President's Report

August 31, 2004

At the Bank

At $62.7 Billion, Advance Demand Remains Solid

For the month of July 2004, average advances outstanding totaled $62.7 billion, a $200 million increase from June. We closed the month of July at $64.2 billion. Members took increased advantage of Adjustable Rate Credit (ARC) advances.

The Home Loan Bank’s actions to strengthen our risk management structure, to enhance several functions, and to ensure that our investment portfolio is of highest quality at reduced risk are producing good results. As reported in our Financial Report for the second quarter, retained earnings grew to $177.4 million at June 30, 2004, from $142.2 million at March 31, 2004, and $126.7 million at December 31, 2003.

Three cash dividends have been paid out of retained earnings during 2004: a 1.45% dividend on January 30, 2004, a 1.58% dividend on April 30, 2004, and a 2.08% dividend on July 30, 2004. The dividend payments aggregated $48.7 million, or 50% of the Bank’s net income, in accordance with our policy for this year to retain one half of our net income. As indicated in previous communications, it is likely for the remainder of the year that dividend announcements will be near 2%.

Continuing the upward trend seen in the previous two quarters, net income for the quarter ended June 30, 2004, grew to $49.9 million. Net income totaled $29.3 million in the first quarter of 2004 and $28.5 million in the fourth quarter of 2003. Healthier interest spreads, higher asset balances, and more efficient funding strategies were the principal factors for about half of the growth. The remainder of the growth in earnings was the result of a change in the manner of assessing effectiveness for certain highly effective hedging transactions used since the adoption of SFAS 133 in 2001. Under the prior approach, we assumed no ineffectiveness in these hedging transactions; under the new approach, the Home Loan Bank will measure effectiveness at least quarterly.

I would like to thank the 96 Chairmen, Presidents, CEOs, CFOs, and other officers from our member lenders who attended this year’s ten stockholder meetings in New Jersey, New York, and the Caribbean. I greatly appreciated the opportunity to receive the benefit of your insights and observations. For a member-driven organization, there is nothing more valuable than direct feedback.

A major objective of the Home Loan Bank is to maintain a high level of value for our members. Through our competitive pricing, innovative products, exceptional service, and a reasonable dividend, we look forward to providing sustained strong performance and greater value for your investment in the Home Loan Bank.

 

Sincerely,
Alfred A. DelliBovi
President & CEO


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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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