President's Report

September 30, 2004

At the Bank

Advance Demand on the Upswing

August 2004 was a month of strong advance growth at the Home Loan Bank, with a $1.4 billion increase in average advances to $64.1 billion. We closed the month at $64.3 billion in advances on our books. The growth was seen particularly in advances with maturity terms of a year or longer. The Bank’s LIBOR-based adjustable rate specials continued to be well subscribed by members.

The Home Loan Bank looks forward to continuing to deliver innovative, cost-effective services to our member lenders.

Home Loan Bank Amends Retained Earnings Policy

As reported in my March report, the Board of Directors unanimously adopted a retained earnings and dividend policy in March of 2004. The adoption of this policy met the request from our regulator, the Federal Housing Finance Board (FHFB), that all 12 Home Loan Banks adopt such policies.

The purpose of the policy is to: (1) establish a process to assess the adequacy of retained earnings in view of the Bank’s assessment of the financial, economic, and business risks inherent in its operations; (2) establish the priority of contributions to retained earnings relative to other distributions of income; (3) establish a target level of retained earnings and a timeline to achieve the target; and (4) establish a process to ensure maintenance of appropriate levels of retained earnings.

To execute the policy, management has completed its research and analysis in developing and applying a new comprehensive statistical methodology to determine the level of retained earnings adequate to absorb potential losses commensurate to the low-risk profile of the Bank during normal operating conditions. The Board approved the methodology. Based on this methodology, the Bank is able to establish a retained earnings target threshold level and retained earnings optimum level. Given current income projections, the Bank expects to meet the threshold level in early 2005. When the threshold is reached, the Bank expects to begin to distribute up to 80% of core earnings until the optimum retained earnings level is reached.

As reported earlier, the Home Loan Bank expects to distribute a dividend near the 2% level at the end of October. The Board will consider 2005 dividend payout guidance at the December Board meeting.

Two More Community Lenders Join the Federal Home Loan Bank

This summer, two community member lenders joined the Home Loan Bank: First National Bank of Long Island, Huntington, NY; and Hudson Heritage Federal Credit Union, Newburgh, NY. I am pleased to welcome our newest members. With their addition, we now have 302 community banks as members.

I again welcome our newest members and thank all our customers and stockholders for their business.

2004 Home Loan Bank Director Ballots in the Mail

It is election season and the ballots are in the mail. On September 29, 2004, the Home Loan Bank mailed the "2004 Election Ballots for the Directorships Designated for the States of New Jersey and New York" to eligible FHLBNY member institutions.

The election is for approximately one third of the elected members of the FHLBNY’s Board of Directors. As of January 1, 2005, there are two seats open for New Jersey representation and two seats open for New York representation. Each of the individuals elected this year will serve a three-year term on the Board starting on January 1, 2005.

The certified ballots must be mailed back to the FHLBNY at 101 Park Avenue, New York, New York 10178-0599, in time to be received by the voting deadline of 5:00 p.m. on October 29, 2004. Election results will be announced in mid-November.

In Washington

Two-Day Federal Home Loan Bank Shareholders Forum A Success

On September 14 and 15, the American Bankers Association, America’s Community Bankers, the Council of Federal Home Loan Banks, the Financial Services Roundtable, and the Independent Community Bankers Association held a two-day shareholders forum in Washington, D.C., to discuss Home Loan Bank issues. Well over 150 stakeholders attended the forum. This forum proved to be an excellent opportunity to ventilate the major issues facing the Home Loan Bank System. On the table for discussion were the implications of SEC registration, multi-district Home Loan Bank membership, and GSE regulatory reform legislation.

A number of significant D.C. policymakers made presentations. These included from the legislative branch Senator John E. Sununu (R-NH) and Congressman Barney Frank (D-MA), Ranking Member of the House Financial Services Committee. From the executive branch were Treasury Under Secretary for Domestic Finance Brian Roseboro, FHFB Chairman Alicia Castaneda, and Director of the Securities and Exchange Commission’s Division of Corporation Finance Alan Beller.

This forum served as a useful opportunity to not necessarily resolve these complex matters, but rather to foster constructive dialogue among a number of parties about the key issues facing the Federal Home Loan Bank System.


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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