President's Report

June 30, 2003

At the Bank

Business Update

I am pleased to report that credit product usage accelerated in May; the month ended at over $72.6 billion in advances, up $1.9 billion from the end of April. This is a $12 billion increase from the May 2002 level. Increases in demand were booked in short-term and repo advance products. 

These strong demand levels indicate that our customers continue to make use of our low-priced credit products. Total Home Loan Bank assets averaged the $101 billion in May -- an increase of $3 billion from April -- reflecting growth in advances and in the Home Loan Bank’s tightly controlled and managed investment portfolio. 

Annualized net income for May was $198.4 million; this is an increase of $9.4 million from April. We are delighted to produce this reasonable return despite this historically low interest rate environment. We also take great pride in fulfilling our Mission Statement: “To advance housing opportunity and local community development by maximizing the capacity of our community-based member-lenders to serve their markets.” Management translates this statement into a profitable and sustainable business proposition through expert risk management, constant innovation, a tight rein on expenses, and dedication to expanding home ownership and affordable housing.

Nominations Open for 2003 Election of Directors of the Home Loan Bank

On June 23, nomination certificates and related information were mailed to all eligible, voting stockholders in New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. One seat in New Jersey, two seats in New York, and one seat in the Puerto Rico/U.S. Virgin Islands region are up for election this year. Each of the individuals elected will serve a three-year term starting on January 1, 2004. The deadline to return your nomination certificates to the FHLBNY is 5:00 p.m. on July 23, 2003. 

Should you have any questions on the schedule or process, please contact the Corporate Secretary, Barbara Sperrazza, at 212-441-6819.

44 Housing Grants Approved In First Ahp Round Of 2003

The Board of Directors ratified the funding of 44 affordable housing initiatives in 2003's first round of the Affordable Housing Program (AHP). In this round, $12.0 million was awarded. Our funds will help create 1,762 affordable homes in New Jersey, New York, Puerto Rico, and the U.S. Virgin Islands. These 44 successful public/private AHP partnerships will generate a total of $213.6 million in community investment that produces jobs as well as housing.

In Washington

Industry Trade Groups Register Their Opposition on Registration To The Sec

In a joint, June 10 letter to Alan Beller, Director, Division of Corporation Finance of the SEC, the ABA, ACB, and ICBA expressed their opposition to the Home Loan Banks registering with the SEC. This letter served as a follow-up to a May 16 meeting between a delegation of member representatives, appearing on behalf of the three trade groups, and the SEC. In the letter, the national trade groups pointed out that they represent the bulk of the capital contributors to the System, and that, as cooperatives owned by their members, the Home Loan Banks cannot fit into the SEC registration regime without a series of accommodations and waivers that may be difficult to achieve. As a result, the trade groups concluded that SEC registration would be unnecessarily burdensome. These groups noted the uncertainties of transition to SEC registration and the duplicative regulatory system that would be created. The groups pointed out that there is a viable alternative: the Section 12(i)-based approach. 

For your information, I have attached a copy of the June 10 letter. 

With respect to the status of voluntary SEC registration, the Home Loan Banks and the SEC are engaged in informal but direct discussions. As required to fulfill the fiduciary responsibilities of the Boards and the officers of the Home Loan Banks, there are a number of issues to be thoroughly understood prior to any Board action to authorize voluntary registration.

Chairman Baker Holds Hearing and Introduces Bill on GSE Reform FHLBs Not Part of Measure

The accounting missteps of Freddie Mac have been the focus of many Washington decision makers over the past few weeks. They were the subject of a public hearing on June 25 by the House Subcommittee on Capital Markets chaired by Congressman Richard Baker. The hearing examined the need for GSE regulatory reform and modernization. The hearing centered on the adequacy of OFHEO and of the existing overall regulatory structure for Fannie Mae and Freddie Mac. The hearing was also intended to help lay a foundation for Congressman Baker’s GSE reform legislation: HR 2575 -- “The Secondary Mortgage Market Enterprises Regulatory Improvement Act.” 

At the beginning of the hearing, Chairman Baker made a point of emphasizing that his legislation this year did not go as far as previous efforts by leaving intact the GSEs’ Treasury line of credit. Chairman Baker stated his legislation has three goals: (1) ensuring an independent regulator; (2) ensuring independent regulatory funding; and (3) giving the regulator all the tools needed to do the job. He also said that the legislation did not include the Home Loan Banks. From my perspective, not including the Home Loan Banks in the bill makes perfect sense. The FHLBank System is a success story that is very different from that of either Fannie Mae or Freddie Mac. Please consider these 11 points that distinguish the Home Loan Banks: 

1. The FHLBanks are cooperatives, and the owners of the System are also its members and sole users of its services. 

2. The FHLBanks issue no publicly traded equity stock to anyone. 

3. The members own contributed cooperative capital, which is a creation of statute. 

4. Contributed cooperative capital does not trade in any market, is not registered on any exchange, and does not fluctuate in value. 

5. No FHLBank officer or director receives any stock options or any stockrelated compensation. 

6. There is no incentive to manage or manipulate earnings in order to reap the benefit of options. 

7. The contributors of the capital are community lenders who elect the majority of the directors of each FHLBank board of directors, and together with the directors that are appointed by the Government, all directors of every Home Loan Bank are completely independent from management of the Banks.

8. The FHLBanks are examined annually by a regulator that supervises nearly every aspect of their business and authorizes all of their activities and investments. 

9. The System and its assets are divided into 12 Banks under separate management, so that, while they are all jointly and severally liable for the debt which the System issues, the authority over and management of the System's assets is not concentrated in any one group of managers or directors. 

10. Any benefits from the implicit government backing of the FHLBank System are directly passed along to the System's members in the form of dividends on the capital and reduced borrowing costs. The members pass such benefits along to their home-buying consumers in the form of lower mortgage rates. 

11. The System works: in the 71 years that the FHLBank System has operated, every FHLBank debt investor has always received the principal and interest that they bargained for while the United States has enjoyed the benefits of being the best-housed country in the world.

In closing, I would like to thank each customer and stockholder for her or his business. 


Alfred A. DelliBovi 
President Enclosure

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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This report may contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. These statements may use forward-looking terms, such as “projected,” “expects,” “may,” or their negatives or other variations of these terms. The Bank cautions that, by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, regulatory and accounting rule adjustments or requirements, changes in interest rates, changes in projected business volumes, changes in prepayment speeds on mortgage assets, the cost of our funding, changes in our membership profile, the withdrawal of one or more large members, competitive pressures, shifts in demand for our products, and general economic conditions. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

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