President's Report

October 31, 2006

At the Bank

Third Quarter 2006 Results

The unaudited results for the third quarter ended September 30, 2006, are in:

Comparison of September 30, 2006, and December 31, 2005, Statements of Condition

Total assets increased 5.9% to $90 billion at September 30, 2006, up from $85 billion at December 31, 2005. Advances increased by $4.6 billion over the period and represented 74% of our total assets at quarter end. Increases in long-term investments and interest-bearing deposits were largely offset by a decline in Fed funds. Capital stock increased by $140 million from year-end, while our retained earnings increased by 24% to $360 million on September 30, 2006.

Third Quarter 2006 Operating Results

The Home Loan Bank had net income of $76.8 million, or $1.97 per share of capital stock, for the third quarter. This represents a 26% increase over the net income of $61.1 million for the third quarter of 2005. Annualized return on average stockholders’ equity, defined as capital stock, retained earnings, and accumulated other comprehensive income (loss), increased to 7.29% for the third quarter in 2006 compared to 6.28% in the comparable quarter in 2005. Annualized return on average earnings assets increased to 54 basis points in the third-quarter in 2006, up from 47 basis points in the comparable quarter in 2005. The increase is primarily attributable to both higher yields on assets and an increase in net interest spread, the difference between the cost of funding and yields on assets. In addition, the increase in net income was attributable to improved yields from advances and investments and from higher earnings in a rising rate environment from deployment of members’ capital and retained earnings.

Net income for the first nine months of 2006 was $214.9 million, or $5.73 per share, compared with $173.9 million, or $4.81 per share, in the comparable period last year.

Third Quarter Dividend Declared at 6.25%

During the month of October, the Board of Directors of the Federal Home Loan Bank of New York declared a regular quarterly cash dividend at an annualized rate of 6.25%. The dividend, based on stock held during the period July 1, 2006, through September 30, 2006, was credited to your demand account on October 31, 2006.

The dollar amount of the third quarter dividend will be approximately $62 million. The dividend reflects the Bank’s low-risk profile and conservative investment strategy. It represents a payout of approximately 80% of earnings for the quarter. Retained earnings after the dividend payment will be approximately $289 million. (Financial and other disclosures by the Bank, as an SEC registrant, may be found on the EDGAR portion of the SEC’s website at http://www.sec.gov/edgar.shtml.)

With the close of this quarter, the Bank has completed the declaration of its quarterly dividends in 2006. For 2006, the Home Loan Bank has disbursed $179 million in the year and provided an overall dividend of 5.59%. This continues the Bank’s overall solid dividend history.

However, please be mindful that future dividend rates may be significantly different from the current rate as a result of a number of factors, including the effects of derivatives accounting (SFAS 133), overall interest rates, demand for our products, and our ability to achieve targeted returns on our investments.

The Home Loan Bank’s dividend rates for 2006 were:
 

Quarter Ended

Date Paid

Rate

December 31, 2005

January 31, 2006

5.11%

March 31, 2006

April 28, 2006

5.25%

June 30, 2006

July 31, 2006

5.75%

September 30, 2006

October 31, 2006

6.25%

 

This third-quarter dividend furthers the Home Loan Bank’s proven record of providing a fair return on our members’ capital investment:

 

Year

Rate

Dividend Paid

2001

6.29%

$229 million

2002

4.51%

$167 million

2003

4.01%

$164 million

2004

1.83%*

$ 70 million

2005

4.50%

$166 million

2006

5.59%

$179 million


*During 2004, in addition to rebuilding its margins, the Bank committed a significant portion of its net income to rebuilding a strong retained earnings level.

Average advances were $67.2 billion for the month of September. As expected, the average advance level was down $1.8 billion from August due primarily to completed mergers of former members with institutions out of our District service area and others paying down short-term advances. The decline is expected to continue at a measured pace through the close of the year. We closed the month of September at $66.4 billion.

Through our competitive pricing, innovative products, and responsive service, we look forward to providing you with sustained performance and greater value for your investment in the 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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