President's Report

May 15, 2009

At the Bank

First Quarter 2009 Results

Today, the Federal Home Loan Bank of New York submitted its Form 10-Q to the SEC and reported that the first quarter of 2009 was a very strong quarter.  The Home Loan Bank reported net income of $148.1 million, or $2.72 per share, compared with $100.2 million, or $2.30 per share for the same period in 2008.  An other-than-temporary impairment (“OTTI”) of $5.3 million was recorded as a charge to other income (loss) in the year’s first quarter.  Net income for the quarter benefited from $38.7 million in fair value gains from interest rate swaps designated in economic hedges that matured or were nearing maturity.  Net income also benefited from $19.1 million in prepayment fees received from members who prepaid advances prior to their contractual maturities, compared to $8.2 million in the prior year.

Dividend Declaration

On May 22, 2009, the Board of Directors of the Bank is scheduled to vote on declaring a dividend for the first quarter of 2009. We will let you know what the Board decides as soon as possible after the vote takes place.

The annualized return on average equity, which is net income divided by average capital stock, retained earnings, and accumulated other comprehensive income, was 10.37% in the first quarter of 2009, compared with 8.59% for the first quarter of 2008.

First quarter 2009 net interest income, after provision for credit losses on mortgage loans held for portfolio, increased to $230.9 million, or 50.5%, from $153.4 million in the first quarter of 2008.  The growth was due in part to growth in advances volume in the first quarter of 2009 relative to the first quarter of 2008 and the declining cost of debt, and in part by recording $46.9 million of net swap interest expense as a hedging expense in other income and not as an interest expense in interest margin.  The comparable expense was not material in the first quarter of 2008 because of the insignificant amounts of swaps designated as economic hedges in the prior year.

At March 31, 2009, the Bank’s total assets were $128.4 billion, a decrease of $9.2 billion, or 6.7%, from December 31, 2008.  Advances borrowed by members declined by $4.7 billion.  Both short-term and long-term investments were lower at March 31, 2009, relative to outstanding amounts at December 31, 2008.

Advances declined by 4.3% to $104.5 billion at March 31, 2009, compared with $109.2 billion at December 31, 2008.  Member demand for advance borrowings in the current year first quarter has been concentrated in the longer-term fixed-rate advance products.  Outstanding amounts of short-term fixed-rate advances, adjustable-rate advances, and overnight borrowings declined at March 31, 2009, compared to outstanding balances at December 31, 2008.  In the first quarter of 2009, fixed-rate advances, specifically those collateralized by marketable securities, grew and partially offset the declining demand for adjustable-rate products.

A credit OTTI charge of $5.3 million was recorded for the Bank’s MBS portfolios in the first quarter of 2009, primarily because it was deemed unlikely that the bond insurer would be able to perform under its contractual obligations to support all projected future cash flow shortfalls.  Without recovery in the near term such that liquidity returns to the mortgage-backed securities market, or if the credit losses of the underlying collateral within the mortgage-backed securities perform worse than expected, or if the presumption of the ability of monoline insurers to support the insured securities that are considered too dependent on insurance continues to be negatively impacted by their future financial performance, it is likely that additional other-than-temporary impairment may occur in future periods.  Recognition of additional impairment would negatively impact the Bank’s net income.

 

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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