President's Report

January 31, 2005

At the Bank

Board Approves Dividend from Fourth Quarter Earnings at 3.05%

I am pleased to report that the Board of Directors has approved a dividend rate for the fourth quarter of 2004 of 3.05% (annualized). The Home Loan Bank's dividend rate for the third quarter was 2.22%. The dollar amount of the fourth quarter dividend will be approximately $27.5 million. The average rate for dividends paid on the basis of stock ownership in 2004 was 2.20%, and the total cash dividend paid in these four quarters was $83.4 million. The dividend will be distributed to member financial institutions on January 31, 2005.

Like all 2004 dividend payments, the fourth quarter dividend complies with the Bank's Retained Earnings and Dividend Policy. 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. As discussed more fully in my September 2004 report to members, the policy establishes a methodology to calculate a retained earnings threshold level and optimum level based on the Bank's risk profile.

The fourth quarter dividend represents a payout of 66% of core earnings for the quarter. Retained earnings after the dividend payment are approximately $196.5 million, which meets the optimum level of retained earnings as of year-end. Our success in rebuilding retained earnings reflects the Bank's low-risk asset profile and conservative financial management practices. With adequate retained earnings now accumulated, we anticipate paying out higher dividends during the remainder of 2005.

For purposes of comparison, below is a chart showing what each of the 12 Home Loan Banks paid as its average dividend for 2004.

2004 FHLBanks Average Annual Dividend Rate

Federal Home Loan Bank

Des Moines
New York
San Francisco*

2004 Average Annual Dividend



*Based on three quarters of data.


Board Elects George L. Engelke, Jr., Chairman and David W. Lindstrom Vice Chairman

I am pleased to announce that the Board of Directors has elected George L. Engelke, Jr., Chairman, President and Chief Executive Officer of Astoria Federal Savings and Loan Association, Lake Success, New York, as Chairman of the Board. The Board also elected David W. Lindstrom, President and Chief Executive Officer of Franklin Savings Bank, Pilesgrove, New Jersey, as Vice Chairman pro tem of the Board. Mr. Lindstrom will also serve as Chairman of the Executive Committee.

We also would like to thank the outgoing Directors for their many contributions. Atwood Collins, III, Executive Vice President of M &T Bank, Buffalo, New York; Edward C. Gibney, Director of Boiling Springs Savings Bank, Rutherford, New Jersey, and Leopold W. Montanaro, Director of Kearny Federal Savings Bank, Kearny, New Jersey, each added their considerable expertise and commitment to the management and direction of our Bank.

And we thank Michael M. Horn, Partner, McCarter & English, for his superior service as a Board Public Interest Director. His appointed term expired on December 31, 2004. We are hopeful that if the FHFB decides to act on public interest director appointments, his reappointment is one of those actions.

21 Affordable Housing Initiatives Approved in 2004

The Board of Directors ratified the funding of 21 affordable housing projects in the 2004 Affordable Housing Program (AHP) funding round. In this AHP round, $6.9 million was awarded and 1,212 new affordable housing units will be created in New Jersey and New York. These 21 successful public/private AHP partnerships will generate a total of $161 million in expenditures, producing jobs as well as housing.

In Washington

First GSE Regulatory Reform Legislation Introduced in the 109th Congress

On January 26, 2005, Republican Senators Chuck Hagel, Elizabeth Dole, and John Sununu introduced the Federal Housing Enterprise Regulatory Reform Act of 2005. This bill appears to closely track Senator Richard Shelby's GSE Reform Legislation adopted by the Senate Banking Committee in 2004. This bill looks to be a solid piece of work that shows it was thoughtfully drafted and will likely be the first of a few bills introduced on the matter. Given the headlines of 2004, the GSE regulatory reform legislation will be considered by both the Senate Banking Committee and the House Financial Services Committee in the coming months. We will keep you informed as both chambers hold hearings and consider GSE regulatory relief legislation.

The Home Loan Bank team wishes to thank you, our members, for your use of our products and services to expand the availability of mortgage credit, to compete effectively in your markets, and to promote strong communities.


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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