Supreme Court of the State of New York, County of New York in support of final court approval of this settlement. The court is currently determining the scope and timing of discovery in this matter. It is not certain at this time whether the settlement will ultimately be approved, the timing of any final settlement or the amount of any distribution the Bank may receive as part of a final settlement. For further discussion of this proposed settlement and previous material developments, see the Bank’s Form 10-K.

Other

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

Item 1A. Risk Factors

In addition to the other information set forth in this report, the factors discussed in Part I, “Item 1A. Risk Factors” in the Bank’s Form 10-K, should be carefully considered as they 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.

69

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

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 President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. +
31.2	Certification of the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. +
32.1	Certification of the President and Chief Executive Officer and 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. +
101	Unaudited financial statements from the Quarterly Report on Form 10-Q of Federal Home Loan Bank of Atlanta for the quarter ended March 31, 2012, filed on May 11, 2012, formatted in XBRL: (i) Statements of Condition, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Capital, (iv) Statements of Cash Flows, and (vi) Notes to Financial Statements.+

⁽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 September 27, 2011 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

⁽³⁾  Filed on August 5, 2011 with the Securities and Exchange Commission in the Bank’s Form 8-K and incorporated herein by reference.

⁺  Furnished herewith.

70

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, 2012	By:	/s/ W. Wesley McMullan
		Name: W. Wesley McMullan
		Title: President and Chief Executive Officer

By:	/s/ Kirk R. Malmberg
	Name: Kirk R. Malmberg
	Title: Executive Vice President and           Chief Financial Officer

71